    [Senate Hearing 105-393]
    [From the U.S. Government Publishing Office]

    [DOCID: f:39827.xxx.done]
                                                            S. Hrg. 105-393

    AGRICULTURE, RURAL DEVELOPMENT, AND RELATED AGENCIES APPROPRIATIONS FOR
                                FISCAL YEAR 1998

    =======================================================================

                                    HEARINGS

                                    before a

                              SUBCOMMITTEE OF THE

                COMMITTEE ON APPROPRIATIONS UNITED STATES SENATE

                           ONE HUNDRED FIFTH CONGRESS

                                 FIRST SESSION

                                       on

                               H.R. 2160/S. 1033

     AN ACT MAKING APPROPRIATIONS FOR AGRICULTURE, RURAL DEVELOPMENT, FOOD
     AND DRUG ADMINISTRATION, AND RELATED AGENCIES PROGRAMS FOR THE FISCAL
             YEAR ENDING SEPTEMBER 30, 1998, AND FOR OTHER PURPOSES

                                   __________

                      Commodity Futures Trading Commission
                           Department of Agriculture
                           Farm Credit Administration
                          Food and Drug Administration
                           Nondepartmental witnesses

                                   __________

             Printed for the use of the Committee on Appropriations

     Available via the World Wide Web: http://www.access.gpo.gov/congress/
                                     senate

                         U.S. GOVERNMENT PRINTING OFFICE
     39-827 cc                   WASHINGTON : 1998
    _______________________________________________________________________
                For sale by the U.S. Government Printing Office
    Superintendent of Documents, Congressional Sales Office, Washington, DC 20402
                               ISBN 0-16-056316-X

                          COMMITTEE ON APPROPRIATIONS

                         TED STEVENS, Alaska, Chairman
    THAD COCHRAN, Mississippi            ROBERT C. BYRD, West Virginia
    ARLEN SPECTER, Pennsylvania          DANIEL K. INOUYE, Hawaii
    PETE V. DOMENICI, New Mexico         ERNEST F. HOLLINGS, South Carolina
    CHRISTOPHER S. BOND, Missouri        PATRICK J. LEAHY, Vermont
    SLADE GORTON, Washington             DALE BUMPERS, Arkansas
    MITCH McCONNELL, Kentucky            FRANK R. LAUTENBERG, New Jersey
    CONRAD BURNS, Montana                TOM HARKIN, Iowa
    RICHARD C. SHELBY, Alabama           BARBARA A. MIKULSKI, Maryland
    JUDD GREGG, New Hampshire            HARRY REID, Nevada
    ROBERT F. BENNETT, Utah              HERB KOHL, Wisconsin
    BEN NIGHTHORSE CAMPBELL, Colorado    PATTY MURRAY, Washington
    LARRY CRAIG, Idaho                   BYRON DORGAN, North Dakota
    LAUCH FAIRCLOTH, North Carolina      BARBARA BOXER, California
    KAY BAILEY HUTCHISON, Texas
                       Steven J. Cortese, Staff Director
                     Lisa Sutherland, Deputy Staff Director
                   James H. English, Minority Staff Director
                                     ------

      Subcommittee on Agriculture, Rural Development, and Related Agencies

                      THAD COCHRAN, Mississippi, Chairman
    ARLEN SPECTER, Pennsylvania          DALE BUMPERS, Arkansas
    CHRISTOPHER S. BOND, Missouri        TOM HARKIN, Iowa
    SLADE GORTON, Washington             HERB KOHL, Wisconsin
    MITCH McCONNELL, Kentucky            ROBERT C. BYRD, West Virginia
    CONRAD BURNS, Montana                PATRICK J. LEAHY, Vermont
    TED STEVENS, Alaska
      ex officio
                               Professional Staff
                               Rebecca M. Davies
                            Martha Scott Poindexter
                           Galen Fountain (Minority)

                             Administrative Support
                               C. Rachelle Graves

                                C O N T E N T S

                                  ----------

                          Thursday, February 27, 1997

                                                                       Page
    Department of Agriculture: Office of the Secretary...............     1

                             Tuesday, March 4, 1997

    Department of Agriculture:
        Animal and Plant Health Inspection Service...................   137
        Agricultural Marketing Service...............................   137
        Grain Inspection, Packers and Stockyards Administration......   137
        Food Safety and Inspection Service...........................   137

                            Tuesday, March 11, 1997

    Department of Agriculture:
        Food and Consumer Service....................................   275
        Center for Nutrition Policy and Promotion....................   275

                            Tuesday, March 18, 1997

    Department of Agriculture: Natural Resources Conservation Service   369

                             Tuesday, April 8, 1997

    Department of Agriculture:
        Farm Service Agency..........................................   441
        Foreign Agricultural Service.................................   441
        Risk Management Agency.......................................   441

                            Tuesday, April 15, 1997

    Department of Agriculture:
        Rural Utilities Service......................................   571
        Rural Housing Service........................................   571
        Rural Business-Cooperative Service...........................   571
        Alternative Agricultural Research and Commercialization
          Corporation................................................   571

                            Tuesday, April 22, 1997

    Department of Agriculture:
        Agricultural Research Service................................   661
        Cooperative State Research, Education, and Extension Service.   661
        Economic Research Service....................................   661
        National Agricultural Statistics Service.....................   661

                             Thursday, May 1, 1997

    Commodity Futures Trading Commission.............................  1041
    Department of Health and Human Services: Food and Drug
      Administration.................................................  1065

        Material Submitted by Agencies Not Appearing for Formal Hearings

    Department of Agriculture:
        National Appeals Division....................................  1167
        Office of the Chief Economist................................  1169
        Office of the Chief Financial Officer........................  1176
        Office of the Chief Information Officer......................  1182
        Office of Communications.....................................  1201
        Office of the General Counsel................................  1203
        Office of Inspector General..................................  1207
        Office of the Secretary and Departmental Administration......  1223
        Office of Small and Disadvantaged Business Utilization.......  1228
    Related agency: Farm Credit Administration.......................  1230
    Nondepartmental witnesses........................................  1235

    AGRICULTURE, RURAL DEVELOPMENT, AND RELATED AGENCIES APPROPRIATIONS FOR
                                FISCAL YEAR 1998

                                  ----------

                          THURSDAY, FEBRUARY 27, 1997

                                           U.S. Senate,
               Subcommittee of the Committee on Appropriations,
                                                        Washington, DC.
        The subcommittee met at 10:05 a.m., in room SD-124, Dirksen
    Senate Office Building, Hon. Thad Cochran (chairman) presiding.
        Present: Senators Cochran, Specter, Bumpers, Kohl, Byrd,
    and Leahy.

                           DEPARTMENT OF AGRICULTURE

                            Office of the Secretary

    STATEMENT OF DAN GLICKMAN, SECRETARY OF AGRICULTURE
    ACCOMPANIED BY:
            RICHARD ROMINGER, DEPUTY SECRETARY
            KEITH COLLINS, CHIEF ECONOMIST
            STEPHEN B. DEWHURST, BUDGET OFFICER

                                Opening Remarks

        Senator Cochran. The meeting of our agriculture
    appropriations subcommittee will come to order.
        Today we are pleased to begin the first in a series of
    hearings to review the President's proposed budget for the
    Department of Agriculture and related agencies for fiscal year
    1998. We are very pleased to begin our hearings with the
    distinguished Secretary of Agriculture, the Honorable Dan
    Glickman. We appreciate your presence this morning and we also
    appreciate the presence of your colleagues, the Deputy
    Secretary of Agriculture, Richard Rominger; the economist for
    the Department, Keith Collins; along with Stephen Dewhurst,
    Budget Officer for the Department.
        As we all realize, this subcommittee has jurisdiction over
    the activities and programs of the Department of Agriculture,
    with the exception of the Forest Service. The President's
    budget request for the activities under the jurisdiction of
    this committee totals $51 billion for this next fiscal year.
    This is a net decrease of $1 billion from the fiscal 1997
    enacted level of funding.
        Three-fourths of this request is for mandatory programs,
    so-called because the law directs that payments be made by the
    Department of Agriculture to beneficiaries of programs and for
    program activities. This year's level of mandatory spending is
    $1.7 billion less than it was for fiscal year 1997.
        The President's proposed total discretionary appropriations
    request for the Department of Agriculture is $13.2 billion,
    which is an increase of about $640 million above the enacted
    level for fiscal year 1997.
        Mr. Secretary, we appreciate your being here to further
    describe and explain the President's budget request for this
    next fiscal year. We know that you have prepared a statement
    for the hearing, and we encourage you to proceed to summarize
    that. We will make it a part of the record in full, so we will
    have an opportunity to ask you questions about it.
        You may proceed.

                        Statement of Secretary Glickman

        Secretary Glickman. Thank you very much, Senator, Senator
    Kohl, Senator Byrd. It is an honor for me to be here.
        You did introduce my partner, Deputy Secretary Rominger,
    who is well-skilled in budget and management issues. I have two
    of the finest career employees in Government with me as well,
    Steve Dewhurst, our Budget Officer, who has probably been
    before here more times than he would like to acknowledge, but
    for many, many years, and Keith Collins, our Chief Economist,
    who has also been at the Department many, many years. And they
    are here to bail me out when I cannot answer your questions
    very well, but they also have a good historical understanding
    of our operations.
        I will summarize my statement, and have my complete
    statement submitted for the record.
        This budget was developed under tight constraints. There
    are four priorities in this budget, and I thought I would list
    those and talk a little bit about them. One is expanding
    economic and trade opportunities. Two is ensuring a healthy,
    safe, and affordable food supply. Three is managing our natural
    resources in a sensible way, recognizing that part of that
    budget is within the confines of another subcommittee because
    of the Forest Service. And four is reinventing Government and
    saving taxpayer money.
        As part of this budget, we have had to make some difficult
    decisions. Some of you are probably hearing about some of those
    decisions in terms of closing offices out in the country. In
    some cases, those discussions are premature. But, the fact of
    the matter is that we are an agency in a steep reduction mode.
    And I will talk about that.
        At the same time, we are also an agency in which the laws
    have been changed which changed our jobs. The farm bill reduced
    budgetary exposure by providing payments to farmers, which are
    set by law over a 7-year period. We do not propose changing
    that at all. However, that changes a lot of our job
    responsibilities. In addition, implementation of the USDA
    portion of welfare reform is projected to save nearly $3.5
    billion this next fiscal year, and $21 billion over 5 years.

                           Balanced Budget Amendment

        I would point out, and I mentioned this at the House
    hearing yesterday, that while we are clearly doing our part, in
    terms of budget reduction and staff reduction, I will indicate
    some concerns about the potentially adverse effect on the
    Department's clientele of an inflexible approach as part of the
    balanced budget amendment. My concern is natural disasters,
    which occur every year. We had them in California, we had them
    in the Dakotas, and they require a great deal of expendable
    resources.
        I am also concerned that the amendment could result in
    reductions in farm program payments under the 1996 farm bill,
    as well as the Conservation Reserve Program [CRP] payments.
    Another concern of mine is the rural constituency is much
    smaller than the urban constituency, and that rural programs
    could be particularly vulnerable when those kind of priority
    decisions have to be made.

                              Discretionary Budget

        The current request before this committee for discretionary
    budget is about $13.2 billion. It is about one-half of a
    billion above the level for 1997. We are also proposing
    legislation which would increase user fees and limit
    reimbursements to private insurance companies. With the effect
    of this legislation, the discretionary budget is pretty flat,
    about $12.7 billion.
        I would also note that the total number of employee staff-
    years associated with the budget are down substantially. We are
    projecting staff-years of about 110,000 for 1998. That compares
    to nearly 130,000 staff-years in 1993. We are down 20,000
    staff-years in 5 years. That is as large a reduction, I
    believe, as any Federal Government agency has taken. And we are
    looking, based on the budget numbers, at further staff-year
    reductions projected for the year 2002. And I will talk a
    little bit more about that later.

                             1997 WIC Supplemental

        Also associated with this budget, we are requesting a 1997
    supplemental of $100 million for the Women, Infants, and
    Children [WIC] Program, to prevent a large drop in
    participation and to ensure a smooth transition between 1997
    and 1998.
        Let me start with the major priority areas, in terms of
    economic and trade opportunity. The new farm bill brings new
    challenges to American agriculture. The legislation provides
    farmers the flexibility to plant for the market rather than
    Government programs. This is for the major row crops. To deal
    with the added risk of farming brought about by this
    legislation--and there will be added risks as we have increased
    price volatility already occurring in major commodities--we are
    expanding crop insurance tools as part of our commitment to
    maintain a safety net for producers.

                        Revenue Insurance Pilot Program

        Last year we worked with the private insurance industry in
    developing a pilot program for revenue insurance, which
    protects farmers against price declines as well as production
    losses. Right now, insurance, to the extent that it works,
    deals with catastrophes, acts of God. We are proposing
    expanding this to include price/revenue insurance. We are
    proposing that this program be offered nationwide this next
    year.
        This will be a budget-neutral proposal and provide for a
    comprehensive set of improvements in the crop insurance
    programs. My statement talks a little bit about the
    improvements in administration of it. But of particular
    interest to the Appropriations Committee, is the proposal would
    change both the amount of discretionary funds needed to operate
    the program and the range of expenses that would be paid with
    such funds.

                                   Safety Net

        As part of our safety net proposals, the committee should
    be aware that we are requesting the authorizing committees to
    give us authority to extend commodity loans beyond their 9-
    month levels, in certain circumstances where there is great
    price volatility, allowing for managed haying and grazing of
    CRP acreage, increased planting flexibility, and providing for
    flexibility in the timing of production flexibility contract
    services. We are also proposing changes in the farm credit
    area.
        Also, to help farmers deal with the added risks of farming,
    we are requesting appropriated funds to expand the collection
    and dissemination of weather data for agricultural areas. We
    are concerned that we need more accurate weather forecasting,
    which would help producers mitigate the adverse impacts of
    weather-related events.
        The most recent one was the freeze in south Florida, where,
    what we are seeing is that the agriculture component of the
    National Weather Service is basically being reduced in terms of
    the separate reporting stations and operations. We think that
    we need to augment some of those in our budget as well.
        On the area of farm credit, we continue to provide
    essential financial support for those who cannot obtain credit
    elsewhere. We are proposing these programs be funded at about a
    level of $2.8 billion in loans and guarantees. Portions of both
    direct and guaranteed farm operating and farm ownership loans
    will be targeted to beginning and socially disadvantaged
    farmers.

                         Socially Disadvantaged Farmers

        We are also requesting that $5 million be appropriated for
    fiscal year 1998 to continue the outreach program for socially
    disadvantaged farmers. Only $1 million was appropriated in
    1997. We have allocated a little bit extra from our fund for
    rural America, but we believe it is very important to ensure
    that members of these groups receive the training and
    management assistance necessary to remain in farming.
        In the area of trade we have had some great success. Last
    year we had a record level of nearly $60 billion in exports
    that we achieved. We believe trade is the ultimate safety net.
    One of every two acres of production in America goes for
    products that go overseas. It is critical that we continue our
    trade expansion efforts.

                                  U.S. Exports

        Changes in the domestic farm programs have made America's
    farmers and ranchers more dependent than ever on exports. In
    addition, although many tariffs and trade barriers have been
    lowered, we continually face new challenges in our efforts to
    access new markets, such as phony sanitary or phytosanitary
    measures that are not based on sound science, as well as,
    concerns about genetically engineered products. Competition
    remains keen.
        Our budget proposals continue our strong commitment to
    export promotion and growth. They provide a total program level
    of just under $7.7 billion for the Department's international
    programs. Funding for most of these programs is either
    maintained at the current levels or increased.
        In the case of the Export Enhancement Program, the budget
    provides funding at the maximum level permitted by the 1996
    farm bill.
        In the area of rural development, portions of rural America
    continue to face persistent poverty, lack of basic amenities,
    and limited economic opportunity.

                    Empowerment Zones/Enterprise Initiative

        The budget provides funding for several key administration
    initiatives to address these problems, including the
    empowerment zone/enterprise initiative, the water 2000
    initiative, the President's national homeowner initiative, and
    the administration's national information superhighway
    initiative.
        The budget provides for about $9.1 billion in loans and
    grants under our rural development programs, which is about $1
    billion more than can be supported with the 1997 appropriation.
    This includes $1 billion for single family housing direct
    loans.
        Further, we are proposing that $689 million of the budget
    authority for rural development, which is enough to support
    about $2.5 billion in loans and grants, be provided under the
    Rural Community Advancement Program [RCAP] authorized by the
    new farm bill. That will give greater flexibility for the
    States to set priorities and allow some limited block granting
    as well.

                             Fund for Rural America

        As most of you know, we have a Fund for Rural America,
    which was established in the farm bill, which provided up to
    $100 million a year in additional funding for critical rural
    development and high-priority research. We are proposing a
    technical correction in that bill, which we will be glad to
    talk about later.
        In the area of research, we are proposing $1.8 billion for
    research, education, and extension. I will not go into that in
    great detail, other than to say, that the priorities in that
    area, including promotion of development of sustainable farming
    systems, long-term global competitiveness, and new and improved
    products, are all the things that will be part of that. Also,
    Congress will have to reauthorize the research title of the
    farm bill this year.
        In 1998, we will also conduct a census of agriculture for
    the first time, and thereby expand significantly its role as an
    information provider. Although we were appropriated funding for
    the census in 1997, the authorization legislation to transfer
    the function from Commerce to USDA has not been passed. I urge
    you to see if you can do that.

                            Marketing and Inspection

        In the marketing and inspection area, we are making
    excellent progress in combating many plant and animal pests and
    diseases, such as brucellosis. The 1998 budget also provides
    funds for pest detection activities, such as Karnal bunt, a
    wheat fungus, and agricultural quarantine inspection along the
    borders.
        In addition, we have several proposals regarding packer
    market competition and poultry industry competition and
    compliance recommended by the Advisory Committee on
    Agricultural Concentration. We believe very strongly that the
    increased concentration in agriculture, particularly in the
    livestock industry, is a threat to family farm operations. This
    is an area that we are looking at very closely.
        So that covers the area of economic opportunity.
        Quickly, I would like to turn to the area of healthy, safe,
    and affordable food supplies. Obviously, the main part of that
    is completing our implementation of the Hazard Analysis and
    Critical Control Point [HACCP] System, which is a performance-
    based system to inspect meat and poultry. We are requesting a
    current law budget of $591.2 million in that area, to inspect
    meat and poultry. That is a $17.2 million increase over the
    1997 level, to maintain inspection and continue making
    investments in technology, training, and science.

                               User Fee proposal

        Legislation will be proposed, I should reinforce this
    because it is very controversial, to recover the direct cost of
    providing inspection to slaughter plants. In-plant inspection
    we are asking this to be provided for by user fees which is
    estimated at $390 million in 1998. This user fee proposal
    assures that the resources will be available to provide the
    level of inspection necessary to meet the demand for such
    services without being subject to annual budget pressures. This
    action will also reduce the pressure to trade off investment
    and improving inspection with the need to meet legislative
    requirements for providing information.
        I might also mention this little side note. Livestock is
    one-half of the gross sales of American agriculture. Fifty
    percent of everything we sell in American agriculture, from
    farmer to rancher, through value added, is in livestock. It is
    billions of dollars a year. Half of that, by the way, is in the
    cattle industry.
        Our point is that we have to continue to convince the
    American consumers, which we have successfully done, that their
    meat and poultry is safe. One outbreak of a problem causes a
    great reflection of fear on the part of the consumer. We have
    been lucky that we have not had the problems nor the resistance
    to good science, as we have seen in other parts of the world,
    particularly with Western Europe, where we saw meat consumption
    in Germany fall 50 percent the month after the BSE or mad cow
    incident came up, and there was not one reported case of BSE in
    Germany.
        We do not have it in this country. We have safe meat and
    poultry. The public is convinced that we do. And we have to
    make sure that we continue to fund this meat and poultry
    inspection operation to continue that consumer confidence.
        We worry that there may not be enough funds in the budget
    without some form of user fee, but I recognize the
    controversial nature of this particular proposal.

                                    Research

        As part of the President's recently announced food safety
    initiative, we are also requesting $9.1 million for research,
    education, and improved inspection systems, working with
    cooperative research land-grant universities, tracing foodborne
    illnesses. We are requesting an increase of $10.2 million be
    made available to the Agricultural Marketing Service [AMS] to
    administer the pesticide data program. We believe that funding
    for this program within USDA is preferable to the current
    funding arrangement through the Environmental Protection Agency
    [EPA], because we are largely the ones involved in the issue of
    application of pesticides.

                               Food and Nutrition

        In the area of food and in the area of nutrition programs,
    we are proud to say that WIC has grown to full participation,
    achieving a longstanding bipartisan goal. A budget request of
    $4.1 billion is proposed for 1998, to provide adequate
    resources to support full funding for WIC at 7.5 million
    participants. We will continue to work with the States to
    improve caseload management and to operate the program within
    available funds.
        We have also requested $7.8 billion for the School Lunch
    and Child Nutrition Programs, and we have stepped up our
    nutrition education activities, designed to help schools serve
    more nutritious meals and to teach children healthier eating
    habits. We are also requesting $12 million for a new human
    nutrition initiative in 1998, with increases each year until
    the initiative reaches $53 million in the year 2002.
        Virtually all the human nutrition research in Government is
    conducted by the Department of Agriculture. The main centers
    you may have heard of are at Tufts and at the Texas Medical
    Center in Houston. But we have centers at the University of
    Arkansas, where we do a lot of human nutrition research. And we
    believe this is important to understand better the relationship
    between diet, cognitive development, and health, particularly
    for infants and children.
        In the area of nutrition assistance, we are working
    actively with the States to implement welfare reform. We plan
    to offer modest legislative changes to the authorizing
    committees to moderate the harsher aspects of welfare reform,
    to provide a softer landing and extend a helping hand to anyone
    able to and willing to work but unable to find a job. This
    legislation would add some money to the budget, and it is
    something you may want to ask me about later.

                                  Food Rescue

        I also want to call your attention to a nonbudget item, but
    USDA, in the last few years, has adopted a major initiative in
    the area of food rescue and gleaning. Congress passed the Bill
    Emerson Good Samaritan Act this past summer, which relieves
    people of liability in most cases for donating surplus food.
        We estimate that, institutionally in this country, we throw
    away 15 million meals a day of perfectly healthy food. And we
    are trying to facilitate, through food banks and through
    community operations, of not wasting good food. USDA happens to
    have the only cafeteria in Government which routinely donates
    our surplus food to the D.C. Central Food Kitchen.
        As a result of this bill, several American companies now
    donate several hundred thousand sandwiches a month into the
    community food bank operation that was otherwise being thrown
    away. And this is an area where Government can be a
    facilitator, without costing any money. It is something that we
    think is part of the community spirit of this country. The Bill
    Emerson law had a lot to do with that.

                                  Conservation

        The third priority is sensible management of natural
    resources. The 1996 farm bill extended the Department's
    conservation responsibilities by creating new programs.
    Actually, if one were to look at the 1996 farm bill, you would
    say it was largely a conservation farm bill. It included a lot
    of new programs.
        We face a critical year in deciding the fate of 21 million
    acres that are coming out of existing CRP contracts. The
    revised CRP will target only our most environmentally sensitive
    lands, so that we get the maximum environmental benefit for
    each dollar spent. Less environmentally sensitive land, better
    suited for planting crops, will be returned to production.
        Using Commodity Credit Corporation [CCC] funds, our goal is
    to reach and then maintain the 36 million-acre maximum
    enrollment established by Congress. Although it will take us
    some time to get there, this is probably the most significant
    part, conservationwise, of the last farm bill.
        In addition, in association with CRP, CCC funds will be
    used to enroll an additional 212,000 acres into the Wetlands
    Reserve Program [WRP], which would bring total enrollment to
    about 655,000 acres in 1998, and reaching a goal of nearly 1
    million acres by the year 2002.
        Finally, we are requesting appropriated funds of $821
    million for our Natural Resources Conservation Service [NRCS]
    to carry out its work.

                                  Reinvention

        The final area is reinvention and saving money. USDA
    continues to implement the reorganization which was authorized
    by Congress in 1994. We have already consolidated agencies and
    restructured the headquarters field offices. Our initial
    streamlining efforts have resulted in substantial reductions in
    employment, and indicate a savings of more than $4 billion by
    the year 1999, and nearly $8 billion by the year 2002.
        We are continuing to close and collate field offices to
    streamline operations, to provide more efficient services.
    Further streamlining and downsizing, as well as better
    management of technology services across the Department is
    underway.
        USDA's total Federal and county employment in 1996 was over
    16,000 below its 1993 levels. And by the year 2002, it will be
    more than 26,000 below the 1993 levels. USDA's employment today
    is lower than it has been at any time in the last 30 years.
        When we were asked to streamline and downsize, and this of
    course started before I got into this job, we are doing just
    that. I also want to point out something that many of you have
    told me individually. There are a lot of rumors out there about
    further closings of offices. Kentucky is one State that I have
    heard from a lot of folks out there. I sent a letter out,
    saying that I have not approved any additional plans to close
    field offices beyond the level of 2,500 field offices that we
    had agreed to as part of the reorganization. We are about 2,650
    now, down from about 4,300.
        Senator Cochran. Mr. Secretary, since you specifically
    mentioned Kentucky, I know Senator McConnell has the obligation
    to chair an appropriations subcommittee at 10:30. If you would
    permit me, I am going to yield time for him to ask you a
    question on that.
        Secretary Glickman. That is why I referred specifically to
    you. Because I knew you would have an interest in this.
        Senator Cochran. Senator McConnell.

                           FSA Field Office Closings

        Senator McConnell. Thank you so much, Senator Cochran. I
    really appreciate this. I will not take but a moment.
        As you know, because we talked about this, the State
    executive director in Kentucky is running around saying that 50
    offices are going to be closed. You had told me and told
    Senator Ford previously that this was a work in progress.
        Secretary Glickman. That is correct.
        Senator McConnell. That nobody was to make announcements
    yet.
        Secretary Glickman. That is correct.
        Senator McConnell. This fellow seems to me to be totally
    out of control. I mean Senator Ford, who is obviously not of my
    party, said to the Farm Bureau just this week that he has told
    you all you ought to either shut him up or fire him. And my
    concern is this fellow is sort of running amok across our
    State. Does he have the authority to do that?
        Secretary Glickman. Let me speak to this in a little more
    generic way, without talking about any individual. I have
    talked to this particular gentleman, because he is not totally
    out of line. He got information from the national office to
    prepare projections of closings based upon a hypothetical plan.
    Let me just explain it briefly.
        Our goal was to get down to 2,500 offices, service centers.
    These would be combined with USDA offices throughout the
    country. We are close to that. The President's budget, as
    proposed, has dollar numbers within the USDA request that would
    require us to get down to 2,000. That is presuming that you all
    adopt an appropriations bill that is compatible with his total
    budget, which you may or may not do.
        There was some discussion by some State executive directors
    [SED] around the country, and I was aware of it, which assumed
    that if we were going to go get down to 2,000 offices, that
    would mean some field offices with fewer people. Therefore, you
    would have to lay off more people in the process, because you
    would have these offices with fewer people. So some of them, I
    suppose you could call it a rump group of which I was aware,
    decided to come up with an option by which we would reduce down
    to a level where we could keep much more of our staff
    functioning, helping people, but we would not have as many
    offices. So that was the option that surfaced from the rump
    group.
        Now, what happened inside the Department is that the
    directive went out to some of the SED's to determine how they
    would handle this, ``option'' of going down to 1,500, which, by
    the way, is 500 more than is proposed in the President's
    budget. Once I heard about it I sent out a letter last week to
    all of you which basically said there is no plan on paper to
    close further offices. I happened to see a wire story about
    Kentucky concerning something that the State executive director
    had said. Just let me say, it has happened in other States as
    well, Senator, besides Kentucky.
        Senator McConnell. Mr. Secretary, I do not want to belabor
    this, and I really thank Senator Cochran for giving me a couple
    of minutes here. I got your letter. The point is he is still
    doing that. I strongly recommend that if he does not have the
    authority to be saying what he is saying, you, as his boss,
    ought to tell him to quit saying it. We understand that some
    offices are going to be closed. You are not going to get a
    wholesale complaint from me about that. I understand the
    budgetary needs. But he has been just bouncing off the walls,
    running around the State. We have a turmoil, a general turmoil,
    down there on this. And I really think you ought to shut him up
    until you finish your work.
        Secretary Glickman. Message heard.
        Senator McConnell. Thank you very much, Mr. Chairman.
        Senator Cochran. Thank you, Senator.
        Secretary Glickman. Thank you.
        Senator Cochran. Mr. Secretary, you may complete your
    testimony.

                        Electronic Benefit Transfer Card

        Secretary Glickman. Besides talking about that issue, I
    want to talk a little bit about efforts in the reinvention area
    to combat fraud and reinvent administrative processes. We are
    working to complete the Electronic Benefit Transfer [EBT]
    Program in food stamps. The debit card, we believe, will
    significantly save taxpayer dollars and reduce fraud. This
    program is operational in 18 States, and in development in all
    other States. We are also stepping up our management and
    integrity efforts in child nutrition and WIC.
        In the area of single direct family housing, we have moved
    to a program called dedicated loans, origination and servicing
    [DLOS], which is a centralized servicing system of housing. We
    expect that to save $400 million over the next 5 years, while
    providing better service to our borrowers and reducing
    delinquencies.
        I have talked to you a little bit about the potential
    impact of the budget on USDA service center locations. I know
    that this creates some hardship in certain places in the
    country. There is no question we are going to have to probably
    continue to reduce, but I assure you that we will create no
    plans on further reductions without notifying you and having
    you participate in that process.
        I do think, in this era of computers, fax machines, and
    electronic communications, that we do not need the same field
    office structure we needed in 1935. We have begun the process
    of reducing it. But, above all, we have to always keep in mind
    that how we serve farmers and ranchers, how we serve the people
    who need our programs, is the key point in terms of that field
    office structure.

                                  Civil Rights

        Finally, Mr. Chairman, I want to mention civil rights. Your
    committee, last year, helped to provide some additional money
    to strengthen staff resources in the area. We have many
    activities underway now to reduce the embarrassing backlog of
    equal employment opportunity and program discrimination
    complaint cases in USDA. A few months ago, I created a civil
    rights action team to do a thorough audit of USDA civil rights
    issues and provide me with recommendations for improvements.
        We held a series of listening sessions around the country,
    to hear from employees and program participants. Deputy
    Secretary Rominger and I attended most of them. I have received
    a copy of this report, which we will get to you. Tomorrow I
    will announce some steps that I am going to take to try to make
    it clear that our Department ought to be viewed in a positive
    way, not a negative way, in terms of how we treat our employees
    and how we treat our customers.
        In addition, I have directed the agencies that serve
    farmers to establish special outreach offices in the field. I
    am committed to making positive changes to USDA to ensure that
    both our employees and our customers are treated fairly and
    with dignity.
        Finally, let me just thank you for your help. It is no
    secret that our committee's budget was one of the few that
    passed on time, the USDA's budget. And in some cases, we were
    the only agency in Government operating when there were
    shutdowns. And I would like to think it was because of the
    cooperative help with which we have worked together, as well as
    the bipartisan spirit in agricultural programs.
        So I thank you very much, and look forward to your
    questions.

                               Prepared Statement

        Senator Cochran. Thank you very much, Mr. Secretary. We
    appreciate very much your cooperation with the committee and
    your helpful description of this budget request. We have your
    complete statement, and it will be made part of the record.
        [The statement follows:]
                       Prepared Statement of Dan Glickman
        Mr. Chairman, Members of the Committee, it is a privilege to appear
    before you to discuss the 1998 budget for the Department of Agriculture
    (USDA).
        I would first like to express my appreciation for the hard work of
    this Committee last year that resulted in the timely enactment of the
    1997 Agriculture Appropriations Act. We are grateful for your efforts.
        The budget again this year was developed under very tight funding
    constraints. It includes savings that are required to meet the
    President's objective of balancing the budget by the year 2002 while
    positively addressing strategic goals for programs that meet the needs
    of people and protect the Nation's natural resources. There are four
    fundamental priorities that we focused on in developing our budget
    proposals for 1998. These include: expanding economic and trade
    opportunities; ensuring a healthy, safe, affordable food supply;
    managing our natural resources in a sensible way; and reinventing
    government and saving taxpayer money.
        In order to meet our budget priorities, it was necessary to make
    hard decisions to restrain, reduce, and redirect spending in a number
    of areas; to include some new user fee proposals; to require employment
    cuts in many of our major agencies; to absorb part of the increased pay
    and inflation costs; and to change the way we do business. I should
    also point out that through recent changes in legislation, USDA also
    contributes to balancing the budget through reductions in mandatory
    spending. The Federal Agriculture Improvement and Reform Act of 1996
    (the 1996 Act) reduces budgetary exposure by providing fixed and
    generally declining market transition payments over a 7-year period.
    Also, implementation of the USDA portion of welfare reform is projected
    to save $3.4 billion in 1998 and a total of about $21 billion over 5
    years.
        The President's budget proposes $60.3 billion in budget authority
    for 1998 for the Department of Agriculture compared to a current
    estimate of $60.6 billion for 1997. The staff year level associated
    with the proposed budget is also worthy of mention. USDA is ahead of
    schedule in reducing employment based on the original reorganization
    and streamlining plan. By the end of 1996, we reduced our total staff
    years including Federal and non-Federal to 113,000--a reduction of
    8,000 below our original estimate and more than 16,000 below the 1993
    level of 130,000. Those reductions were primarily achieved through
    normal attrition and the use of early outs and buyouts.
        I would like to mention also that, while the Department and its
    clientele will make the necessary sacrifices to meet the needs to
    balance the budget, we believe the economy will benefit in the long
    run. However, I would like to register some concern about the
    potentially adverse effects on the Department's clientele of the
    inflexible approach pursued in the balanced budget amendment, which
    could limit our ability to respond to natural disasters, reduce food
    stamp benefits in times when the need is greatest, and create intense
    pressures to reduce valuable programs for our farm and rural clientele.
        The request before this Committee for discretionary budget
    authority is $13.2 billion. However, the budget proposed legislation in
    several areas of the Department that if enacted would reduce
    discretionary budget authority to $12.7 billion, the same level as
    1997. The legislation includes new user fees for the Food Safety and
    Inspection Service, the Agricultural Marketing Service, and the Grain
    Inspection, Packers and Stockyards Administration; and legislation to
    limit reimbursements paid to private insurance companies in the crop
    insurance program.
        Also associated with the 1998 budget, we are requesting a 1997
    supplemental of $100 million for the WIC program to prevent a large
    drop in participation and to ensure a smooth transition between 1997
    and 1998. We are also requesting a $6.2 million supplemental for the
    Nutrition Education and Training (NET) program to restore funds lost
    when the Welfare Reform Act removed the direct funding mechanism of
    this program, leaving it with no funds. NET provides State level
    technical assistance for nutrition education throughout the Child
    Nutrition Programs. The Administration's supplemental proposals are
    fully offset including a rescission of $50 million in budget authority
    for the Public Law 480 Title I program.
                     farm and foreign agricultural services
        A fundamental goal of the Farm and Foreign Agricultural Services
    mission area is the expansion of economic and trade opportunities to
    further income growth and development throughout rural America. How we
    accomplish our mission will in large part be determined by the new
    policies set in place by the 1996 Act, and one of our primary tasks
    this past year has been to implement the policy and program changes
    provided for in the 1996 Act. As a result of our efforts, nearly 99
    percent of eligible producers entered into production flexibility
    contracts.
        Although the 1996 Act has provided much greater flexibility to our
    farmers in their production and marketing decisions, it has also
    increased the risks inherent in farming by reducing the Government's
    role in supporting incomes and managing supply and demand. As a
    consequence, 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 risk.
        In this regard the Committee should be aware that we will be
    proposing legislation to the authorizing committees to improve the
    safety net for farmers. Our legislation provides discretionary
    authority to extend commodity loans, allows managed haying and grazing
    of Conservation Reserve Program acreage, increases planting flexibility
    and provides for flexibility in timing of production flexibility
    contract payments. Legislation will also be proposed to expand revenue
    insurance coverage nationwide, improve farm credit services, and make
    other technical adjustments to improve farm programs.
        At the same time, we will continue in our efforts to reduce
    expenses, improve efficiency, and provide improved service to our
    customers. A major focus of these efforts is the establishment of Field
    Office Service Centers and associated steps to enhance services in the
    field.
    Farm Service Agency
        The Farm Service Agency (FSA) administers the farm credit programs,
    commodity programs, several conservation programs, and activities of
    the Commodity Credit Corporation (CCC). The consolidation of staffs and
    county offices under FSA continues to be a major focus of our
    streamlining efforts.
        FSA staffing has changed dramatically as a result of these
    streamlining efforts. FSA Federal and county staffing is projected to
    be down from 19,008 staff years at the end of 1996 to 17,875 staff
    years at the end of 1997 as a result of buyouts, RIF's, and attrition.
    The 1998 budget for FSA salaries and expenses proposes a program level
    of $954.1 million, estimated to support a ceiling of 15,756 staff
    years, suggesting further separations in 1998 of approximately 2,119
    staff years.
    Farm Credit Programs
        The farm credit programs administered by FSA continue to serve as a
    vital source of credit for our Nation's farmers and ranchers. Over the
    last two decades or more, these programs have changed significantly.
    Guarantees of loans made by private lenders now comprise the bulk of
    activity. A portion of the direct loans are targeted to beginning and
    socially disadvantaged farmers and ranchers, and far more attention
    than in prior years is being paid to repayment ability and adequate
    security.
        The 1998 budget provides for a total of about $2.8 billion in farm
    credit program loans and guarantees, which is about $300 million less
    than the amount supported by the 1997 appropriation. Of the reduction,
    approximately $200 million is related to the guarantee portion of the
    farm ownership loan program. The $400 million guaranteed farm ownership
    program provided for in the 1998 budget reflects the actual demand for
    the program in recent years. The remaining farm ownership and operating
    programs are generally funded at the 1997 supportable levels with a
    modest increase for the credit sales program. In addition, the 1998
    budget proposes to maintain the emergency disaster loan program at $25
    million.
    Commodity Credit Corporation
        The Commodity Credit Corporation (CCC) programs are carried out by
    a number of agencies. It is the source of funding for most of the
    conservation programs administered by FSA and the Natural Resources
    Conservation Service (NRCS), commodity programs administered by FSA,
    and most of the export programs administered by the Foreign
    Agricultural Service (FAS). The CCC is also the source of funding for
    certain administrative support services associated with delivery of
    these programs.
        Provisions of the 1996 Act limit CCC expenditures for computer
    equipment and cap reimbursements to agencies for administrative support
    services at 1995 levels. These provisions impose significant
    restrictions on the availability of CCC funds for transfers and
    reimbursable agreements used to fund conservation technical assistance
    and other support services for the conservation, commodity, and export
    programs.
        The request for 1998 appropriations to reimburse CCC for net
    realized losses will cover the amount of the loss incurred 2 years
    earlier which has not been previously reimbursed. The 1998 budget
    requests $0.8 billion for the balance of 1996 losses not reimbursed
    through appropriations in 1996 and 1997. Appropriations to reimburse
    CCC for net realized losses incurred in 1997 will be requested in the
    1999 budget.
        Reflecting the pattern of outlays for the commodity programs, total
    CCC outlays have declined from a peak of $26 billion in 1986 to less
    than $5 billion in 1996. Including conservation programs and other
    programs for which CCC funding was authorized by the 1996 Act, 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 2002.
    Conservation Programs
        The Conservation Reserve Program (CRP) is the major conservation
    program administered by FSA. The 1996 Act reauthorized the CRP,
    switched financing for the program from appropriated funds to CCC, and
    set maximum enrollment at 36.4 million acres. The 1998 budget assumes a
    competitive bid process will be used to enroll nearly 19 million acres
    of new and expiring acres in 1997. Enrollments in subsequent years are
    assumed to gradually increase total enrollment to 36.4 million acres by
    2002.
        The budget also reflects provisions of the 1996 Act authorizing CCC
    funding for a number of new conservation programs most of which will be
    administered by the NRCS in cooperation with FSA.
        The Agricultural Conservation Program, the Colorado River Basin
    Salinity Control Program, the Water Quality Incentives Program, and the
    Great Plains Conservation Program were replaced by the Environmental
    Quality Incentives Program. The Flood Risk Reduction Program provides
    incentives to move farming operations from frequently flooded land, and
    the Conservation Farm Option gives producers incentives to create
    comprehensive farm plans. The Wildlife Habitat Incentives Program
    provides cost-share assistance to landowners to implement management
    practices improving wildlife habitat. The Farmland Protection Program
    provides for the purchase of easements limiting nonagricultural uses on
    prime and unique farmland.
        The 1998 budget does not include a request for funding the
    Emergency Conservation Program (ECP). Under this program, the
    Department has shared the cost of carrying out practices to assist and
    encourage farmers to rehabilitate farmland damaged by natural
    disasters. ECP received emergency funds of $25 million in 1997. The
    President's Budget, however, proposes the establishment of a new $5.8
    billion contingent reserve for emergency funding requirements for
    various disaster assistance needs. This fund would be available to the
    President for disaster relief purposes including use in the
    Department's emergency conservation activities.
        CCC outlays for CRP and other conservation programs are projected
    in the 1998 budget to increase from negligible levels in 1996, when
    rental payments were funded through appropriations, to $1.9 billion in
    1997 and to $2.2 billion in 1998.
    Commodity Programs
        The 1998 budget projects CCC outlays for commodity price and income
    support programs administered by FSA will increase from about $5.0
    billion in 1997 to $6.2 billion in 1998, and then decline again to
    about $4.0 billion by 2002. These projections largely reflect the
    pattern of expenditures established in the 1996 Act, with payments for
    production flexibility contracts increasing between 1997 and 1998 and
    declining thereafter.
        The 1996 Act fundamentally restructured income support programs and
    discontinued supply management programs for producers of feed grains,
    wheat, upland cotton, and rice. The income support programs were
    changed by replacing the deficiency payment program, which was tied to
    market prices and was in place since the early 1970's, with a new
    program of payments that generally are not related to current plantings
    or to market prices. The 1996 Act also expands planting flexibility and
    suspends the authority for the Secretary to require farmers to idle a
    certain percentage of their cropland in order to be eligible for income
    support payments.
        Dairy policy also is changed under the 1996 Act with phaseout of
    price support and consolidation of milk marketing orders. The new law
    also alters the sugar and peanut programs.
        These changes have diminished the traditional role of the farm
    programs as a buffer against fluctuations in production and commodity
    prices. Our greatest challenge from the 1996 Act 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. That is
    why risk management has become a top priority, and why the President
    and the Department attach such importance to enactment of legislation
    designed to improve the programs that help farmers better manage
    production and market risk.
    Risk Management Agency
        The 1998 budget provides funding for the crop insurance program
    administered by the Risk Management Agency (RMA) under both current law
    and new legislation to be submitted to the authorizing committees to
    improve the safety net for farmers by establishing a nationwide program
    for revenue insurance. Revenue insurance protects producers' income
    against shortfalls due to either price or yield fluctuations. Our
    legislative proposal is budget neutral overall. However, it provides
    for a reduction in the discretionary spending portion of program
    expenses, which is likely to be of particular interest to the
    Appropriations Committees.
        Under current law, funding for sales commissions, which have been
    treated as mandatory spending, shift to discretionary spending in 1998.
    The budget provides $203 million for this expense. Further, it provides
    $68 million in discretionary spending for Risk Management Agency's
    (RMA) own administrative expenses. All other expenses of RMA are
    treated as mandatory, although subject to appropriation, for which the
    budget provides ``such sums as may be necessary.'' The 1996 Act created
    RMA to administer the crop insurance program and to carry out other
    risk management functions. Previously, the crop insurance program was
    administered by FSA, which retains responsibility for the Noninsured
    Assistance Program (NAP).
        The Administration's proposal to establish a nationwide program for
    revenue insurance reflects the strong demand among producers that we
    have seen for new revenue insurance products such as Crop Revenue
    Coverage (CRC), Income Protection (IP) and Revenue Assurance (RA).
    Current law, however, limits RMA's authorities in the revenue insurance
    area to pilot programs. In implementing the revenue insurance programs,
    no additional premium subsidy has been paid, and the expected 1996 loss
    ratio experience is within the statutory limits and comparable to RMA's
    standard multi-peril production risk coverage. The only additional cost
    to the Government has been a modest increase in delivery expenses,
    including underwriting gain paid to the insurance companies.
        To offset the additional delivery expenses and the expected growth
    in market penetration involved in expanding revenue insurance
    nationwide, the Administration's proposal provides for a change in the
    administrative (delivery) expense reimbursements paid to private
    insurance companies, as well as an incremental reduction in the loss
    ratio. The Administration is proposing that the reimbursement rate for
    delivery expenses be reduced from 28 percent under current law to 24.5
    percent of the premium for multi-peril coverage. This reduction is
    based on extensive analysis conducted by RMA and the General Accounting
    Office. It will reduce discretionary spending for delivery expenses
    from $203 million under current law to $149 million under the proposal.
    Further, our proposal would make a portion of the overall reimbursement
    rate discretionary and subject to appropriation whereas current law
    treats only the sales commissions portion of the reimbursement as
    discretionary. We believe this change offers insurance companies more
    flexibility for adjusting to the reduced reimbursement rate.
        Finally, the legislative proposal will provide more flexibility for
    determining subsidy amounts and establishing pilot programs. It will
    also require a processing fee for RMA's review and approval of industry
    requests for new insurance products, and make certain changes in
    program compliance requirements. None of these changes is expected to
    have a budgetary impact.
    International Trade and Export Programs
        Exports of U.S. farm and food products achieved a second straight
    year of robust growth in 1996 and set another record at just under $60
    billion. With the strong, back-to-back gains of the last 2 years, U.S.
    agricultural exports have increased by nearly $22 billion or over 50
    percent since 1991. As a result, agriculture led all U.S. trade
    categories as the most significant contributor to the U.S. balance of
    trade and supported one million jobs both on and off the farm, one-
    third of which were in our rural areas.
        These strong export gains provide convincing evidence that American
    agriculture is reaping the benefits of the North American Free Trade
    Agreement, the Uruguay Round Agreement on Agriculture, and the more
    than 200 other trade agreements the Administration has successfully
    negotiated. As a result of these agreements, we now have the most open
    world market of this century and enormous opportunities for additional
    export growth.
        Further progress on the trade front is crucial to American farmers
    and ranchers. Changes in the domestic farm programs made by the 1996
    Act have made U.S. producers more dependent than ever on exports to
    maintain and expand their income. 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 opportunities. At
    the same time, we must continue to adapt and improve these efforts to
    meet today's challenges and keep pace with the competition.
        The 1998 budget continues the Administration's commitment to export
    promotion and growth by providing a total program level of just under
    $7.7 billion for the Department's international programs and
    activities.
        For the CCC export credit guarantee programs, the budget provides a
    total program level of $5.7 billion, an increase of $200 million above
    the 1997 level. The increase consists of export credit guarantees which
    will be made available to emerging markets for U.S. agricultural
    products. This complies with provisions of the 1996 Act which require
    that $1.0 billion of export credit guarantees be made available to
    emerging agricultural markets during the 1996 to 2002 period; these
    guarantees will be made available in annual installments of $200
    million beginning in 1998.
        The budget also continues two other export credit initiatives.
    Included within the overall program level for CCC export credit
    guarantees are $350 million of supplier credit guarantees, an increase
    of $100 million above the 1997 level. These guarantees, which were
    first made available in late 1996, allow exporters of U.S. agricultural
    products to obtain CCC guarantees for short-term credit extended
    directly to foreign buyers. Supplier credit guarantees are expected to
    be particularly useful in facilitating sales of processed and high
    value products.
        The budget also includes $100 million of facilities financing
    guarantees, unchanged from the current estimate for 1997. Under this
    initiative, CCC will provide guarantees to encourage the establishment
    or improvement of agricultural related facilities and/or services to
    address infrastructure barriers to increasing sales of U.S.
    agricultural products in overseas markets.
        The budget provides higher program levels for our two export
    subsidy programs in 1998, the Export Enhancement Program (EEP) and
    Dairy Export Incentive Program (DEIP). In the case of EEP, we propose
    to make available $500 million, the maximum level permitted by
    provisions of the 1996 Act and a $400 million increase over 1997. As
    you are probably aware, EEP and DEIP program activity was reduced in
    1996 as a result of world commodity supply and competitive conditions.
    The higher program levels established for 1998 will allow for increased
    sales under the programs in response to changed market conditions.
        For the Market Access Program (MAP), formerly the Market Promotion
    Program, the budget continues funding at its maximum authorized level
    of $90 million. During the past year, changes have been made in MAP to
    make it more targeted and more friendly to small businesses. In 1996,
    56 percent of the funds for promotion of branded products was made
    available to small entities, up from 41 percent in 1994, and another 20
    percent was made available to farmer cooperatives. Additional program
    improvements have recently been made which are designed to broaden
    participation, clarify program participation criteria, strengthen
    evaluation and accountability, and simplify program requirements for
    participants.
        For the Public Law 480 foreign food assistance programs, the budget
    proposes a total program level of $990 million. This is expected to
    provide for approximately 3.2 million metric tons of commodity
    assistance, unchanged from the level currently estimated for 1997.
        I would like to highlight one component of our Public Law 480
    budget proposals in particular. It transfers the budget and
    expenditures for the Title I concessional sales program from the
    international affairs function to the agriculture function of the
    Federal budget. This proposal is an outgrowth of recent changes in the
    Title I statutory authorities which have placed a much greater emphasis
    on the program's market development objectives. With these changes, the
    role and importance of the Title I program in the Department's overall
    long-term market development strategy has increased. Shifting Title I
    to the agriculture function will allow the program to be managed and
    budgeted as part of a consistent package of agricultural export
    programs; all of our other export programs are presently included in
    the agriculture function. I urge your favorable consideration of this
    proposal.
        For the Foreign Agricultural Service, which administers the
    Department's important trade, export, and international cooperation
    activities, the budget provides appropriated funding of $151 million,
    an increase of $15 million above the 1997 level. Most of the proposed
    increase will be used to help meet the costs of several FAS activities
    which are currently supported with CCC funds made available to FAS
    through reimbursable agreements. The budget proposes that future
    funding of these activities will be included in the FAS appropriation;
    with this change their funding will no longer be subject to the annual
    limitation on CCC reimbursable agreements established by the 1996 Act.
    These activities include the Emerging Markets Program, under which
    technical assistance and training are provided to promising, overseas
    growth markets where there is potential to increase U.S. exports
    significantly over the long term. They also include the operating costs
    of the CCC Computer Facility, which serves as the Department's
    collection point for international production intelligence and crop
    estimates, and for other, related FAS Information Resources Management
    costs.
        The budget also includes two innovative proposals to assist FAS
    address variability in the annual operating costs of its overseas
    offices. This variability can result from a number of factors,
    including exchange rate fluctuations. The FAS budget provides an
    advance appropriation of $3 million for 1999 to offset wage and price
    increases that occur at its overseas posts in 1998 and that the agency
    is able to document. In addition, the budget includes language that
    will allow funds appropriated to FAS to be obligated over 2 years
    rather than 1 year; this will allow savings that may be realized in the
    cost of overseas operations to carry over for use in the following
    year. These savings generally result from exchange rate gains.
                               rural development
        Overall, the 1998 budget reflects the Administration's strong
    support for ensuring that rural Americans have the ability to take
    advantage of the same opportunities for economic growth that exist in
    urban areas. It supports the Administration's Water 2000 initiative
    which targets resources to the estimated 2.5 million rural residents
    who have some of the Nation's most serious drinking water availability,
    dependability, and quality problems. It continues support for direct
    and guaranteed loans to help meet the Administration's National
    Homeownership initiative. It provides additional support for the
    Administration's National Information Superhighway initiative. It also
    targets resources to those rural residents and communities most in need
    of assistance through the Empowerment Zones and Enterprise Communities
    (EZ/EC) initiative.
        The 1998 budget provides $175 million more budget authority for
    Rural Development than was provided by the 1997 appropriation. The
    increase is expected to support $1 billion more in loans and grants
    than is currently estimated for 1997.
        The 1996 Act authorized the delivery of the Department's rural
    development programs under provisions of the Rural Community
    Advancement Program (RCAP). RCAP allows the Department to manage a
    portion of its current array of rural development programs through an
    integrated initiative that: (1) increases flexibility to more
    effectively meet local needs; (2) reinvents program implementation and
    increases reliance on performance measures; (3) ensures participation
    in the development of State strategic plans from State and local
    officials, the non-profit and private sectors, the State Rural
    Development Councils, and others involved in the rural development
    process; and (4) targets a portion of the rural development funding to
    Native Americans. The 1998 budget fully implements RCAP, including the
    creation of block grants to the States for the administration of
    program activities similar to those conducted under the Department's
    ongoing rural development programs.
        The 1996 Act also authorized the Fund for Rural America, which made
    $100 million available for rural development and research in 1997. We
    are proposing a technical correction to this Act to correct a drafting
    error in order to move up the release date making another $100 million
    available in 1998.
    Rural Utilities Service
        Without the Department's rural utilities programs, much of rural
    America would have been unable to obtain, at reasonable prices, basic
    infrastructure such as electricity, telephone, and water and waste
    disposal services. In earlier times, progress was measured in terms of
    the number of farms and rural households receiving any level of
    services. Today, the primary need is to assure quality infrastructure
    and service at a reasonable price so that rural America can keep pace
    with modern technology and clean water requirements.
        The 1998 budget provides for $1.5 billion in electric and
    telecommunications loans, approximately the same level as 1997. Within
    the total, the 1998 budget provides for an increase of about $56
    million for 5 percent electric loans, and for reductions of $56 million
    in direct municipal and $35 million for 5 percent telecommunications
    loans. Electric and telecommunications loans made through the Federal
    Financing Bank and Treasury rate telecommunications loans would be
    funded at their 1997 levels.
        There would be $175 million in loans made by the Rural Telephone
    Bank (RTB), the same as the 1997 level. The Administration continues to
    work with the industry towards the goal of privatizing the bank on a
    reasonable schedule. The equity of RTB continues to grow and by the end
    of 1998 we estimate sufficient funds would be available to retire the
    Government-owned stock in the bank and, thus, achieve privatization
    under current law. The Administration is in the process of developing
    proposed legislation to facilitate privatization.
        With regard to the distance learning and medical link program, the
    1998 budget includes about $21 million for grants and $150 million in
    loans at the Treasury rate, which requires budget authority of $21
    million for both programs. In 1997, Congress provided budget authority
    of $9 million which the Department converted into a grant program of
    about $7.5 million and a loan program of $150 million at the Treasury
    rate. This program encompasses two of the most useful applications of
    modern telecommunications--education and medical services. Applications
    for this program are well in excess of current funding. The increase in
    grant funding will provide vitally needed assistance to some of rural
    America's most remote and poorest communities.
        The water and waste disposal program is one of the Administration's
    highest priorities. A program level of $809 million in loans and $484
    million in grants will allow the Department to continue making
    significant progress towards meeting the goals of the Administration's
    Water 2000 initiative. Water 2000 targets resources to the estimated
    2.5 million rural residents who have some of the Nation's most serious
    drinking water availability, dependability, and quality problems--
    including the estimated 400,000 rural households lacking such basic
    amenities as complete plumbing.
    Rural Housing Service
        For rural housing, the 1998 budget supports almost 120,000 housing
    units in rural America, compared to about 104,000 in 1997. It provides
    for about $3.0 billion in guaranteed single family housing loans, and
    $1.0 billion in direct single family housing loans. Interest rate
    adjustments in 1997 reduced the direct loan program to $585 million.
    Restoring the $1.0 billion program level in 1998 will require $45
    million in additional budget authority. These loans go to low and very
    low income families. Families with higher incomes are served through
    unsubsidized guarantees of loans made by private lenders. To further
    the President's National Homeownership initiative, which seeks to
    increase the rate of homeownership in the U.S. to an all-time high, the
    budget provides for $3.0 billion for unsubsidized guarantees of loans
    made by private lenders, $300 million more than the 1997 level. The
    budget includes an additional $100 million to be set aside for current
    direct loan borrowers who can afford to obtain private credit for
    refinancing. The budget also provides for $25 million in direct loans
    for the sale of inventory property.
        The rural rental housing program would be maintained at the 1997
    level of about $150 million, and the budget request reflects proposed
    legislation to shorten the loan terms from 50 to 30 years while
    amortizing the loan over 50 years. Rental assistance payments, most of
    which is needed for the renewal of expiring contracts, would be
    increased from $524 million to $593 million. This amount includes $52.5
    million in funding to replace expiring HUD Section 8 rental assistance
    contracts with less costly RHS rental assistance. The HUD budget
    request has been reduced by a corresponding amount, reflecting this
    transfer of responsibilities to USDA.
    Rural Business-Cooperative Service
        Jobs are the cornerstone of all economic development--rural as well
    as urban. The Department's role in creating jobs and improving the
    infrastructure in rural areas is both financial and supportive. Despite
    budgetary pressures, it is important that the job creation and
    retention programs of rural development remain adequately funded.
        The business and industry loan program has been expanded over
    several years from a relatively modest $100 million level to about $700
    million in guaranteed loans in 1997. In 1997, Congress provided for a
    $50 million direct loan program to augment the guaranteed loan program.
    The 1998 budget maintains the direct loan program at $50 million, the
    guaranteed loan program would be funded at $611 million.
        The Alternative Agricultural Research and Commercialization program
    would be increased from $7 million in 1997 to $10 million in 1998. This
    program in particularly useful in meeting the needs for capital to
    commercialize innovative value-added products from agricultural and
    forestry materials and animal by-products.
        The budget also proposes a change in the method of funding for the
    rural economic development loan and grant program. This program
    provides financial assistance to Rural Utilities Service (RUS)
    borrowers who use the funds to provide financing for business and
    community development projects. In 1997, the Department used interest
    generated from the voluntary cushion of credit account of RUS borrowers
    to fund a $20 million grant program, and Congress appropriated funding
    for a $12.8 million loan program. In 1998, the budget proposes to use
    the cushion of credit account to fund both the loan and grant programs.
        The budget also proposes a $2 million increase in the level of
    funding for research on rural cooperatives. This increase is provided
    within the salaries and expense account to fund cooperative agreements.
        Finally, I would mention that about $135 million of the rural
    development program funding would be targeted to EZ/EC. The EZ/EC
    initiative reaches communities with the most persistent poverty and
    other economic adversity, which have developed strategic plans for
    development.
                     food, nutrition and consumer services
        While USDA farm and food safety programs help ensure a safe and
    affordable food supply, the nutrition programs help to ensure that food
    supply is available and affordable to low-income families. The Food
    Stamp, Child Nutrition, and WIC Programs are the Department's primary
    vehicles for carrying out this Nation's food assistance policy. Our
    goal is to help ensure that no low-income child goes to bed hungry. We
    also seek funding to provide nutrition information and dietary guidance
    to all Americans in our continued long-term efforts to reduce the risk
    of diet-related health problems.
        The Food Stamp Program is estimated to cost $25.1 billion in 1998
    under current law. In addition, we are proposing a $2.5 billion
    contingency fund to cover unforeseen needs. We project that some 23.4
    million people will still need food stamps to maintain or improve their
    nutritional status during 1998. Although this number is still high, it
    is down substantially from the peak of 28 million food stamp
    participants reached in March of 1994, thanks to an improving economy.
        The budget also includes several proposed legislative changes to
    permanent food stamp law that would add an additional $0.8 billion to
    this estimate in 1998, and $3.3 billion over 5 years. We believe these
    changes are necessary to moderate the harsh effects last year's Welfare
    Reform Act are having on some food stamp eligibles.
        The Administration's proposal would extend the time limits on
    unemployed adults with no dependents from 3 months out of every 3 years
    to 6 months out of every year. At the same time, stronger penalties are
    proposed for individuals who refuse to accept employment, or fail to
    comply with work requirements. The proposal also would provide relief
    to households with high shelter costs by increasing the amount they may
    deduct from their income when applying for food stamps; and it would
    delay implementation of the ban on aid to legal immigrants for up to 5
    months while these individuals seek naturalization. Meanwhile, we
    remain committed to working with the Congress and the States to
    implement the new welfare reform provisions. We are also committed to
    modernizing benefit delivery via nationwide use of Electronic Benefit
    Transfer; and we are continuing our efforts to root out food stamp
    fraud by cracking down on retailer and participant abuses, as well as
    reducing program errors causing overpayments.
        For the Child Nutrition Programs, including the National School
    Lunch, Breakfast, Child and Adult Care Food Program, Summer Food
    Service, and Special Milk Programs, we are requesting $7.8 billion,
    about $0.9 billion less than the 1997 appropriations. Our request
    assumes continued full funding for all of these programs, as well as
    better targeting of funds in the family day care program as required by
    welfare reform. Within this budget, the funds requested to support Team
    Nutrition are very important because the National School Lunch Program
    touches almost all school children during the year. This program works
    with schools to help them serve meals that meet the 1995 Dietary
    Guidelines for Americans and to help schools teach children about
    nutrition. This is a critical component of the Department's commitment
    to improve the health and welfare of children by promoting food choices
    for a healthy diet.
        Our WIC request for 1998 of $4.1 billion, an increase of $0.4
    billion above the 1997 appropriation fulfills the President's
    commitment to fully fund WIC. As indicated, the Administration is also
    proposing a supplemental of $100 million for WIC in 1997. Without the
    supplemental many States will have to cut participation significantly
    in 1997. With several new initiatives to improve program management, as
    well as careful food and formula cost containment, the 1998 request
    should be adequate to support all eligibles who choose to participate.
    WIC eligibility is based on household income and individual nutritional
    risk. With this now mature program, we will work with the States to
    improve program management and operate the program within available
    funds.
        The budget proposes increases in several of the commodity
    assistance programs. Increases for Food Distribution on Indian
    Reservations and the Commodity Supplemental Food Program are necessary
    to maintain program levels. Because of the large increase in mandatory
    and discretionary funding for TEFAP in 1997, we believe discretionary
    funding can be brought down by $45 million leaving a program that will
    still total $145 million.
        For the Center on Nutrition Policy and Promotion, our budget
    proposes $2.5 million, an increase of $281,000 over 1997. This will
    enable the Center to continue to help all Americans reduce their risk
    of nutrition-related disease.
        Finally, let me say just a few words about the Administration's
    commitment to food recovery and our efforts to expand food recovery
    through volunteerism. Food recovery allows us to share, at virtually no
    cost to the taxpayer, part of the immense food resources that Americans
    otherwise allow to go to waste. As the recently enacted Good Samaritan
    Act demonstrates, there is widespread, bipartisan support for food
    recovery. No one wants to see food go to waste. The hard part is how to
    get organized to avoid the waste. Since the food is available for the
    giving, new governmental organizations are not needed. Volunteerism
    needs to be encouraged to identify donors, organizations that can
    adequately store and transport recovered food, and organizations that
    can distribute the food to needy people. While our budget does not
    propose any new spending on food recovery, we are working within the
    Administration on a proposal to promote food recovery through creation
    of a non-governmental, charitable foundation. You will hear more about
    this proposal shortly.
                                  food safety
        Last July we reached a milestone in our strategy for making
    significant gains in improving the safety of America's food supply. We
    published the final rule for Pathogen Reduction and Hazard Analysis and
    Critical Control Point (HACCP) Systems for meat and poultry products.
    This rule modernizes a 90-year-old inspection system and lays out the
    Administration's commitment to ensure a healthy, safe, and affordable
    food supply.
        On January 27, 1997, we reached our first implementation date. All
    meat and poultry establishments now have in place standard operating
    procedures for sanitation to ensure they are meeting their
    responsibility for maintaining sanitary conditions, thereby reducing
    the potential for contamination. In addition, slaughter establishments
    have begun testing carcasses for generic E. coli to ensure their
    processes are under control with respect to prevention of fecal
    contamination. Next January 26 the largest establishments will be
    required to have the HACCP systems in place. The largest slaughter
    establishments and those producing ground product will have to meet
    Salmonella performance standards, thereby implementing a major portion
    of the science-based inspection system. By January 25, 2000, all the
    provisions of the rule will be implemented.
        The final rule sets an important framework for change, but by no
    means is it the culmination of our strategy. Much more needs to be done
    to ensure that we can meet today's and tomorrow's food safety
    challenges.
        The 1998 budget proposes an increase of $17.2 million under current
    law to maintain inspection and to continue making investments in
    technology, training, and science. It is expected that the
    implementation of the HACCP rule will generate the efficiencies
    necessary to maintain the level of inspection necessary to ensure the
    safety of the growing supply of meat and poultry products with the
    current level of inspectors. Our 1998 budget request builds on the 1997
    budget approved by Congress, which maintains a frontline workforce
    capable of providing rigorous science-based inspection. Furthermore,
    our budget request reflects a 1997 budget decision by the
    Administration and Congress to reallocate inspection resources from
    traditional in-plant settings to high risk food safety areas beyond the
    confines of the plant.
        As part of the President's Food Safety initiative, we are proposing
    to provide HACCP training to State and local food regulatory officers
    to ensure proper handling of meat and poultry products after they leave
    official establishments and make their way to consumers. Under the
    initiative we are also proposing to expand our work with the Centers
    for Disease Control and Prevention and other public health agencies to
    identify sources of foodborne illness attributable to Campylobacter.
    This pathogen has been identified as a growing threat to the safety of
    our food supply.
        Legislation will be proposed to recover the direct cost of
    providing inspection to all meat, poultry, and egg products
    establishments. Under this proposal the industry will be asked to pay
    for only the cost of inspection personnel. We estimate that this
    proposal would generate approximately $390 million in new revenues.
    Approximately $201 million in appropriated funding would be sought for
    administering the program, including critical food safety initiatives,
    such as establishing inspection methodology and standards,
    microbiological testing, technology development, animal production food
    safety, and epidemiology and emergency response functions. States
    administering their own inspection programs would continue to be
    reimbursed by the Federal government for up to 50 percent of the cost
    of administering their programs.
        This user fee proposal assures that the resources will be available
    to provide the level of in-plant inspection necessary to meet the
    demand for such services without being subject to annual budget
    pressures. This action will also reduce the pressure to trade-off
    investment in improving inspection with the need to meet legislative
    requirements for providing inspection. As a greater share of agency
    resources have been allocated to keep pace with the growing demand for
    inspectors, investment in new inspection systems designed to increase
    safety and productivity has been hampered. Separating the cost of in-
    plant inspection from the cost for administering the program will
    permit the agency to focus more on the investment in science and
    technology to improve the effectiveness of the program. This proposal
    has the benefit of providing establishments requiring an intensified
    inspection presence the added incentive to improve operations in order
    to avoid higher inspection fees. The proposal is expected to add less
    than a half a cent per pound to the cost of meat, poultry, and egg
    products.
                       natural resources and environment
        The 1996 Act provides the necessary tools that will enable the
    Department to play a major role in meeting the President's commitment
    to protecting our natural resources as well as to helping foster a more
    common sense approach to their overall management. The 1996 Act not
    only established several new incentive-based programs including the
    Environmental Quality Incentives Program (EQIP), the Wildlife Habitat
    Incentive Program, and the Farmland Protection Program but it also
    reauthorized and refocused two of our most successful conservation
    programs ever: the Conservation Reserve Program (CRP) and the Wetlands
    Reserve Program (WRP).
        The funding request for the Natural Resources Conservation Service
    in 1998 totals $821 million which includes $549 million for
    conservation technical assistance. These funds are needed by NRCS to
    maintain the viability of its base program which are those activities
    that support locally led, voluntary conservation through the agency's
    partnership with conservation districts. It is this base program that
    also provides the foundation upon which the agency will carry out the
    important new mandates called for in the 1996 Act. However, while these
    new programs are now funded through CCC and are therefore considered
    mandatory, their technical support is not and will impose an especially
    heavy new workload on NRCS that can only be addressed with appropriated
    funds. To counter the effects of this new workload and to strengthen
    the agency's base program, the budget includes a $15 million increase
    for geographic information systems and related technology to help in
    further modernizing USDA field service centers and a $4 million
    increase for training in rangeland conservation and improving
    conservation district skills.
        In addition to the new demands imposed by the 1996 Act, the
    Department's reorganization authorized by Congress in 1994 led to
    significant changes in how NRCS delivers its conservation services to
    the field. The agency is now able to provide higher levels and more
    valuable technical assistance to farmers and other clients with
    proportionately fewer management and support staff. Field staff are
    moving to service centers where farmers and government officials can
    conduct their business more efficiently. Decision-making
    responsibilities previously centralized in Washington are now assigned
    to regional and State level officials who are in closer contact with
    agency clientele. Maintaining our technical assistance workforce in the
    upcoming years becomes even more critical as farmers take advantage of
    increased global demand and the new program flexibility that will allow
    them to farm more land more intensively.
        Another high priority activity supported by this budget is the need
    to target adequate levels of assistance to small and minority producers
    who need help in maintaining their financial viability. A total of $5
    million is being requested for the Outreach for Socially Disadvantaged
    Farmers program, a program recently transferred to NRCS from FSA. This
    request is $4 million over the level appropriated for this activity in
    1997. To support the program in 1997, the Department has apportioned an
    additional $4.5 million in funding from the Fund for Rural America.
    These funds will help support our cooperative agreements with 28
    entities, including 1890 land grant institutions and Native American
    community colleges, through which we provide training and management
    assistance to small or minority farmers and ranchers.
        In the watershed planning and construction area, the Department
    will continue efforts to make the best use of limited resources. Only
    the most cost effective and environmentally beneficial projects will be
    funded with an emphasis on nonstructural management systems. We will
    also continue to closely examine approved watershed plans and de-
    authorize infeasible projects in order to reduce the backlog of
    unfunded work. Beginning in 1998, technical support for NRCS' watershed
    planning and construction activities will come from the agency's
    conservation operations program which will improve overall
    administrative efficiency. Also, we will try and help sponsors with
    implementation costs by allowing up to $15 million to be used to
    subsidize rates of municipal loans administered by the Rural Utilities
    Service.
        Finally, the Department's 1998 budget continues its support of the
    289 authorized Resource Conservation and Development (RC&D) areas. In
    addition, an increase of $18 million is requested to fund local, non-
    Federal watershed coordinators to assist in watershed planning for a
    wide range of environmental purposes such as the salmon recovery
    efforts in the Pacific Northwest.
                       research, education, and economics
        The budget recommendations for the programs administered by the
    Research, Education, and Economics (REE) mission area agencies reflect
    the importance of investments in scientific, technological, and
    economic knowledge for future performance of the agricultural sector in
    the U.S. economy. Driven by publicly funded research, agricultural
    productivity has grown at an annual average rate of 1.8 percent over
    the past 45 years. There is a critical need to maintain the overall
    level of scientific and technological expertise to support key
    Departmental objectives related to expanding agricultural-based
    economic and trade opportunities; ensuring a healthy, safe, and
    affordable food supply; and protecting public and private natural
    resources for the benefit of current and future generations.
        The ability of U.S. agriculture to meet the growing worldwide
    demand for food will require that the research pipeline continue to
    provide knowledge which will maintain productivity growth, protect the
    natural resource base, create a safer food supply, and address critical
    human nutrition needs. Continued support for research and education
    also will lead to a better understanding of how agricultural production
    impacts the environment and how effective management practices can be
    applied to avoid or mitigate harmful effects. Federal support for
    research conducted in universities and private laboratories encourages
    these institutions to invest in technology at levels beyond what they
    would invest on their own. Publicly supported research provides the
    scientific foundation for and complements much of the work carried out
    in the private sector.
        Current research activities will be further strengthened through
    the Fund for Rural America. On January 17, 1997, the Department
    announced plans to allocate $46.1 million of the $100 million fund for
    research, education, and extension activities. Of this $46.1 million,
    $33.3 million will fund projects that address international
    competitiveness, environmental stewardship, and/or rural community
    enhancement, and $12.8 million will be used to address key priorities
    including livestock concentration, food safety, nutrition, food
    recovery, and telecommunications. Grants will be awarded on a
    competitive basis for multi-disciplinary projects.
        Total funding requested for REE agencies in 1998 is $1.8 billion,
    which is about the same as the 1997 appropriation. Within this total,
    the Agricultural Research Service (ARS) would receive an increase of
    $10 million, about 1.4 percent above the 1997 appropriation. The agency
    would redirect $23 million from ongoing research projects to support
    programs of high national priority.
        The budget includes an increase of $12 million for a new Human
    Nutrition initiative. Half of the total would support activities
    carried out at ARS human nutrition research centers which examine the
    impact of nutrition on health of individuals representing diverse
    population groups in terms of age and ethnic background. The remainder
    would fund surveys to collect data on food intake by infants and
    children which will, in turn, be used by the Department and the
    Environmental Protection Agency to assess pesticide residue levels and
    establish tolerances in accordance with the Food Quality Protection Act
    of 1996. The budget also includes a $5 million increase for Emerging
    Diseases and Exotic Pests to control the spread of non-native diseases
    and pests.
        Both ARS and the Cooperative State Research, Education, and
    Extension Service (CSREES) have important roles in the Administration's
    food safety initiative. The ARS budget includes an increase of $4.1
    million for pre-harvest food safety research to develop new
    technologies for detection and control of pathogens and for post-
    harvest intervention strategies needed to support the HACCP approach
    used by the Food Safety and Inspection Service.
        The CSREES components of the food safety initiative consist of: (1)
    a $2 million increase for research focusing on pre-harvest issues
    related to detection and control of pathogens, and post-harvest issues
    related to production, processing and handling practices, and (2) an
    additional $2 million for education programs related to HACCP
    implementation, including compliance education, quality assurance, and
    State food handler certification.
        An increase of $4 million is proposed for ARS pest management
    research, including support for large scale Integrated Pest Management
    (IPM) projects, host-plant resistance, and for biological control of
    plant pests. Other increases are proposed for preservation of plant and
    microbial genetic resource collections and for development of methods
    for more efficient management of grazing lands.
        ARS also plays an important role in the Administration's initiative
    to restore the South Florida Everglades ecosystem. The budget includes
    a $2 million increase to develop mechanisms to control the spread of
    invasive Melaleuca trees and to conduct research on ways to reduce the
    environmental impact of agricultural production in the Everglades. An
    increase of $4 million for construction of a quarantine facility to
    house the study of biological control agents is also proposed.
    Construction of this facility was designated by the Administration's
    South Florida Ecosystem Task Force as a top priority to ensure prompt
    restoration of the Everglades National Park and other fragile
    ecosystems in South Florida.
        The budget also includes $59.3 million for facility construction
    and modernization projects. An increase of $23.4 million is proposed
    for a replacement laboratory in Parlier, California, used to conduct
    horticultural, irrigation, and post-harvest research. Funding in the
    amount of $3.2 million is proposed for continued modernization of the
    agricultural research center at Beltsville, Maryland. Other increases
    provide support for Federal regional centers, including $8 million for
    research carried out by the National Center for Agricultural
    Utilization Research at Peoria, Illinois, and a total of $6.3 million
    for modernization of the Eastern and Southern Regional Research Centers
    located in Philadelphia, Pennsylvania, and New Orleans, Louisiana.
    Funds are also recommended for modernization of the National
    Agricultural Library at Beltsville and for the foreign animal disease
    facility at Plum Island, New York. An increase is also proposed for
    construction of new facilities for the European Biological Control
    Laboratory at Montpellier, France. The mission of this laboratory is to
    discover, research, and introduce natural enemies of domestic insect
    pests and weeds.
        The budget request for CSREES calls for a reduction of about $69
    million, about 7.6 percent below the 1997 appropriation. Funding for
    formula programs is held constant at the 1997 appropriated level. An
    increase of $36 million is proposed for the National Research
    Initiative (NRI), the competitive grants program which funds merit-
    reviewed proposals open to participation by Federal laboratories,
    public and private universities, and other research entities and
    individuals. It is especially important that the Federal government
    support this meritorious program which supports both fundamental and
    mission-linked research. Estimated returns on research funded through
    the NRI are among the highest in the portfolio of programs and this
    work provides technology used by other public and private sector
    researchers. The budget continues to reflect the Administration's view
    that the Federal government should not be financing research projects
    and facility construction activities on university campuses through the
    Congressional earmarking process. Proposed reductions in these two
    program areas total over $100 million.
        The budget includes increases for CSREES and other participating
    agencies to move forward on the IPM initiative. This initiative has the
    ambitious goal of increasing the adoption of IPM practices to 75
    percent of the Nation's crop acreage by the year 2000. Strategies for
    IPM implementation are based on input from growers, scientists, and
    other stakeholders who serve on regional and State teams and are
    involved in program planning and implementation. A proposed increase of
    about $13.2 million above the 1997 appropriation for IPM research and
    education programs will allow us to: (1) support regional IPM
    development and implementation projects, (2) fund a special grants
    program devoted to pest management alternatives to replace pest control
    technologies under consideration for regulatory action by the
    Environmental Protection Agency (EPA), and (3) fund additional area-
    wide projects by ARS. We are also requesting a $5 million increase to
    support data collection activities for registration of minor-use crop
    pesticides.
        CSREES conducts several relatively small, but important higher
    education programs to encourage both graduate and undergraduate
    students to pursue careers in agricultural and food sciences. We are
    seeking a small increase in support for the highly successful
    Institution Challenge Grants program and continued funding for the
    Graduate Fellowships Grants program. Both programs focus on recruiting
    diverse and talented students and enhancing the quality of education
    necessary to strengthen the Nation's scientific and professional
    workforce.
        Efforts are made through these programs to reach out to population
    groups who are under-represented in many agriculture-related fields to
    enable all young Americans to have opportunities for successful careers
    in agriculture. The 1890 Capacity Building Grants program, which is
    funded at the 1997 level, is the cornerstone of the Department's
    successful partnership with 1890 land grant universities. In the 7
    years from 1990 through 1996, over $60 million has been awarded for 305
    research and training projects, each of which features an active,
    cooperative relationship with one or more USDA agencies. The agency
    plans to continue supporting construction, renovation, and upgrade of
    facilities projects at 1890 universities. We have encouraged
    Departmental agencies to build on partnership relationships with 1890
    institutions to establish centers of excellence which are on-campus
    entities devoted to addressing specific USDA agency tasks. The budget
    also includes proposals for continued support of Hispanic-serving
    institutions, and the 1994 Native American institutions.
        Finally, CSREES continues to support ongoing extension projects of
    high national priority and carries out education and technology
    transfer activities in the areas of food nutrition and education, water
    quality, and sustainable agriculture. The budget includes an increase
    for the Children, Youth and Families at Risk program with a specific
    amount designated for use by the 1890 institutions. A reduction of
    about $19 million below the 1997 appropriated level is proposed for
    several extension programs which could potentially be supported with
    formula funds and State and regional resources.
        The Economic Research Service (ERS) is an important source of
    analytical information on food and agricultural related issues, and the
    economic and social science research conducted by ERS supports better
    decisionmaking in both the public and private sector. The budget
    request for ERS is $54 million, which includes a modest increase to
    conduct analysis focusing on the costs and benefits of resource
    conserving production practices, such as IPM and conservation tillage.
    This initiative supports our goal of improved harmony between
    agriculture and the environment. This research would provide
    information which would help producers make profitable and
    environmentally conscious choices and help policymakers direct
    resources to the most cost-effective conservation programs.
        Like ERS, the National Agricultural Statistics Service (NASS) is
    also an important source of information. The estimates and forecasts
    that NASS produces are used by all participants in the agricultural
    economy, and NASS has earned and maintained an unmatched reputation for
    accurate, unbiased, and timely information. In addition, the
    implementation of the 1996 Act has made reliable and timely information
    about production, supply and prices even more critical. Within the
    total budget request of $120 million for NASS, an increase of $18.5
    million is requested for conducting the Census of Agriculture. The 1998
    costs of the Census are higher than any year in the 5-year Census
    cycle, because it is the year the Census is scheduled to be conducted.
    Last year, the Census of Agriculture was transferred from the
    Department of Commerce to USDA. Although USDA received funding through
    appropriations for the Census in 1997, the authorization legislation to
    transfer the function has not yet been passed. I urge you to support
    the swift passage of this legislation.
        The Census is the main source of local level data about American
    agriculture, the only complete enumeration of farmers, and an important
    benchmark for USDA's current program which uses statistical analysis to
    produce national and State estimates. The Census of Agriculture is
    taken every 5 years, and in 1998, USDA will conduct the Census for the
    first time, expanding significantly its role as an information
    provider. By changing the way the data are processed, NASS plans to
    complete the collection and processing of the approximately 2.5 million
    census report forms in 25 percent less time than the previous
    agricultural census.
                       marketing and regulatory programs
        The Marketing and Regulatory Programs contribute to increased
    domestic and international marketing of U.S. agricultural products by:
    (1) reducing international trade barriers and assuring that all
    sanitary and phytosanitary requirements are based on sound science; (2)
    protecting domestic producers from animal and plant pests and diseases;
    (3) monitoring markets to assure fair trading practices; (4) promoting
    competition and efficient marketing; (5) reducing the effects of
    destructive wildlife; and (6) assuring the well-being of research,
    exhibition and pet animals. Consumers as well as the agricultural
    sector benefit from these activities.
        Beneficiaries of these services already pay a large percentage of
    the program costs through user fees. And, we are proposing legislation
    to recover over $38 million in new user fees from those who directly
    benefit from USDA services. New license fees are requested to recover
    the entire cost of administering the Packers and Stockyards Act.
    Expanded user fees are requested for developing grain standards, for
    certain animal and plant inspection activities, and for Federal
    administrative costs for operating marketing orders and agreements.
        The budget includes an increase of $11 million for the Agricultural
    Marketing Service (AMS). The 1998 budget includes modest increases for
    expanding foreign market news reporting and expanded reporting of
    livestock and poultry markets in accordance with recommendations set
    forth by the Advisory Committee on Agricultural Concentration. We
    expect to have a proposed rule to implement the Organic Foods
    Production Act issued this year. In order to implement the program we
    are requesting additional funds to accredit organic certifiers. We plan
    to recover the full cost of the program through user fees. For 1997,
    the Pesticide Data Program (PDP) was funded through EPA. The
    Administration believes that funding for PDP within AMS is preferable
    to funding the program within EPA. AMS is in a unique position to
    conduct the program in cooperation with State departments of
    agriculture. It has the agricultural marketing expertise to develop a
    statistically reliable testing system.
        For the Animal and Plant Health Inspection Service (APHIS), the
    current law budget contains a $6 million reduction below the 1997
    current estimate. This reduction reflects program successes in many
    pest and disease management programs such as the eradication of
    brucellosis. It assumes increased cost sharing from beneficiaries of
    Animal Damage Control activities and from cotton producers for
    eradicating boll weevil. It maintains funding for our important data
    gathering and risk analysis used in negotiations concerning sanitary
    and phytosanitary trade barriers and restrictions on genetically
    engineered products entering world markets. Funding increases are
    provided for Pest Detection activities such as Karnal bunt and
    Agricultural Quarantine Inspection at the borders. Finally, this budget
    proposes to fund architectural and engineering work for a sterile
    screwworm rearing facility to be built in Panama.
        The current law budget proposes $2.6 million of increased funding
    to strengthen the Packers and Stockyards programs of the Grain
    Inspection, Packers and Stockyards Administration (GIPSA). The
    increased funding will enable GIPSA to address more of the
    recommendations of the Advisory Committee on Agricultural
    Concentration. Specifically the agency would: (1) hire additional staff
    to monitor and analyze packer market competition and implications of
    structural changes and behavioral practices in the meat packing
    industry; (2) expand poultry compliance activities; and (3) install
    electronic filing equipment to reduce financial reporting costs for
    stockyard owners and packing house operators. Legislation is proposed
    to authorize a dealer trust similar to that of the existing packer
    trust. Dealers would be required to establish a trust covering the
    value of livestock inventory and accounts receivable due from the sale
    of livestock. This proposed trust would be a valuable tool in assisting
    the recovery of payments for unpaid sellers.
                       departmental management activities
        Reinventing government and reducing costs is one of my major goals
    for the Department. A great deal has been accomplished already. The
    Department's reorganization reduced the number of agencies from 43 to
    30 and over 13,500 staff years have been eliminated. As a result of
    these changes and further downsizing, savings of more than $4.0 billion
    are projected by 1999 and $8.0 billion by 2002. Further streamlining
    and downsizing as well as technological, financial, and administrative
    improvements are underway and will continue.
        Also currently underway in the Department is the implementation of
    the Government Performance and Results Act of 1993 (GPRA). The agencies
    and mission areas are in the process of preparing 5-year strategic
    plans, and a Departmentwide strategic plan is currently in draft form.
    USDA plans to begin consultations with Congress after the
    Departmentwide plan is completed and reviewed by OMB. In addition, the
    explanatory notes for the fiscal year 1998 budget include the mission
    statements and goals for each agency, as well as performance measures.
    Currently we are working to refine these performance measures and to
    develop annual performance plans for next year's budget. A great deal
    of time and effort has been spent on implementing GPRA, and the process
    is helping us improve program effectiveness, service quality, and
    customer satisfaction. We look forward to working with Congress to
    fully implement GPRA.
        In light of existing and proposed reductions of staff and funding
    for the Farm Service Agency and other county-based agencies we have an
    urgent need to determine ways to increase efficiency and improve
    coordination. Therefore, the Department will study the administrative
    and other functions of the county-based agencies and will re-examine
    our plans for county office based service centers to identify and
    examine opportunities for further streamlining of program delivery and
    administrative support for these agencies.
        Several offices are responsible for Departmental management
    activities. These offices provide leadership and administrative support
    to USDA agencies and coordinate many of the reinvention efforts in the
    Department. The 1998 budget provides the resources necessary for these
    offices to enhance their leadership, coordination, and support
    activities and as a result, improve the overall delivery of the
    Department's programs and services.
        One of my priorities is to reduce the existing backlog of equal
    employment opportunity and program discrimination complaint cases in
    the Department and to improve the systems in place to ensure that the
    same situation does not recur in the future. In 1997, the Congress
    increased funding in this area to enable the Department to reduce the
    backlog and we are working to accomplish that goal. This funding level
    is maintained in the 1998 budget request to continue these activities.
    In addition, I have created a civil rights action team to do a thorough
    audit of USDA civil rights issues and provide me with recommendations
    for improvement, directed agencies that serve farmers to establish
    special outreach offices in the field, and personally attended a number
    of listening sessions across the country to hear the concerns of
    employees and program participants. I am committed to making positive
    changes at USDA to ensure that both our employees and customers are
    treated fairly and with dignity.
        As required by the Clinger-Cohen Act of 1996, USDA has established
    an Office of the Chief Information Officer (CIO) to oversee the
    management of the Department's information technology (IT) resources.
    This request includes an increase to fully fund the CIO's immediate
    office. We are funding these activities within available resources this
    year. However, in order to provide adequate resources to improve the
    planning, acquisition and management of USDA's IT resources, we believe
    these funds are necessary to strengthen the CIO's office.
        This request includes funds to continue the implementation of the
    Strategic Space Plan for the Washington Metropolitan area. This plan
    has been tailored to meet the needs of USDA based on the projected
    reductions in staff at the Washington Headquarters and to provide a
    safe efficient work place for our employees. The Beltsville Office
    Facility is scheduled to be completed by December 1997 and should be
    ready for occupancy by January 1998. This proposal includes an increase
    to provide necessary operations and maintenance for the new facility. A
    contract for the overall concept design of the South Building
    renovation and specific design for the first phase of construction was
    awarded in January 1997. We expect to award the contract for the first
    phase of construction in September 1997. The funds included in this
    request will be used to continue the renovation effort.
        The budget proposes an increase for the central hazardous waste
    management account. These funds are used to meet requirements of the
    Comprehensive Environmental Response, Compensation, and Liability Act
    and the Resource Conservation and Recovery Act. The additional funds
    will be used to be more aggressive in our efforts to cleanup sites that
    have been previously identified. Specifically, we will target those
    projects with the highest risk to public safety and those with overdue
    compliance deadlines.
        An increase is proposed for the Office of the Chief Economist (OCE)
    for agricultural weather-related services. OCE is responsible for
    weather monitoring and agriculture related weather analysis and houses
    the Joint Agricultural Weather Facility, co-staffed by USDA and the
    Department of Commerce. The funding would provide USDA with the
    capability to coordinate, implement, and utilize a national
    agricultural weather and climate data system to expedite decisions at
    the Federal level affecting agricultural commodity trade and markets,
    fire weather management and ecosystem conservation. For example, lack
    of observational data in agricultural areas and a breakdown in the
    dissemination of forecasts played a significant role in the destruction
    caused by the recent Florida freeze. The proposed increase would expand
    the collection of weather and climate data in agricultural areas and
    result in improved dissemination of observations and forecasts to
    producers. This would help producers mitigate the adverse impact of
    weather-related events. In addition, the National Weather Service (NWS)
    has recently undergone a major restructuring and modernization
    initiative. Funding is proposed to provide for compatible technology to
    allow the Department to continue to directly access the NWS data needed
    to carry out its weather and crop surveillance mission.
        Funding is also included for the Commission on 21st Century
    Production Agriculture. This Commission, established by the 1996 Act,
    will produce two studies. The first study, due June 1, 1998, will be a
    comprehensive review of changes in the condition of production
    agriculture in the U.S. since the date the 1996 Act was enacted and the
    extent to which the changes are the result of this Act. The second
    study, due January 1, 2001, will be a comprehensive review of the
    future of production agriculture in the U.S. and the appropriate role
    of the Federal government in support of production agriculture. The
    Commission will be made up of eleven members, selected by the President
    and the House and Senate Agriculture Committees, who are to be
    appointed by October 1, 1997.
        An increase is proposed to provide the National Appeals Division
    (NAD) with adequate resources to fulfill its statutory requirements and
    ensure fair and equitable treatment for USDA program participants. NAD
    was established to provide an impartial appeals process for adverse
    program decisions. Financial constraints in fiscal year 1996 as well as
    reduced funding in 1997 have impeded NAD's ability to obtain needed
    automated information systems and provide employees with necessary
    training.
        An increase is proposed for the Office of the Inspector General.
    These funds will be used to enhance the audit and investigative
    functions of the office by providing funds for additional FERS costs
    for investigators, additional training, ADP and personnel support. This
    will support the Department's overall goal of improving the way USDA
    works.
        The Office of the General Counsel (OGC) provides critical legal
    support and advice to the Department and its agencies. Recent budget
    austerity has eroded OGC's resources. An increase necessary to maintain
    appropriate staffing levels is proposed. This will enable OGC to handle
    more effectively the expanding number of legal issues confronting the
    Department, especially those related to trade, food safety, welfare
    reform, civil rights and the management of the National Forests.
        Although the Department has made significant progress in
    implementing the Chief Financial Officers Act (the CFO Act), much work
    still needs to be done. An increase is proposed to provide the Office
    of the Chief Financial Officer with additional resources to facilitate
    the full implementation of the CFO Act in the Department.
        Finally, the budget includes a small increase for the Office of
    Communications (OC) to conduct an outreach program to bring information
    about USDA programs to underserved groups through various media
    sources.
        That concludes my statement. I am looking forward to working with
    the Committee in the months ahead in reviewing these budget proposals
    as we work to meet our common objectives of serving our customers and
    controlling Federal spending.

                            New Subcommittee Member

        Senator Cochran. I am very pleased we have such good
    attendance at our subcommittee this morning. I am going to
    defer my questions until other members of the subcommittee have
    had an opportunity to make comments or ask you questions about
    the budget request. I have to be here this entire hearing. None
    of them is required to be. So, I am going to defer my
    questions, and will be happy to do that.
        The distinguished ranking member of this subcommittee is
    the Senator from Arkansas, Senator Bumpers. I want you to know,
    though, that the former chairman of this committee was the
    first Senator here at this hearing, and I was going to call on
    him, assuming you were going to be here as promptly as he was.
        Senator Bumpers. I have never crossed him one time in my
    life. [Laughter.]
        Senator Cochran. Senator Byrd is not only a new member of
    the subcommittee, but he is also a prompt member of the
    subcommittee, and we want to welcome him. We certainly
    appreciate his presence and his participation in the work of
    this subcommittee.
        If you have no objection, I would call on him.
        Senator Bumpers. No objection, Mr. Chairman.
        Senator Cochran. Senator Byrd.
        Senator Byrd. Mr. Chairman, as one who believes strongly in
    the rules with respect to seniority, I am going to say thank
    you for your deference, your kind deferential treatment, and
    also a thank you to Senator Bumpers. But I will not run afoul
    of the rules of seniority. I am going to stay around a while,
    and I am going to be listening with interest to Senator Bumpers
    and others who have seniority over me. And I will wait until my
    turn to make any further comments.
        Thank you very much.
        Senator Cochran. Thank you, Senator Byrd.
        Senator Bumpers.

                               Prepared Statement

        Senator Bumpers. Mr. Chairman, first of all, I ask
    unanimous consent my opening statement be inserted in the
    record.
        Senator Cochran. Without objection, so ordered.
        [The statement follows:]

                     Prepared Statement of Senator Bumpers

        I want to welcome Secretary Glickman, Secretary Rominger,
    Mr. Collins and Mr. Dewhurst to our subcommittee and I look
    forward to their statements. I also want to express an
    additional welcome to our new subcommittee members, Senator
    Byrd and Senator Leahy. The experience and expertise they bring
    will be most helpful as we work through the budget difficulties
    posed by the challenges of increasing demands and declining
    resources.
        Secretary Glickman, by all measures and various reports,
    the optimism we expressed upon your confirmation as Secretary
    appear to have been understatements. These have, indeed, been
    trying times for rural America and for the many men and women
    who serve at the Department of Agriculture. In spite of the
    multitude of difficulties you and all of us have faced, you
    have exhibited unfailing leadership and confidence in executing
    your duties as Secretary. You have reminded us all that, as
    President Lincoln declared, USDA is the ``Department of the
    People'' and one in which all the people may feel served.
    Speaking on behalf of the entire subcommittee, I want to thank
    you for your untiring work and for the accomplishments you have
    achieved.
        To examine the many facets of the Department of Agriculture
    is to touch upon many of the vital and most basic of services
    the federal government can provide the American people and, in
    fact, the people of the world. Few Departments of the federal
    government can lay claim to the variety of activities that fall
    under your jurisdiction. Food security and food safety, basic
    and applied research, natural resources, housing, rural
    utilities, international trade, and contributions to easing
    world hunger are all your responsibility.
        Above all this, you have the task of educating an ever
    increasing urban population that the Department of Agriculture
    is more than a Department of Farmers and, at the same time,
    remember that without a strong base of agricultural production
    on the farm, we would all become a nation enslaved by the
    productive capabilities of our international friends and
    adversaries. It is a daunting responsibility.
        Poultry production and processing is vitally important to
    the economy of my state. Just one year ago, we were faced with
    a threat of sanctions by the former Soviet Union that would
    have deprived us of valuable markets. You went to work, along
    with other members of the Administration, and overcame that
    threat. It is now reported that U.S. poultry exports into that
    country are proceeding without objection. Your actions not only
    served to protect the jobs of many men and women in Arkansas
    and other states, they also ensured the availability of high
    quality products to the Russian people and maintained our
    nation's position as a strong player in world markets.
        Also, one year ago, you were presented the task of
    implementing a new farm bill, one much different than any farm
    bill administered by any of your predecessors in recent
    history. I won't belabor you and my colleagues with another
    rendition of my view of that legislation, but it presents you,
    and all of us, tremendous challenges in Departmental management
    and long term protection for the men and women on the farm who
    face daily threats of weather, pests, markets, and a host of
    other factors far beyond their control. Their livelihoods are
    on the line, and that line will become more and more tenuous in
    the days that are sure to come when farm prices tumble without
    a viable safety net to see them through. If farm security in
    the form of income and price support is a thing of the past,
    then it must be replaced by a security in the form of increased
    research, market development, and risk management. We have a
    long way to go and, perhaps, not long to get there.
        The Department of Agriculture was created during a period
    of our history immersed in deep conflict and prone to intense
    introspection. One hundred years later, the Department had
    grown into a massive network connecting all parts of the
    nation, at the local level, where service delivery to a still
    largely rural population was the touchstone of efficiency. Now,
    introspection is renewed and your unenviable task is to
    revitalize a new touchstone of efficiency with a minimum of
    conflict. Modern communication, transportation, and other
    technologies have changed the face of service delivery
    challenges as much as similar changes have altered the face of
    agricultural production itself.
        Still, we must remember that quality service must be
    maintained and common sense approaches must be evaluated before
    disruptive changes are thrust upon an unwary rural population.
    Your action of recent days to calm the concerns of USDA and
    county employees that sudden and arbitrary changes will not
    occur will prove to benefit us all. However the face of
    agriculture may appear in the 21st Century, we must ensure a
    legacy adequate to meet the demands of farmers, ranchers, and
    the ultimate consumers of their products. At this juncture of
    another agricultural revolution, one born of innovative
    research, environmental protection, and a global marketplace,
    history would not judge well any imprudent dismantling of the
    very means by which we have become the envy of the world.
        As we turn to the task immediately before us, I am sure
    that there will be some areas in which we will find
    disagreement. But on the whole, I feel that we all want to meet
    at the same destination. We must allow our farmers the tools
    necessary to feed an ever hungry nation and world. We can't
    allow the strongest nation on earth to be home to an
    undernourished and under served population. Our food must be
    safe and our science sound. Our nation is and has always been
    blessed with the inventive genius to take us into the next
    highest plain of achievement. The tools are before us, all of
    us, and our charge is to manage them wisely.

                        Research on Genetic Engineering

        Senator Bumpers. Second, I only have a couple of questions
    of the Secretary.
        And the first one, Mr. Secretary, is: Does the Department
    of Agriculture have any ongoing research on genetic
    engineering, such as we have just seen come out of Scotland?
        Secretary Glickman. I am confident that we have a lot of
    biotechnology research going on. And much of that is related to
    genetic modifications. But I am not aware of any cloning
    research. I know that there obviously has been over the years
    embryonic research in terms of the development of stronger
    animals and more disease-resistant animals. We do genomapping
    for livestock. We are not doing the research to produce cloned
    animals.
        Senator Bumpers. Is genomapping similar to the Human Genome
    Project that we have at NIH?
        Secretary Glickman. I think so, yes.

                               User Fee Proposal

        Senator Bumpers. Second, Mr. Secretary, the fees that you
    have mentioned for the Food Service and Inspection Service, I
    think you told me in the office the other day that the fee is
    $590 million--is that what you are asking for?
        Secretary Glickman. Well, $390 million in fees, which is
    about 70 percent of FSIS's total budget. The rest of it would
    be under our budget through the general nonfee dollars.
        Senator Bumpers. So you are asking $390 million?
        Secretary Glickman. $390 million in fees, which is in-plant
    inspection and the other 30 percent is for research and
    supervision and overhead and a lot of the other functions of
    that part of the Department.
        Senator Bumpers. I think you told me in the office the
    other day that represents roughly one-half cent a pound?
        Secretary Glickman. If the full $390 million were paid for
    by in-plant fees, we estimate about one-half cent a pound is
    what that would cost.
        Senator Bumpers. Of both meat and poultry?
        Secretary Glickman. That is correct.
        Senator Bumpers. Would you anticipate that that would be
    passed on to the consumers in higher prices for the goods and
    products?
        Secretary Glickman. I would honestly say that I would
    expect much of it to be passed on. I cannot tell you what the
    competitive conditions are out there. But we want to see the
    meat and poultry inspection program adequately financed. If we
    can figure out another way to do it without the fees, obviously
    we would. We are not hung up on the fees, but my concern is,
    given the tightness of the budget, that the integrity and
    safety of the meat and poultry supply is paramount. That is why
    we thought, if we cannot find it somewhere, then we have got to
    go with the fees.

                                     HACCP

        Senator Bumpers. Is the so-called HACCP, which is an
    acronym, H-A-C-C-P. How far along are we on that inspection
    program in the meat and poultry business?
        Secretary Glickman. Well, our final rules were approved
    this past summer. We are starting with E. coli testing which
    just began. There is a whole process to go through. But this
    process will take about 3 years to complete.
        A lot of the plants, larger plants, particularly, are
    already operating with HACCP right now. It is the medium-sized
    and smaller plants that will take a little longer to complete.
    But, I would say about 3 years.
        Right now, at the end of this fiscal year, we estimate that
    about 75 percent of the pounds slaughtered, both meat and
    poultry, will be under the HACCP inspection system. And in
    fiscal year 1999, it is going to be 95 percent. In the year
    2000, it will be complete.
        Senator Bumpers. Can you tell us what magnitude of
    improvement that is over the present system? For example, take
    the poultry industry, which, as you know, is extremely
    important in my State. What percentage of the poultry that
    comes off the assembly line has any kind of bacteria on it, do
    you know, under the present inspection system?
        Secretary Glickman. In the case of poultry, it is probably
    higher than in the case of beef, just because of the nature of
    how chickens are produced.
        Senator Bumpers. Really, the question----
        Secretary Glickman. Yes; just because there may be a higher
    incidence of some bacteria does not necessarily mean that the
    product is not clean or safe or that any problem cannot be
    eliminated when the product is cooked.
        Senator Bumpers. I am saying so far as the inspection is
    concerned, I am on your team. Of course, I have always
    maintained that nobody stands to benefit more from a perfect
    inspection system than the industry itself. Because every time
    there is any kind of an outbreak, they suffer in sales and
    revenues.
        All I was trying to do was to ask you if you knew, for
    example, if 30 to 60 percent of the poultry today has some E.
    coli or something else on it? My question is, Would that be
    reduced to 10 percent under the new inspection system?
        Secretary Glickman. It would be reduced. I cannot tell you
    what levels. I would have to get you that information. But the
    reductions in levels of Salmonella and other pathogens would be
    reduced. In fact, most of the companies who are doing it now
    agree that the system provides a better method to test at
    various points of the slaughter process, so that inspection
    would not just be by sight. You would be able to test for the
    pathogens at various points. So there is a quantifiable
    improvement expected.
        Senator Bumpers. Mr. Dewhurst, did you have a comment on
    that?
        Mr. Dewhurst. I was just thinking, we did publish an impact
    statement when we put out the final rule on HACCP, and it has
    some estimates in it. I just do not remember what those were.
    But we'll give you all that information.
        [The information follows:]
                            Economic Impact Analysis
        The Food Safety and Inspection Service has determined that the
    implementation of Hazard Analysis and Critical Control Point (HACCP)
    systems with pathogen reduction performance standards in meat and
    poultry plants will substantially reduce the incidence of pathogens
    that can cause foodborne illness.
        FSIS conducted a final Regulatory Impact Analysis on implementation
    of the new HACCP-based regulatory program for inspected establishments.
    The regulatory impact analysis concluded that the final rule has
    potential annual public health benefits of $990 million to $3.7 billion
    because of reduced foodborne illness costs such as medical care and
    lost worktime.
        FSIS is publishing the final Regulatory Impact Analysis along with
    the final rule.
        Over a four-year period, the estimated cost to the meat and poultry
    industry for developing, implementing and operating the proposed
    pathogen reduction and HACCP systems is estimated at $305 to $357
    million, averaging $76 to $89 million per year, or slightly more than
    one-tenth of a cent per pound of meat and poultry.
        This is significantly lower than the annual estimated cost of
    implementing the proposed rule, which was about $244.5 million per
    year, or slightly more than \2/10\ of a cent per pound of meat and
    poultry.
        The recurring cost after full implementation of the pathogen
    reduction and HACCP systems is estimated at $99.6 to $119.8 million per
    year.
        The rule has been developed to minimize the economic impact on
    small and very small plants. Small plants are those with 500 or fewer
    employees, the Small Business Administration's size standard for small
    meat and poultry manufacturing establishments. In addition, FSIS has
    designated establishments ``very small'' if they have fewer than 10
    employees or annual sales of less than $2.5 million.
        Of the 6,200 USDA-inspected slaughter, processing, and combination
    slaughter and processing plants, over 2,900 (or 48 percent) are
    considered small plants and another 2,900 are considered very small
    plants.
        The nearly 2,900 state-inspected plants--all assumed to be very
    small plants--will also be required to implement the pathogen reduction
    and HACCP requirements.
        FSIS is allowing small and very small federal and state plants
    additional time to meet the new HACCP requirement and the Salmonella
    performance standard, thus minimizing the economic burden. Small plants
    have 30 months to implement HACCP systems and meet pathogen reduction
    performance standards. Very small plants have 42 months. All plants,
    regardless of size, will implement sanitation standard operating
    procedures and E. coli testing requirements at the same time, six
    months after publication of the final rule.
        The frequency of mandatory microbial testing by slaughter plants
    for generic E. coli will be based on production volume. Slaughter
    establishments with lower production volume will have reduced sampling
    requirements, thereby reducing the burden on small businesses.
        Of the 2,700 federal and state slaughter facilities, over 78
    percent (the small and very small plants) will be required to conduct
    E. coli testing for only a specific period each year as long as they
    can demonstrate compliance with the established criteria. This will
    further reduce the burden for smaller slaughter operations.
        Plants that now have good processing controls are expected to have
    relatively few implementation costs to comply with the proposal. Plants
    with little or no process controls would need to invest more to comply.

                                 Honey Program

        Senator Bumpers. Mr. Chairman, I had three or four other
    questions. I just want to close with this one question. When I
    was running for reelection in 1992, I was in Hot Springs, and I
    went to the courthouse. And there was a long line--I would say
    a 200-yard line--of people who were waiting for absentee
    ballots. So I started shaking hands. [Laughter.]
        And I got down about halfway through that line, and this
    young couple there--this very attractive young woman, about 30
    years old, said, Senator Bumpers, I just want to know one
    thing: How do you stand on the honey program? Now, Arkansas is
    not noted as a honey-producing State, and I thought that was a
    really strange question. That was her only concern.
        And obviously she had either heard Rush Limbaugh or some
    other news program, news magazine, talking about what a rip-off
    the honey system was, which I think at that time was costing us
    roughly $30 million a year. Does that sound about right, Mr.
    Dewhurst?
        Mr. Dewhurst. Yes, sir.
        Senator Bumpers. So I tried to get her the best information
    I had about the importance of the honey program. And she said,
    well, I can see I am not going to be able to vote for you. Now,
    I think--I am not sure, and I had not researched it--I think I
    may have voted 4 years later to eliminate that program.
        And I want to publicly apologize for having done so,
    because I think it was a mistake, and I said it on the floor at
    the time, that oftentimes these programs that are targeted by
    the news magazines or the talk show hosts about how your money
    is spent--that ABC program, periodically, you know, ``It is
    Your Money, Your Choice,'' or some such thing as that--they can
    make those programs look terrible. But the truth of the matter
    is, bees pollinate 25 percent of all the crops in this country.
    And I am told that this is becoming a very critical problem.
        I am also told by beekeepers that the number of beekeepers
    in this country is declining dramatically. In my home county, 5
    years ago, we had nine; now we have one. And in New England,
    where they use a lot of honey hives to pollinate crops, they
    cannot get them anymore at any price. And when I think about
    the possible loss of $5 billion in agricultural products to
    save $30 million, that is not a good deal for the taxpayers or
    us or anybody else.
        And I wanted to ask you if you can tell me if you have done
    any studies as to what the impact of eliminating the honey
    program has been?
        Secretary Glickman. Well, first of all, let me say,
    Senator, that I voted the same way as you did. I also have
    qualms about the impact on pollination and protection of the
    development of basic species of plants because of it.
        Our research people are looking at it right now. I am not
    in a position to tell you whether we are going to recommend
    reestablishing a program at this stage. But there are real
    worries out there about this.
        Senator Bumpers. Mr. Secretary, our beekeepers cannot
    compete with Romania and South American countries, where most
    of our honey is coming from today. So I am simply saying I hope
    you will look very seriously at this, because I think it may
    turn out to be one of the most beneficial programs for the
    money in our whole Agriculture Department.
        Secretary Glickman. Our Agricultural Research Service is
    looking at that. There is a parasite that is killing bees out
    there as well, which is compounding the problem.
        Senator Bumpers. Yes; they tell me--for example, I have a
    good friend who is a beekeeper in my hometown. He had nine
    hives. He is down to three. And he says the life of those hives
    used to be 3 years and now it is down to about 1\1/2\ years.
        Secretary Glickman. I remember this debate on the House
    floor. And there was an extraordinarily eloquent Congressman
    who has since passed away, named Silvio Conte. And he was a
    wonderful man. And he made a rhetorical career out of this
    issue, talking about how it was stinging the American
    taxpayers. But you are correct. Sometimes one's point of view
    is not necessarily compatible with all the truth. And I fell
    victim to that myself.
        Senator Bumpers. It is a small item, but in my opinion, it
    is a very big item, too.
        Thank you, Mr. Chairman.
        Senator Cochran. Thank you, Senator Bumpers.
        Senator Byrd.
        Senator Byrd. Thank you, Mr. Chairman.
        And thank you, Mr. Secretary. Thank you, Senator Bumpers. I
    will just make a statement, and perhaps ask one question.
        As a representative from the State of West Virginia, I know
    firsthand the challenges confronting rural America and the
    small family farm.
        And incidentally, I wish every boy and girl in this country
    had an opportunity to live on a small family farm. I had that
    experience when I was a boy. And it forever shaped my attitudes
    and outlooks on life. And a great amount of my self-discipline,
    which I try to exercise today comes from the days when I was on
    that small family farm, back in the days of the 2-cent stamp
    and the penny postcard, no running water in the house, no
    electricity in the house. And I am very sympathetic to the
    problems of the small family farm.
        If we read about the ancient Romans, we will find that the
    primary manpower resource came from the farmers in the Apennine
    Mountains. And during the latifundia, the purchasing of the
    small farms by senators and others in ancient Rome developed.
    The small farmers who left the farms, migrated into the cities,
    where there was crime, and they contributed to the growing
    welfare mobs. And we can pretty much trace the downfall of Rome
    from the year 133 B.C., when Tiberius Sempronius Gracchus, one
    of the Gracchi brothers, became a tribune, and promoted the
    distribution of lands and agrarian programs which would help to
    draw these people back to the farms.
        We can take a great lesson from that. And if we note the
    history of ancient Rome, we will see a lot of parallels between
    that government and the ancient Romans and our early Americans
    of the 18th and 19th centuries. We have seen this happen in our
    own country as well. And we ought to take a lesson from what
    happened in ancient Rome, as the small family farmer left the
    farm and migrated into the towns.
        The U.S. Department of Agriculture, the People's
    Department, it was called by President Lincoln, is an agency
    that provides meaningful benefits to rural States. And while I
    believe that all seven of the agency's mission areas merit
    recognition, I would like just briefly to touch on a few
    programs that are important to West Virginia. And I begin with
    the USDA's Rural Development Program, which provides assistance
    to one of my longstanding priorities: the implementation and
    maintenance of basic community infrastructure such as water and
    wastewater systems, through its Rural Utility Service Program.
        While most Americans assume that when they turn on the
    faucet, clean, safe water will flow out, in West Virginia,
    176,000 families live without an adequate supply of safe
    drinking water. And the estimated cost of needed water
    development projects in the State exceeds one-half of a billion
    dollars.
        I applaud the USDA's efforts to alleviate this problem.
    Last year, under the capable leadership of Bobby Lewis, the
    West Virginia Rural Development State Director, the USDA made
    available the necessary resources to fund projects that will
    provide hundreds of West Virginians with access to a reliable
    source of clean drinking water for the first time. And much
    work remains, but I strongly support funding for the water and
    wastewater account.
        Other programs under Rural Development, such as grants and
    loans for housing and community development, have also
    contributed to rural revitalization efforts in the State.
        I took a trip in 1955, Mr. Chairman, as a member of the
    House Foreign Affairs Committee. And I was gone--we went around
    the world in an old Constellation. We spent 68 days on that
    trip, which, in these days, would have brought forth a number
    of investigators I suppose. [Laughter.]

              National Center for Cool and Cold Water Aquaculture

        But I was greatly impressed when I visited particularly
    Asian countries--India and the Far East--at the dearth of
    sanitation and sanitary water and waste facilities. And I
    learned a great deal on that trip, and I have many pleasant
    memories. But one of the most pleasant memories I have is that
    of being able to go to a water faucet back home, when I
    returned to the United States, and I was able to turn on the
    water and drink it--turn the faucet on and drink the water
    without fear of becoming ill.
        And we have a lot of people in West Virginia right today--
    and I would imagine in your State, Mr. Chairman, and other
    rural States--that do not have the luxury of clean drinking
    water. So I point to these unique needs of West Virginia, as to
    rural farmers, out. West Virginia farmers are hard-working
    family operators. It is my opinion that small and part-time
    businesses, such West Virginia farm operations, represent the
    backbone of our Nation's economy and spirit of community.
        I have been disappointed in the distribution to West
    Virginia of program benefits administered under the Farm
    Service Agency, the Agricultural Research Service, and the
    Cooperative State Research, Education and Extension Service to
    West Virginia. While limited benefits have been brought to West
    Virginia from these programs, they have been generally due to
    this subcommittee's attention to the worth of the small family
    farmer. And I appreciate the subcommittee's efforts.
        I have only one quick illustration of an ARS project that
    this subcommittee made possible that has already had a valuable
    economic impact on West Virginia, although the facility has yet
    to be constructed. And I refer to the National Center for Cool
    and Cold Water Aquaculture. All leading sources of data now
    confirm that aquaculture production will create hundreds of
    jobs and generate millions of dollars in the State. And the
    development of this industry is a State government priority.
        Many reports, further, suggest that abandoned mine sites
    can be used for aquaculture, with impressive economic results.
    Already, West Virginia, Mr. Secretary, boasts 40-plus active
    aquaculture producers, with increased activity expected this
    year. And so I thank the subcommittee for its vision,
    particularly the chairman and the ranking member.
        I shall ask only one question, and with your permission and
    the permission of the subcommittee, submit others for the
    record, Mr. Chairman.

              National Center for Cool and Cold Water Aquaculture

        That question would be with reference to the National
    Center for Cool and Cold Water Aquaculture, what actions, Mr.
    Secretary, will the USDA take to expand cool and cold water
    aquaculture opportunities in West Virginia?
        Secretary Glickman. First of all, Senator, we believe this
    is a very important project, that can have great positive
    impact on the development of an industry, which is still pretty
    much at a pretty elementary stage in terms of being able to
    produce farm-raised fish in cool and cold water environments.
    We see more in warm water environments.
        And of course, Senator Cochran's own State is one of the
    leading aquaculture States in the country as it relates to
    catfish. That is an industry that, frankly, has grown like
    wildfire in the last 10 years. I visited a few of the
    facilities when I was down in Mississippi, and it is a
    remarkable thing.
        We have a letter that is ready to go to you that defines
    the progress in this area. An architectural and engineering
    firm was selected in November of 1996 to design the facilities.
    And developing design concepts to accommodate specific facility
    needs will be initiated by March 31, 1997. That design process
    was mandated by Federal law.
        We anticipate approval of the final design and plans by
    September 30, 1998. Pending the appropriation of full
    construction funding, a construction contract could be awarded
    in the last quarter of calendar year 1998. To expedite the
    ongoing design process, we have negotiated a reimbursable
    agreement with the Department of the Interior's Biological
    Service, which will allow a senior aquaculture scientist, with
    substantial aquaculture experience, to be detailed to assist us
    in moving this process forward as fast as we can.
        To date, $7.9 million has been appropriated for the
    project, $6 million for construction and $1.9 million for
    planning and design. An additional $4.1 million of construction
    funds are required, for a total of $12 million. Eighteen months
    is typically required for construction of this site. So it may
    not be absolutely required that the additional funds be in this
    appropriation, but it will have to be in the next appropriation
    for sure to accomplish that.
        Reading from my staff's report, a staff research facility
    to address cool and cold water aquaculture production could be
    operational as early as early in the year 2000. I would just
    tell you that this is a high-priority project. We will see what
    we can try to do to accelerate it and expedite it any where we
    can. But we are moving on it.
        Senator Byrd. Mr. Chairman, I thank the Secretary for the
    attention and the interest that he and the Department are
    giving to this very important matter, as far as we are
    concerned in West Virginia. I also thank the chairman for the
    assistance that he has rendered to us in West Virginia in this
    regard.
        I close by referring to another trip that I took, which was
    not a junket, by the way. [Laughter.]
        The chairman and I had the great privilege of visiting the
    old city of Ephesus, where Paul the Apostle walked the streets
    before we arrived there, as did Hannibal and Publius Cornelius
    Scipio Africanus Major. Scipio defeated Hannibal at the Battle
    of Zama in the year 202 B.C. And Hannibal eventually had to
    flee from Carthage to escape the tentacles of the Roman
    government, which continued to reach out, which sought to
    finally lay its hands on this great Carthaginian general. And
    he was with Scipio one day in Ephesus.
        And as I say, Scipio had defeated Hannibal, who, by the
    way, Napoleon said was the greatest general of antiquity. In my
    book, I am not judge of who was the greatest general, but I
    have read a lot about Hannibal. And in my book, he is the
    greatest general also in antiquity and maybe down to more
    recent times.
        But Scipio asked Hannibal who the three greatest generals
    of all time were. And Hannibal said that Alexander and Pyrrhus,
    who defeated the Romans at the Battle of Heraclea, in Asculum,
    in 280 B.C.--he used elephants for the first time--Pyrrhus used
    elephants for the first time on that peninsula. It was the
    first time that the Romans had ever seen elephants.
        But Hannibal, to make a long story short, said the three
    greatest generals of all times were Pyrrhus, Alexander--no--
    yes--Pyrrhus, Alexander, and himself, Hannibal. And Scipio
    Africanus said, where would you rank yourself if I had not
    defeated you at Zama? And Hannibal then said, I would have been
    first. I would have been No. 1. But because you won that
    battle, I rate myself as No. 3.
        Of course, Hannibal went ahead to commit suicide in 183
    B.C. The Romans surrounded the compound in which he had taken
    refuge. One of his servants told him that the Romans were out
    there, looking around. And he said, well, go to the windows and
    make sure they are on all sides. And they reported back that
    they were indeed on all sides.
        He made his way into a subterranean cavern and he always
    carried a little poison in a ring. So when the Romans finally
    broke into the compound and found Hannibal, lo and behold, he
    had foiled them once again. They did not take him alive.
        Thank you.
        Senator Cochran. Thank you, Senator Byrd.
        Senator Kohl.

                               Prepared Statement

        Senator Kohl. Thank you very much, Mr. Chairman. I have an
    opening statement that I would like to have inserted in the
    record.
        Senator Cochran. Without objection, it is so ordered.
        [The statement follows:]

                       Prepared Statement of Senator Kohl

        Mr. Secretary: I appreciate your willingness to testify
    before this subcommittee today on the issue of the USDA's
    fiscal year 1998 budget submittal.
        You have had a very big task over the past year as you
    undertake the hard and thankless job of implementing the
    significant program changes mandated by the 1996 farm bill. And
    for many of these changes, implementation is still in process.
        Of particular importance to my state are the dairy reforms
    that are underway. Most important is the reform of milk
    marketing order reform process, which will not be fully
    implemented until 1999. I believe USDA has at its disposal the
    tools necessary to modernize this system, to make it more
    economically credible and equitable to all producers in all
    regions. As you are well aware, I feel strongly that USDA
    should use this opportunity to make the changes that are
    needed, instead of bowing to the significant political pressure
    against change, as so many previous Secretaries have done.
        Unfortunately, since passage of the farm bill, dairy
    farmers across the nation have experienced a disastrous decline
    in prices. This past fall, prices fell by more than 25 percent
    in a period of 3 months, and prices remain relatively low
    today.
        In response, you have taken a number of actions to help
    stabilize prices, and I applaud those efforts. I believe your
    willingness to increase the use of dairy products in USDA
    programs such as the School Lunch Program, the Commodity
    Supplemental Food Program, and the Dairy Export Incentive
    Program has helped bolster prices.
        And your responsiveness on the issue of National Cheese
    Exchange reform is much appreciated as well. The flaws of the
    National Cheese Exchange and the market's inappropriate
    influence on farmers' milk checks, has been one factor
    contributing to the price volatility that farmers have
    experienced in recent years. Cheese Exchange reform is not a
    panacea for fixing the problems experienced by family dairy
    farmers. But any reform of the national milk pricing system
    must also include a more credible system for price discovery,
    and I appreciate your efforts, Mr. Secretary, on that matter.
        And at the appropriate time, I will have a few questions
    for you about some of these issues.

                            National Cheese Exchange

        Senator Kohl. And, Mr. Secretary, we welcome you here
    today. I have three areas that I would like to cover with you.
    The first is with reference to the National Cheese Exchange.
        Secretary Glickman. Yes.
        Senator Kohl. Last year, Mr. Secretary, when you testified
    before the subcommittee, we discussed concerns about the flaws
    of the National Cheese Exchange. As you know, Mr. Secretary,
    research funded by this subcommittee and conducted at the
    University of Wisconsin in Madison, highlighted the market
    failures of the National Cheese Exchange.
        As you know, although less than 2 percent of all the cheese
    sold in the Nation is traded on the National Cheese Exchange,
    nevertheless, the price determined on the National Cheese
    Exchange in Green Bay acts as a reference price for almost all
    the commercial bulk sales of cheese in the country. And that is
    also used as a very important determinant by the USDA in
    setting milk prices paid to farmers.
        Now, that exchange is very thinly traded. And as a result,
    no one has complete confidence in the prices that are
    determined on that exchange. And yet, as I said, these prices
    are used in a very important way with respect to both cheese
    and milk prices throughout our country. Now, you have worked on
    this, and I know you are greatly concerned about it. And I
    appreciate that concern. And you have been very helpful in
    coming forward with a proposal to delink the National Cheese
    Exchange from the USDA's calculations.
        Last year I asked you to put together some proposals on
    alternative price discovery mechanisms. And I know that there
    are many proposals currently being considered in this regard.
    Mr. Secretary, if the USDA decides to delink the basic formula
    price from the National Cheese Exchange, what viable
    alternatives do you see to take their place?
        Secretary Glickman. Thank you, Senator Kohl. First of all,
    I want to thank you. You have led the way to get us to evaluate
    and reevaluate this process by which we rely on the National
    Cheese Exchange to determine the price of cheese, which is a
    big component of the price of milk and the basic formula price.
    You are correct, we are looking for options to remove that
    process. Because we believe that delinking that very thin
    method of determining cheese prices is important to give dairy
    farmers and others who use these markets some confidence that
    there is some viability to how the prices are set.
        Now, I would say a couple of things, then I would ask Mr.
    Collins, our Chief Economist, to comment.
        We have been receiving comments since 6 weeks or so ago,
    frankly, a lot of this effort was due to your pressure and
    Senator Feingold and Senator Specter and others, but you have
    been talking about this with me for about a year now. So we
    said we have got to find a process other than the Cheese
    Exchange. So we have been receiving comments since the end of
    January, in response to your request.
        We have had about 80 so far. And the comments have been
    geared to what substitute methods are there out there, or what
    should we do internally if there are no substitute methods,
    whether it might be the futures market, which, as of today,
    does not really exist. There may be some desire to use such
    alternatives.
        We have left the record open for about another 30 days to
    let people have some additional time to comment and then we are
    going to terminate that record. We then hope to have enough
    information to make some decisions as to what it ought to be.
        But I would like Mr. Collins to comment specifically. And
    while I have not evaluated those comments yet, maybe he could
    talk a little bit about the general character of what those
    comments have been.

                            National Cheese Exchange

        Mr. Collins. Sure, Mr. Secretary, I would be happy to.
        Senator Kohl, under milk marketing orders, our main goal is
    to value milk at its lowest valued use. That is what the basic
    formula price is. To do that, we really have two choices. We
    can value milk by looking at milk prices themselves, which we
    used to, or we can value milk looking at product prices, which
    is what we do now. Cheese, of course, is one of those product
    prices.
        So basically, the alternatives before us, and the
    alternatives that are being suggested in the comment period,
    are for us to go back and value milk on a survey of processors
    by asking them what they pay for milk, or to find a replacement
    for the Cheese Exchange price. The difficulty is, of course,
    there is only one organized cash market for cheese in the
    United States. That cash market is the National Cheese
    Exchange. That is the only place where a cheese price is
    discovered in any formal way. And, that is the market that is
    under attack.
        People would have us, as alternatives, go out and come up
    with some kind of survey of transactions that take place off
    the exchange. Most of the data we have suggest that those
    prices are based on the prices on the exchange. So it is not
    clear that we are going to get new information by surveying
    off-exchange prices.
        Another alternative is simply to help foster the demise of
    the National Cheese Exchange, and replace it with a successor
    exchange. That process is underway, and is something the
    Department has been involved with also. We have been assisting
    any exchange that wants to start a new cash market for cheese.
    In particular, we provided some assistance to the Coffee,
    Sugar, and Cocoa Exchange in that regard.
        So those are sort of the general range of options that we
    are looking at right now. As the Secretary said, comments have
    been pouring in. We have had about 80 comments so far in the
    last 2 weeks, and we are evaluating those. I am sure, until
    this comment period closes on March 31, we are going to get a
    lot more.
        Secretary Glickman. What I would like to do is, once we get
    a summary of those comments, then I would like to be able to
    come back to you and run through the kind of general options
    that are there, to determine whether these are the kinds of
    things that we can make or should use to make a decision
    whether to go back to computing milk based upon processed milk
    or go to the product value, which is cheese, which we are doing
    right now. However, we really need to get off this reliance on
    the Cheese Exchange. There is universal agreement on that.
        Senator Kohl. That is good. Do I hear you saying that there
    is an agreement that we have to come up with an alternative
    price discovery mechanism, that you are hard at work in this
    process, and that by the end of March you are going to close
    the comment period and, very shortly thereafter, we are going
    to really get to trying to put in place an alternative price
    discovery mechanism?
        Secretary Glickman. I think that is a fair statement.
        I would tell you that what I would like to do is, after the
    comment period, sit down with you and go over the general
    option areas available to us--they probably all have pluses and
    minuses to them--and talk about whether we have all the
    authorities that we need to do what we need to do or whether we
    need additional legislative authorities or not.

                          Milk Marketing Order Reform

        Senator Kohl. OK, good. On milk marketing order reform, Mr.
    Secretary, I appreciate your comments about the Cheese
    Exchange. But let us not forget that one of the most important
    things, is the larger reform process underway--and that is milk
    marketing order reform. You and I have had many conversations,
    Mr. Secretary, about the outmoded and the inequitable nature of
    the current system. You have made many public statements, which
    I appreciate, including the comments that you made before this
    subcommittee last year, which I appreciate.
        Secretary Glickman. Others remember those same comments,
    too, who do not appreciate them. [Laughter.]
        Senator Kohl. I understand. But I appreciate them.
        And you suggested that you agree with the assessment that
    we have to do something about the current pricing system.
        As you know, we have many opinions about the issue
    represented on this subcommittee, and I fully respect the need
    of all Senators to represent the needs of farmers in their
    State. It is my hope that as you go through your reform
    process, you will find a way to find a system that is
    economically credible and fair to all producers. Ultimately, if
    the milk marketing system is going to have any future, it must
    reflect the modern realities of dairy markets, and it must be
    equitable.
        In my mind, that means not only order consolidation, but
    also significant reform in the class I differential price
    structure, which has to take place if we are really going to
    have some kind of reform that is truly deserving of that name.
    In this context, we have been expecting a new discussion draft
    from the USDA regarding milk pricing and the milk pricing
    system. Could you tell us today when you expect to release that
    document to us?
        Secretary Glickman. I would ask, Mr. Collins, if you know
    generally, timewise?
        Mr. Collins. We are very close. We have a draft document
    that is complete. It is in its final stages of review. I would
    almost say imminently, in the near future, we should have that
    out.
        Secretary Glickman. I have personally been a little
    concerned that we have not had enough of what I call serious
    options come from various parts of the country, various parts
    of the industry, as part of this process. What people are
    finding is this a tough nut to crack. So I get a lot of folks
    who are upset about the current system. But then when we say,
    OK, help us devise an alternative or modification that needs to
    take place, it is tougher to get that, even from the academic
    side of the equation. We have got some. It is coming; however,
    it is slower than I would like to see.
        Senator Kohl. By the same token, imminently, you are going
    to have some serious proposals for us?
        Secretary Glickman. That is correct. Yes; we have got to
    get them out. And then, if they are going to be attacked or
    they are going to be challenged and improved or modified, we
    have got to get them out quickly.

                       Risk Management for Dairy Farmers

        Senator Kohl. OK. Last, I would like to talk about risk
    management for dairy farmers.
        In your testimony, you discuss efforts underway to help
    farmers manage risk. Given the rapid deregulation of
    agricultural markets as a result of the 1996 farm bill, and
    price volatility that is inevitably going to result, risk
    management, as we know, is a necessity. Most of the rhetoric
    that I have heard about risk management has been focused on the
    needs of crop farmers, with little discussion, Mr. Secretary,
    of the risk management also for livestock producers.
        This past fall, dairy farmers saw their prices decline by
    over 25 percent in 3 months. And beef prices have also been
    very volatile in recent years. That sort of volatility makes it
    harder for the average livestock producer to stay in business
    unless they have greater opportunities to manage the price
    risk.
        So I would like to ask you, Mr. Secretary, what is the USDA
    doing to help livestock producers weather the storms of price
    volatility?
        Secretary Glickman. It is kind of interesting, the first
    time I saw the Washington Post comment since the farm bill was
    on dairy price volatility. I do not know if you saw that
    editorial. But it recognizes that we are in a much more risk-
    oriented environment now, generally speaking, in agriculture,
    as a result of the last farm bill.
        There is no question that the focus has been on the crop
    side. In expanding this pilot program nationwide for revenue
    insurance, it has been on the crop side. However, we do have a
    couple of things--and I would again ask Mr. Collins to comment
    on this. One is the proposed options pilot program for milk.
    That has been submitted to the Department. We have not acted on
    it yet.
        The whole area of agriculture options, as you know, over
    the years, has had a lot of speculative concerns about it. So
    whether it is in options for grains or options for milk, it is
    one that, since there is no futures market in milk products to
    speak of, it is one we are looking at. And perhaps Mr. Collins
    would comment on that.
        The other thing is, as a part of our efforts on livestock
    concentration and the concerns about it, we have created a lot
    of new mechanisms on new market information for livestock. Some
    of those are out there already including more frequent
    reporting of prices of livestock, both cows as well as other
    farm animals. And a lot of your producers are already taking
    advantage of some of this increased market reporting
    information, much more frequent information, information on
    imports and exports across the borders.
        Now, again, this is in the animal area, not in the raw
    product area. Keith, do you have any other comments? It is a
    very legitimate concern, in terms of how we deal with the issue
    of risk.
        Mr. Collins. In dealing with risk, we really want to focus
    on two areas, financial management of farm business operations
    and marketing management of the product. We have a statutory
    requirement from the 1996 farm bill to run a risk management
    education program. There is a small amount of money in our
    budget to fund that effort. We have already begun that effort.
    The Risk Management Agency [RMA], as you know, focuses, as the
    Secretary said, on crops and crop insurance.
        Secretary Glickman. Although, if I might add, crop
    insurance for feed does provide some protection for the dairy
    producer. Because the feed costs have been a big part of the
    cash flow problem there.

                       Risk Management for Dairy Farmers

        Mr. Collins. This risk management education initiative that
    we will run will also include livestock and dairy. It is going
    to be broader than just crops. It will involve developing
    packages of information to cover both financial management, as
    well as, marketing management; and, communicating that to
    producers to help them identify, prioritize, and deal with
    their risks.
        We also, as the Secretary said, have received from the
    Coffee, Sugar, and Cocoa Exchange a proposal for an Options
    Pilot Program for dairy producers. I would point out that the
    1996 farm bill limits our ability to use the Options Pilot
    Program the way we did in the past. Such programs now have to
    be essentially budget-neutral, whereas in the past, we used CCC
    funding to fund those programs. Therefore, we are having some
    difficulty in studying the proposal from the Coffee, Sugar, and
    Cocoa Exchange; but, we are going to try to work with them and
    see what can be done in that area.
        As you may know, there are a couple of dairy co-ops in the
    United States that are running programs that allow producers to
    hedge and use futures markets through their co-ops. I think, in
    fact, there are only two such co-ops that do that. And we would
    like to see those kinds of activities become more broadly
    developed, so that futures markets for dairy products do become
    much more viable than they currently are.
        Senator Kohl. Well, I thank you. And I appreciate your
    sensitivity and your concern about this issue and this problem
    and your determination to try and do something about it to
    bring some stability, over and above what exists today, to
    livestock producers.
        I also want to say, Mr. Secretary, that I am very impressed
    with the efforts that you have made thus far to understand and
    recognize and the determination you have shown about trying to
    do something with respect to the pricing system on milk. I know
    it has been done at some peril with respect to yourself and
    some of the criticism that you have received, but I think you
    really are determined to find some equity in this situation.
    And we understand equity is not all black and white.
        And I have said across the State of Wisconsin that of all
    the Secretaries I have worked with, none has been, in my
    opinion, more determined to be forthcoming and decisive and to
    get something done. And across the State of Wisconsin, because
    of the comments that I have made, there are great
    expectations----
        Secretary Glickman. I knew that was coming. [Laughter.]
        Senator Kohl. For what we hope that you can achieve. And
    for that, I want to say that I appreciate your efforts, and I
    am looking forward to getting something done, working with you.
        Secretary Glickman. Senator, obviously, you have had a
    great deal to do with inspiring my interest, as has Senator
    Leahy and others, as well. I think, philosophically, this is a
    very important issue for us. Because it relates to the
    viability of small-and medium-sized producers generally. It is
    not just in dairy. As you know, these trends toward fewer
    producers and more larger producers is almost in all segments
    of American agriculture.
        Quite frankly, I do not think we in USDA, over the years,
    have given a lot of attention to the changing structure of
    agriculture. I am not saying that we fight the nature forces of
    the economy and economic trends. To the extent that we can kind
    of be a constructive, positive force in helping small-and
    medium-sized agriculture stay in business, that ought to be one
    of our prime focuses.
        And that is not just in dairy. It is in the row crops and
    other commodities as well. And the markets are sometimes cruel.
    And Congress, in the 1996 farm bill, and we signed that bill,
    determined to change that, to let the markets run more
    naturally, with less Government involvement. We also have an
    obligation to recognize that a little bit of what Senator Byrd
    talked about is right on target. The fundamental structure of
    the country is strengthened by the preservation of strong
    agriculture. That just does not mean five companies running the
    show. That means a healthy social structure as well.
        I view the dairy issue as part of that issue, keeping
    enough folks on the land to preserve a social structure in this
    country as well.
        Senator Kohl. That is something with which I could not
    agree more. And again, I am very impressed with your
    sensitivity, and I appreciate your being here and your
    willingness to work with us.
        Secretary Glickman. Thank you.
        Senator Kohl. Thank you.
        Senator Cochran. Thank you, Senator Kohl.
        Senator Burns.

                               Prepared Statement

        Senator Burns. Thank you very much, Mr. Chairman, I have an
    opening statement that I would like to have inserted in the
    record.
        Senator Cochran. Without objection, it is so ordered.
        [The statement follows:]
                      Prepared Statement of Senator Burns
        Thank you, Mr. Chairman.
        I would like to offer my thanks to Secretary Glickman for coming to
    the Committee today to discuss the proposed Budget for the Department
    of Agriculture, as submitted by the President. I do have to tell the
    Secretary though that I am very disappointed in the budget that this
    Administration has proposed. I don't feel as though the Department of
    Agriculture has taken into account the agricultural producers of our
    country in this budget. They have listened to, too many groups that are
    no longer related to the production of food and fiber for our great
    land.
        The issue of great concern to me, is the funding level for real
    agriculture in this budget, and the misperception that the American
    public has about where the dollars in this budget really go. I have
    concerns as well about the funding for those agencies and areas that
    directly impact the concerns and fears of the people who make their
    living on the ground providing a food supply for our country. Among
    these are the budgets for Agricultural Research, Grain Inspection
    Packers and Stockyards, predator control and those agencies which make
    sure that these people have access to information and the continued
    ability to work on the land.
        I am also very glad that the Secretary is here today, since later
    this afternoon my Montana colleagues and I will be meeting with him to
    discuss an issue that is of vital importance to the state of Montana.
    For several years now I have held hope for the Department of
    Agriculture, through the Animal Plant Health Inspection Service to come
    to the front in the debate over the disease of brucellosis in the
    Yellowstone bison herd.
        I have to say that as of this date I have been greatly disappointed
    in the agency and the department in general on this issue. I feel very
    dissatisfied by the way that the agency has handled both the animal and
    human health issue in this area. I hope the Secretary remembers what a
    great proponent I have been of APHIS in the past and the words of
    encouragement I have provided in these hearings. However, later this
    afternoon I will discuss more thoroughly this very issue with the
    Secretary and will not take any more Committee time than necessary to
    discuss this issue today.
        Before concluding on this topic though, I would like to extend to
    you an invitation to come to Montana. I believe it imperative that you
    come out and see what exactly it is that the government of the state of
    Montana must face on a daily basis. To make this trip beneficial to
    all, I think you need to schedule this trip almost immediately. I would
    be more than glad to accompany you so that you can see the problem we
    are facing right up front and in person.
        Mr. Secretary, I continue, as in years past, to be very concerned
    about the Agricultural Research Budget. As always this Administration
    has continued to defund the grants, which are of extreme importance to
    states like mine and those that surround Montana. I am also concerned
    with the budget increase for the Agricultural Research Service which
    will provide funds for nutrition research and not provide an increase
    in funds for those areas which will provide for the farming family on
    the land.
        In looking at the proposed budget, I have seen the increase in the
    ARS budget, but when I look at where the dollars are going, I see
    programs that will not help the family farm. The budget, as proposed by
    the President, will provide additional funds to the nutrition study of
    our food supply. Mr. Secretary, there are numerous groups in downtown
    Washington, that are providing this research at little or no input of
    taxpayer dollars.
        When visiting with my fellow Montanans, I find that they want
    research dollars going to funds which will provide for them in the
    future, not to groups or organizations that seek to tell them what is
    in that steak or vegetable dish that they are eating tonight. What we
    seek are ways to increase what we have now and what we can do to help
    the family farmer.
        These people ask that their tax dollars go to the universities that
    will provide for them in the future. They want to see their tax dollars
    go to something that will assist the future and their children. Yet
    this Administration seeks to provide funding for special interests that
    have no interest in the future of the food and fiber provided by
    agricultural producers in our nation.
        While reviewing the budget proposal earlier this month I was also
    concerned with the manner in which the department thought it necessary
    to reduce funding for Grain Inspection, Packers and Stockyards. During
    the past two years Congress has heard the numerous concerns of the
    livestock producer on the issue of packer concentration. Yet as we look
    into your numbers, we see where you think you can get by asking more
    from this agency and provide them with less funds to investigate what
    is happening on the ground.
        This work needs to be done to provide a sense of confidence in the
    federal government by the people that fund that very government. Yet it
    appears your department has no concern for the developing or renewing
    that confidence. I hope you will not tell me that the Department feels
    that they can make up the difference in user fees, because I have great
    concern about them as well.
        Mr. Secretary, as the past year has moved by us, I have become
    increasingly concerned with the manner in which your department has
    proceeded with the implementation of the most recent farm bill. It
    appears to me, that the rule making procedure has been used to benefit
    the department and not the producers in the field. A case in point is
    the recent rule making on the Conservation Reserve Program.
        Within the past few weeks you have finally put out the final rules
    on CRP. This week you are taking the time to educate your field
    personnel, and next week you start the process for signing up for the
    program. At this then, you only give producers a few days more than
    three weeks to make the decision of signing up for the program. This
    action is undefendable to me.
        Basically, I guess I am concerned with the amount of leadership,
    and where the leadership in your department is coming from. One example
    of this comes directly from my office. Recently in an attempt to
    schedule the meeting for this afternoon, my staff was ignored in
    efforts to make contact with you to schedule this appointment. I will
    get into more detail with you on this later, but Mr. Secretary, I would
    expect a little more from a former member of Congress.
        Mr. Chairman, I have lost a great deal of confidence in the
    Department of Agriculture this past year. I would hope that today, both
    in this meeting and later with Secretary Babbitt, that the Secretary
    can give me some reason to restore my faith and confidence in this
    department. The agriculture producers in our country deserve a
    department that is working for them and not against them. They expect
    and deserve a Secretary that will be out there telling their story.
    This is something that I would like to see as well.
        We are facing a time in agriculture where the vast majority of the
    people of this country have no idea of the pleasure of being on the
    land, of working with livestock and seeing of nature reborn every
    spring. Our country needs leadership that will provide this rural
    lifestyle to continue and not always feel like ``Big Brother'' is
    trying to put them out of business and drive them off the land.
        I look forward to listening to Secretary Glickman and learning what
    he plans to do with the funding that the Administration has budgeted
    for Agriculture this year. It is my sincere hope that he can give me
    reason to renew my confidence and faith in the Department of
    Agriculture.
        Thank you, Mr. Chairman.

                                  ARS Funding

        Senator Burns. Mr. Secretary, thank you.
        I want to stress just some of my concerns with this
    appropriation and where you have placed your emphasis and where
    I am going to--I am going to be very, very up forward with--I
    hope you change some of it. First of all, I do not think you
    have got near enough money in ARS. I think, if there is one
    area that we are lacking in the U.S. Department of Agriculture
    it is in agricultural research.
        Now, you did increase some dollars there. But the dollars
    went the wrong way. We have got people all over this country
    doing nutrition studies and recommending diets and all this
    healthy stuff. And I will probably die before I am 62, but that
    is OK; it is because I eat all the wrong stuff. I happen to
    like it. But we are not doing enough as far as helping
    production agriculture.
        Now, everybody wants to keep that young farmer on the farm,
    but I do not see anybody out here in the Department of
    Agriculture leading the band to say we ought to reform estate
    taxes so we can pass our farms on to the next generation. I do
    not see anybody in the Agriculture Department doing that.
        Mr. Secretary, we are to the point now where we need an
    advocate for the farmer. We need an advocate for the people who
    provide the food and fiber for this country, and quit fiddling
    around with this other stuff.
        And Robert Byrd hit it over here a while ago--the way we
    handle our water is very, very important. I have a daughter
    that graduates from medical school this spring. I am very proud
    of her. You know what she said? The advances that we have made
    in medicine have only contributed 5 percent to the increasing
    of the average life-span in this country. The rest of it has
    been the way we handle our water. That has really done more to
    extend our life expectancy than anything that we have done in
    this country. So I think it is very important.
        In ARS, I do not think you have got enough money. In
    construction, we need some more money. And do not worry about
    the nutrition programs; let us worry about production
    agriculture. I want to change that formula a little bit. And I
    will work with you on that. That is one area.
        The next one, and with that, through ARS, is extension. I
    think that is very important. It does nothing to do the work if
    we cannot get that information out to the people who have to
    apply the new technologies and the work that we have done
    through ARS.

                             Inspection Activities

        Let us talk about inspection just for a second. We got a
    situation on the border. We are going to address that. And we
    will talk to you about that more privately with the situation
    up there. Because I happen to believe that whoever said that
    they are going to pass along these increased fees on
    inspections to the consumer, they are as crazy as a bedbug. It
    is going to go right back to the producer.
        Because I do not care how you look at it, agriculture will
    always--we will always buy retail, we will always sell
    wholesale, and we will pay the freight both ways and all the
    incidentals in between. We will always do that. And anybody
    that does not understand that ain't never lived on 160 acres of
    two rocks and one dirt. And there is a difference right now.
    There is a disparity between the way we inspect chickens and
    poultry and the way we inspect red meats.
        We are not playing with a level playing field there. And I
    think it is time that we take a good look at that. We have got
    some good people down in P&S and at our Inspection Service.
    They have some recommendations and I think we should take those
    recommendations.

                             Field Office Closings

        And then another area, you are talking about a reduction in
    force as far as our service centers are concerned. I want to
    see that reduction happen here before it happens at the point
    of sale, so to speak. We are talking about closing offices in
    Montana. And we have got long distances out there. And I would
    ask you to take a good look at your force here, and then take a
    look at the force out there at the sort of point of sale or
    point of service. That is where we need to put our people, and
    help some of these people through some of these very stressful
    times.
        As far as the bee situation is concerned, I voted for the
    bees. I am happy to say, this old, conservative Republican
    voted for that liberal, old program of helping the beekeepers.
    Now, all at once, we are finding out that that was a very, very
    shortsighted situation. It is also shortsighted in the wool
    incentive. Because we have one-half as many sheep in this
    country as we had whenever that incentive went away. And that
    is the biggest share of it. And that did not cost the taxpayer
    anything but the administrative costs. And that is a shame.
        So in order to cut programs and to be heroes to what we
    think is perceived as helping the taxpayer, we absolutely hurt
    the taxpayer and in a lot of different ways. So those are the
    areas that I will be looking at. I do not have any specific
    questions. But I am going to make some recommendations to you
    with regard to where we spend our money on these
    appropriations. Because I think there are some disparities
    there that are just very glaring.

                            Advocate for Agriculture

        And, Mr. Secretary, I am down to the point where we in
    agriculture have got to have an advocate at the USDA. Everybody
    else has got one down there, but not this old guy out here that
    is--and we are going to lose a lot--do not worry about the
    numbers of cattle--we are going to take care of that--North
    Dakota, South Dakota, and eastern Montana--we are going to take
    care of a lot of those numbers this year. We are going to lose
    a lot of cattle--frozen to death, standing. Could not get feed
    to them.
        And besides that, it has been terribly cold. And right now
    they are saying snow does not qualify as being a disaster. But
    we should take a look at that and see if we cannot do something
    about that.
        But those are the areas that I am really concerned about--
    inspection, how we inspect, are we dealing with products coming
    into this country, are they coming in on the same label, are
    they going through the same hoops that our local producers have
    to go through. And that is my statement. I am going to see you
    this afternoon if I get out of here. Because I have got to go
    look on television now--about violence on television.
        Secretary Glickman. Can I just make a couple of quick
    comments?
        Senator Burns. Yes, sir.
        Secretary Glickman. First, I appreciate your comments
    concerning the Agricultural Research Service [ARS]. Congress
    has to reauthorize the research programs this year. So to the
    extent of redirecting priorities, that will be a part of the
    process. Clearly, we have the best agricultural research
    establishment in the world. We want to keep it that way.

                             Inspection Activities

        On the issue of inspection, just so that you know, we
    recently announced some changes in increasing the amount of
    random inspections of meat coming across from Canada. Your
    office probably got a copy of this, but we will make sure you
    get a copy of what was done. I think you will find that
    somewhat helpful in the process.
        On the disparity issue, the fact is there are differences
    between chickens and beef, in terms of the numbers, the
    quantity, and everything else. I have said publicly my goal is
    to achieve relative parity in the inspection process.
        Senator Burns. We just want a level playing field. Because
    I ain't got too many chicken farms in Montana.
        Secretary Glickman. Both are big parts of American
    agriculture, poultry and beef.
        Senator Burns. I am not worried about chickens. I have
    never seen a seeing-eye chicken or a stock chicken or a guard
    chicken. I do not know what to use them for. [Laughter.]
        Secretary Glickman. As you know, I come from a State which
    actually is the largest beef processing State in the country.
        Senator Burns. I will talk to you about concentration now.
    [Laughter.]
        Secretary Glickman. But I have grown appreciative of the
    significance of the poultry industry. For example, in 1990, our
    sales of poultry to Russia were about zero. Last year, we sold
    nearly 1 billion dollars' worth of chickens to Russia--$1
    billion, from zero 10 years ago, roughly. One-third of all of
    our poultry exports go to Russia. Nearly 25 percent of
    everything the Russians buy from us, which includes
    pharmaceuticals, cars, airplanes, nearly 25 percent is
    chickens.
        Senator Burns. I am sorry I brought it up now. [Laughter.]
        Secretary Glickman. So I guess my point is that it is an
    important industry as well. At the same time, we do not want to
    give any one part of the livestock industry a disproportionate
    advantage in the slaughtering and in inspection process. That
    is not my goal. Our goal is to move those industries to a more
    comparable level. We are doing that as a matter of fact.
        Senator Burns. Well, there is a disparity there, and if we
    could address that, that would be fine. But that is not high on
    my agenda either. I think the ARS, extension, the way we
    deliver our services to our farmer, and we need an advocate. I
    have never seen a time when agriculture needed it more than we
    do right now. Because we have got a lot of answers for this
    society. And we are not having riots out there, you know. None
    of that. But we want to keep on producing, too.
        And I am sure glad to hear now that--the cloning of the
    sheep, I realize why Dale would be concerned about that.
        Thank you very much. [Laughter.]
        Senator Cochran. Thank you, Senator Burns.
        Senator Leahy.
        Senator Leahy. Thank you, Mr. Chairman. I am delighted to
    be a member on this subcommittee. You and I have served
    together on appropriations for many years, as well as on the
    Agriculture Committee because of the influence this
    subcommittee has on agriculture and the environment and USDA
    and the lives of people who use the WIC Program or other
    nutrition programs. And I find that very interesting.

                            National Cheese Exchange

        I listened to what Senator Kohl said about reducing the
    influence of the Cheese Exchange and the pricing of milk. Well,
    I agree. It makes no sense in my State of Vermont, for example,
    to see a little cheese exchange, which has really no influence
    in our State at all, other than the fact that whatever happens
    on it can dramatically change overnight the price of milk in
    Vermont. It has nothing to do with supply and demand. It has
    only to do with what one company or two companies might do in
    that one exchange.
        I think that we can find a far better way to have a
    statistically reliable national survey system to monitor
    prices. What I would suggest is do something like we do with
    the New York Times best seller list. The New York Times goes
    each week to different booksellers, checking how the books are
    being done. For example, every week, the New York Times checks
    a list sort of at random, of bookstores. That way, no book
    publisher can just buy up all their own books and go up to the
    best seller list.
        What has happened on the Cheese Exchange, though, is just
    the opposite. They know that every single week or month or
    whatever it be, you have to go to that same one exchange. So it
    is very easy to manipulate it.
        As I said, when we see the price of milk drop
    precipitously, for example, in Vermont, and yet the supply and
    demand has not changed a bit, you have to ask what caused this.
    And if the cause is one small exchange and some people probably
    speculating or manipulating, then we have to find a different
    system. And I will work with you in any way we can to do that.
        It has been mentioned here also the farm bill. And I would
    note to everybody, a lot of work went into that farm bill and
    passing it last year. It was a bipartisan coalition in the
    Senate. I was part of that. We worked very hard to compromise
    and to put one together. It meant that Republicans and
    Democrats had to work together. A lot of special interests,
    from the left to the right, were left outside the door while we
    tried to do what was best for this country.
        I would also note, Mr. Chairman, that as I recall, that
    farm bill got the largest number of votes a farm bill has
    gotten, certainly since I have been in the U.S. Senate. I say
    that because I will fight any and all attempts to undo that
    bill before we have a chance to see how it works.
        I have heard some discussion among some that say we have to
    revisit it and basically rewrite it. I will do everything, from
    having a chance to instruct my colleagues on what goes into a
    farm bill--I understand there are several hundred pages that
    they probably have not had a chance to read, although they may
    want to hear me say them over the days and weeks and months on
    the floor if there is going to be a change.

                               Nutrition Programs

        We established spending, such as the CRP, the Conservation
    Reserve Program. We have to work together, protecting these
    programs and to protect our environment. The nutrition
    programs--I support the President's request for $100 million
    for a supplemental appropriations for the WIC Program. If we
    take advantage of the savings identified, we can provide
    supplemental funds to feed 400,000 additional infants,
    children, and pregnant women.
        We have hungry children in a nation where none of us in
    this room goes hungry except by choice. If you stop to think
    about that, there is not a single person in this room who goes
    hungry or will go hungry today except by choice. We have a lot
    of children who do not have that choice. And we suffer as a
    nation if they start off hungry and if they go into life
    hungry.
        We have one program that works well, the Farmers Market
    Nutrition Program in WIC, where we spend about $6 million on
    that. That has worked very, very well in my State. What it
    means, Mr. Chairman, is that on these farmers markets, people
    can use WIC certificates and they get food that is extremely
    fresh, that had been growing hours before they get it.
        I look forward to being on this committee. I have questions
    which I will submit for the record.
        I was pleased, as I said, to see the question on the Cheese
    Exchange come up.
        And I would hope that the Department might continue to look
    at the electronic benefits transfer system--that is an entirely
    different thing--on food stamps. As the son of a printer, I
    hate to say this--but we are spending hundreds of millions of
    dollars in printing food stamps. And there has to be a better
    way.
        And also, I would think, from my days as a prosecutor, I
    think that you could track fraud a lot easier with an
    electronic system. It certainly would be fairly easy to set up
    a program where, if you suddenly see a huge spike in the use of
    food stamps in one small store, that you would at least call
    your investigators' attention to it.
        Thank you, Mr. Chairman.

                   Russia's Economic and Political Situation

        Senator Cochran. Thank you very much, Senator Leahy.
        Mr. Secretary, this morning I had an interesting
    experience, having been invited to a breakfast meeting
    sponsored by the Aspen Institute. I heard a presentation from
    Dr. Peter Reddaway, who is professor of political science and
    international affairs at George Washington University. He
    discussed the current political and economic situation in
    Russia. Your reference to the tremendous growth of Russia as a
    market for poultry exports reminded me of some things he said.
    I thought you might be interested in hearing some of his
    comments, because they may very well affect the capacity of
    Russia to continue to be an important market for United States
    food exports.
        He said that the gross domestic product in Russia is down
    50 percent over the last few years--I think he said 4 years--
    even though they have an inflation rate that is very modest--
    almost zero--and their debt-to-GDP ratio is about 7 percent.
    Those are the only good things that you can say about the
    Russian economy today. Because, in his view--and he said this
    is shared by others--the economy is in a very serious state--
    almost a state of near collapse because of the criminal element
    that has taken over in large measure. The economy is being
    criminalized and corrupted in ways that very few realize around
    the world today.
        He said: In July, funds for rations to feed the military
    will cease to exist. The central government will not have funds
    to make available to the military to buy food. And that
    regional governments will be asked to provide those funds or
    foodstuffs to feed the military forces that are deployed in the
    various regions of Russia.
        It is almost shocking or alarming to me to just hear the
    various other characteristics of the Russian economy. I bring
    that up because I am curious to know whether the Department of
    Agriculture is aware of these reports and whether or not any
    assessment is being done on the impact on American agriculture
    of the state of the economy in Russia.
        Secretary Glickman. The answer to the second question is
    yes. Our Foreign Agricultural Service is actively involved. We
    have people in Moscow and throughout the area, trying to
    analyze these conditions. And also we rely on intelligence
    reports as well.
        But let me tell you an interesting thing. Vice President
    Gore and the Prime Minister of Russia, Mr. Chernomyrdin, they
    have this commission, the Gore-Chernomyrdin Commission. They
    meet twice a year, once there and once here. We just had our
    meeting here. I was with my counterpart, Mr. Zavaruka, who is
    the Deputy Minister for Agriculture. I am not sure I heard as
    bearish a sounding scenario, but it is clear that one of the
    reasons why they have just extraordinarily exploded their
    demand for American poultry is because they have lost their
    infrastructure to produce farm commodities of all sorts. They
    do not have the feed available. It is just a combination of
    factors.
        One of the things that they clearly said to us was that you
    cannot expect to have these markets forever unless you help us
    develop our own poultry infrastructure, which our industry is
    beginning to do. We are involved in joint venture activities;
    and, we are trying to help with that. Because we believe,
    without that, we risk the fact, politically, of having these
    markets removed.
        Remember, they tried to do this last year, alleging
    Salmonella, or some other sanitary type of problem. But they do
    not have, because of the lack of marketing and financing
    capability, much of an agricultural infrastructure at all.
    Obviously, we are worried about it. The days of us selling
    large amounts of grain have long passed. But there is some
    reason to believe they may need some grain in the future
    because of their infrastructure problems. We are ready,
    willing, and able to help with that. I talked with the
    Agriculture Minister about that as well.
        They clearly are in deep trouble, but my impression from
    the meeting that we had was that there is some degree of
    political stability, depending of course on President Yeltsin's
    health and other things. We just have to do our best to try to
    improve their economic and political structures. In the
    meantime, they still need our poultry. They do not have the
    infrastructure to grow their own chickens in any kind of
    marketable way.
        The old days of us being very dependent upon them in the
    grains are gone. They do not have the resources to buy it. We
    have seen ourselves become somewhat dependent on the poultry
    situation over the last few years and we have got to recognize
    that it may be tenuous. I mean we have got to hope their
    political structure is such that they can continue that
    process.
        Senator Cochran. There are no estimates in the Department
    as to the length of time that this kind of purchase record or
    practice of buying poultry products can be sustained? Are you
    making any estimates or projections of that?
        Secretary Glickman. No; at least not as a result of these
    meetings. As you may know, when the Russians made sounds to cut
    off these imports of poultry, the Vice President personally
    intervened and the Prime Minister also personally intervened,
    to see what was going on. It is clear that we also have an
    obligation to help them develop their own indigenous industry.
    Our industry understands that and is working on that. But, I do
    not have any formal projections.
        I would just tell you that we are dealing with a rather
    tenuous economy over there.

                   Russia's Economic and Political Situation

        Senator Cochran. One question that was asked of this
    professor at this breakfast meeting was what kind of aid
    programs would be most effective in assisting in the continued
    strengthening of the Russian economy. He talked about training
    programs, education exchanges, technical assistance, and the
    like. Are there any Department of Agriculture programs that are
    ongoing that you are requesting funding for that are
    specifically designed to deal with that problem in Russia?
        Secretary Glickman. Yes; but let me first tell you that we
    have a book we have published, called ``Agriculture Baseline
    Projections to the Year 2005.'' Basically, it analyzes every
    commodity, every importer, every exporter. I would have to say
    that our projections, poultry trade projections, are actually a
    slight increase over the next 5 to 6 years.
        Senator Cochran. Is that worldwide?
        Secretary Glickman. That is to Russia.
        Senator Cochran. To Russia specifically?
        Mr. Collins. Excuse me, that is worldwide. That would be
    Russia's global imports of poultry. That is premised on some
    recovery in their economy. The economic data on gross domestic
    product, which you pointed out, have been somewhat of a
    surprise to analysts who have followed Russia over the last
    several years. For about 2 or 3 years in a row now, people have
    been forecasting that Russia's gross domestic product [GDP]
    growth would turn positive in the upcoming year. It has not. It
    has remained negative.
        GDP growth is doing much better than it was a couple of
    years ago. A couple of years ago it was declining at about a
    12-percent-per-year rate. This current year, I believe the
    estimates are for a couple-of-percentage-point decline. I mean
    this is so horrific that Americans cannot even conceive of
    this. We define a United States recession as two quarters of
    negative GDP, and we are talking about 15-percent declines per
    year in Russia. I think I read in the Wall Street Journal
    recently that Russia's GDP just turned positive.
        Right now, observers believe that Russia's annual GDP
    growth would probably not turn positive until 1998, but most
    likely 1999. But at least it seems to be stabilizing. The sharp
    declines of the last few years seem to be bottoming out at this
    point.

                           Cochran Fellowship Program

        Secretary Glickman. Let me just make a couple of comments.
    As you know, there is a program named after you, the Cochran
    Fellowship Program. And those do provide opportunities for
    technical assistance to individuals. I was just in South
    Africa, and I met one of the Cochran fellows. And this is a
    young man who came over here to learn about the wine industry.
    He was a Cochran fellow. He has gone back and has become a
    leader in South Africa, in terms of trying to develop black
    ownership of vineyards and involvement in the wine industry.
    And your name came up.
        There I was in the middle of South Africa, and there was
    the name Cochran which came up. It is something that changed
    his life. It just shows you how this can work.
        We have market development activities. Steve, maybe you
    might want to talk about the various assistance programs,
    credit programs, et cetera, emerging democracies programs, I do
    not have it right at the top of my chart here.
        Mr. Dewhurst. We have a series of programs, some of which
    provide direct assistance to exports, like the export credit
    programs, and some of which provide training, or what I would
    call indirect assistance to foreign countries. The Cochran
    Fellowship Program is funded in the 1998 budget at the same
    level it was funded in 1997, $2.4 million.
        We have about 287 international participants from 30
    countries in that program this year. Over 4,800 participants
    moved through that program since its inception. That program is
    planned to continue.
        When you look at the entire international portfolio of the
    Department, you are talking about $7.6 billion in programs.
    That includes everything from the Export Enhancement Program to
    the cooperator program run by the Foreign Agricultural Service.
    We have quite a tool kit of programs, all of which are being
    carried out to deal with various aspects of the kinds of help
    we need to give foreign countries or our own exporters.
        Senator Cochran. I know that in our budget, we are going to
    be constrained by the allocation we get as a subcommittee. The
    anticipation is that if we are lucky, we will have the same
    amount of money for our discretionary programs next fiscal year
    as we had in the current fiscal year--which means no increase.
    I am wondering whether or not we are figuring out ways to make
    our dollars go further in these foreign assistance programs
    that stimulate demand for U.S. agriculture commodities and help
    foreign economies buy more of what we produce here for sale in
    the global market.
        I know that in the cooperator program, for example--and I
    was going to ask you about this----
        Secretary Glickman. Which program, sir?

                 Foreign Market Development Cooperator Program

        Senator Cochran. With respect to the cooperator program
    that the Foreign Agricultural Service administers, there is a
    change that is suggested in the budget submission which would
    require cooperators, U.S. agriculture commodity groups, to pay
    more to participate in that program. Is that going to enlarge
    the program? Or is that required just to keep the program at
    current levels?
        Secretary Glickman. Steve, do you want to comment on the
    cooperator program?
        Mr. Dewhurst. Yes, sir; it is required just to keep the
    program at current levels. The FAS, like a lot of our agencies,
    has costs that are rising faster than our ability to add money
    to their discretionary budget. And in particular, in the
    Foreign Agricultural Service, they jointly finance a computer
    center with the Commodity Credit Corporation. In the fiscal
    year 1998 budget, a greater share of that cost is on the FAS
    side of the agenda.
        They have to absorb that cost. The way they have done it is
    to constrain the new money that is going into the cooperator
    program. The only way to keep the program at the prior level
    is, then, to ask the cooperators to make a greater contribution
    to the program.
        Senator Cochran. Has there been any effort of outreach to
    discuss this with the participants, to see whether or not they
    are going to pay these extra assessments or required increases,
    or whether they are going to just maintain their current level
    of contribution and therefore decrease the activity in this
    program? Do you know the answer to that?
        Mr. Dewhurst. No; I know that the Foreign Agricultural
    Service has had discussions with the cooperators. However, I do
    not know where they have come out on that question.

                             Market Access Program

        Secretary Glickman. On the Market Access Program [MAP], the
    Foreign Agricultural Service has engaged in efforts to improve
    its operation, in targeting its impact more in recent years. I
    believe that program gets a lot of criticism; but, it is a drop
    in the bucket compared to what the rest of the world spends. We
    are proposing flat-lining that number this year.
        Frankly, I would like to have more money to spend in it.
    But it has had a remarkable impact on everything from fresh
    fruits and vegetables to livestock. And we think it is very
    important.
        The French, I think, spend as much on promoting their wine
    alone as we spend on our entire Market Access Program.
        Senator Cochran. That is an argument I remember using
    against an amendment to knock out the money for the program
    when this bill was on the floor last year. We are always
    confronted with some amendment to either reduce the level of
    funding of the program or to cancel it completely. I am glad
    that the administration is supporting full funding for the
    program. I commend you for your efforts to get that included in
    the budget.
        I was going to ask you about the changes that you mentioned
    are being made to target and reform and try to change the
    program to meet some of the criticisms. I know you probably do
    not have all that available to you, but I would like to have
    that for the record--what changes you are planning to implement
    or have implemented--so we will know what they are. I assume
    they are all authorized under the law and that you would not go
    beyond the authorities of existing law in changing the program.
    But whatever you have in mind or whatever you have in place, we
    would like to know about it.
        Secretary Glickman. OK, we will get you that.
        [The information follows:]

                             Market Access Program

        Changes have been made in the Market Access Program (MAP)
    to make it more targeted and to increase small business
    participation in the program. For fiscal year 1998, the budget
    includes the full authorized permanent funding level of $90
    million for MAP.
        The Market Access Program has been an important contributor
    to the gain in U.S. world market share of sales of consumer-
    oriented products since 1985. During this period, MAP and its
    predecessor, the Targeted Export Assistance Program, have
    helped this share grow from 11 percent to 18 percent in 1994.
    Each percent gain represents sales of more than $1 billion.
    While changes in the value of the dollar have added to the
    growth, analysis carried out by FAS has indicated that market
    promotion contributed to more than half of the total increase.
        Consistent with the Administration's commitment to
    streamlining government activity, new MAP regulations were
    published on February 1, 1995, that increased flexibility and
    simplified program requirements for participants. The revised
    regulations also reflected public comments and changes made by
    the Omnibus Budget Reconciliation Act of 1993. Among the
    changes made by the rule are:
        (a) U.S. exporters no longer need to show that a U.S.
    agricultural commodity faces an unfair trade practice in an
    overseas market in order to participate in the program;
        (b) Small businesses and cooperatives are accorded priority
    consideration in the allocation of brand promotion funding;
        (c) Application and allocation approval criteria are
    clarified;
        (d) Paperwork requirements are reduced;
        (e) Procedures for appealing compliance findings are added;
    and
        (f) Program evaluation requirements are clarified and
    simplified.

        Secretary Glickman. There has been some targeting to
    cooperatives and smaller operations. But we will get you that
    information.
        Senator Cochran. Some of those changes may be required by
    the changes that we had to accept when the appropriations bill
    was on the floor.
        Secretary Glickman. That is right.

                           U.S. Agricultural Outlook

        Senator Cochran. In connection with the outlook in the
    report that you have there, talking about Russia's capacity to
    continue to purchase United States agricultural commodities in
    the global market, what is the outlook generally for world
    economic conditions and the impact that that will have on
    United States agriculture and the demand for United States
    agricultural commodities? What do you show in your outlook
    report?
        Secretary Glickman. Keith, you take it first.
        Mr. Collins. Generally, it is fairly positive. And that is
    premised primarily on strong economic growth, particularly in
    Asia and in Latin America. Those would be the two greatest
    areas of growth. This past year we had agricultural exports of
    about $60 billion. We show them coming down a little bit in the
    current year, to $56.5 billion. And then, generally, we show
    them trending up to the year 2005, getting up to something in
    the order of $80 billion.
        But the driving force behind this is principally economic
    growth in less-developed countries, which, this year, will run
    about 5.5 percent. That is a tremendous source of growth,
    particularly for our feed grains and our oilseeds and our
    livestock products and our high-value products.

                      North American Free-Trade Agreement

        Senator Cochran. There are some who are suggesting that we
    have got some bilateral problems in Latin America. You
    mentioned that as a potential growth area. I wonder what your
    assessment of the North American Free-Trade Agreement has been
    for agriculture, and specifically for some of our commodities
    like rice, beef, and others, where some dramatic changes were
    predicted for the better. Have those turned out to be
    forthcoming? What is the consequence of that agreement on
    American agriculture?
        Secretary Glickman. Let me just say, by and large, the
    NAFTA agreement has been positive for agriculture, particularly
    livestock has been an area that has been positive. Now, the
    President of Chile is here as we speak. Yesterday he came in
    and the President met with him. And then we had a little larger
    meeting with the Trade Representative and myself and some other
    folks.
        It was interesting. The first item mentioned was
    agriculture. We have some problems with Chile. One has to do
    with wheat and the importation of American wheat. They have
    some sanitary and phytosanitary requirements that we think are
    unrealistic and unnecessary. Also poultry is another area where
    we think the same thing is there.
        We told them, both the President and I, said that the
    passage of fast-track legislation certainly could have an
    impact on agriculture and the ability to believe that they are
    taking our commodities will be a helpful factor in getting that
    fast-track legislation through. As a part of that, the
    President committed to send me to Chile a few weeks after he
    goes, in early May, to set up a consultative commission process
    on some of these bilateral trade issues with the Chileans.
        We are also working with the Argentines along the same way,
    where we are trying to resolve some of these specific disputes
    that are taking place.
        So I think it is pretty good. Let me just mention to you
    that during fiscal year 1996, United States agricultural
    exports to Canada and Mexico increased by 14.2 percent,
    reaching record levels. In the case of Mexico, United States
    agricultural exports reached $5 billion in fiscal year 1996, an
    increase of 35 percent over fiscal year 1995 and 38 percent
    over fiscal year 1993 pre-NAFTA levels. We have projected about
    $5.1 billion this year.
        We sell to Mexico about 75 percent of its agricultural
    imports. Part of that is due to our price advantage.
        Imports from Mexico were $3.67 billion in fiscal year 1996,
    slightly below the $3.7 billion level for fiscal year 1995.
        So, by and large, we have a positive balance of trade with
    Mexico, and it is growing as a result of NAFTA. Now, that does
    not mean there are not peculiar problems, such as tomatoes,
    avocados, and some of the specialty crops remain big problems.
    But, by and large, it is positive.
        Senator Cochran. There was some indication to me that our
    rice industry is having some difficulty, at least the rice
    milling industry, because of increased exports of rough rice
    from the United States into overseas markets. There is only
    about 40 percent operating capacity being utilized of U.S. rice
    mills right now because of these increases in exportation of
    rough rice.
        Is that something that has come to your attention, gotten
    to the Secretary's level yet? Is there any policy question
    here, or is this just a phenomenon of prices being attractive
    in the global market?
        Secretary Glickman. Keith, would you respond to that?
        Mr. Collins. I would only say that it has been raised. We
    have heard about that. As we look at the data, the percentage
    of total exports that go out that are rough is still fairly
    small, perhaps 15 percent. In fact, they predominantly do go to
    Latin America. I have heard of other countries besides Mexico
    that get them, too. But I have not specifically heard much
    about Mexico recently. We will certainly look at that.

                      North American Free-Trade Agreement

        Senator Cochran. This was to Latin America. It was not just
    to Mexico. My information was to Latin America. Most other
    countries who grow rice and mill rice export only their milled
    rice, as I understand it.
        Mr. Collins. Yes, sir.
        Senator Cochran. But the U.S. rice mills have access only
    to U.S. rough rice. So if the rough rice is going out of
    country, they fear that they may not have enough to continue
    milling and doing it at a profit. That is the issue, and I just
    raised it to see if there was something that could be done and
    to make sure you had the information.
        The other rice issue that I am aware of, which has been
    brought to my attention, involves the European Union [EU].
    There is a quota apparently or an allocation of U.S. rice that
    has been made under a negotiated agreement. Over $20 million of
    U.S. rice could be purchased under this arrangement, but the
    U.S. rice industry and the companies that would be providing it
    have not been able to work out any arrangement under which that
    rice would be sold--like who gets to sell the rice, who gets
    the $20 million-plus of new business under this arrangement.
        It has also been described to me as something where the
    Secretary of Agriculture has a role to play in this. I don't
    know whether or not you are involved in trying to work this
    out. I am told that you could sign a piece of paper and it
    would solve all the problems. I do not know whether it is that
    simple or not.
        Secretary Glickman. I do not know what that piece of paper
    is. But I will try to find it this afternoon. [Laughter.]
        The only thing I can tell you is that this is a problem. We
    believe the European Union has failed to implement the two rice
    tariff rate quotas [TRQ's] that it committed to in 1995. It has
    to do with us allocating our portion of the TRQ. But until such
    time as they approve that, we are unable to allocate what we
    have not used.
        And I raised this with my counterpart in the EU. Quite
    frankly, I think I got the regulatory runaround on the issue.
    So it is a gnawing problem. It has not been solved. And let me
    just mention that I plan to seek an interagency meeting on how
    to proceed on this issue. I have tried to deal with it on a
    bilateral basis with my counterpart in Europe.
        Now, part of the problem, I have to tell you, is that the
    rice industry is somewhat split on how to allocate the TRQ and
    how to allocate the licenses. And the EU is using that split as
    kind of an excuse not to open the quota.
        Anyway, the ball is in our court, because we cannot hit it
    back because the industry kind of will not give us the racquet
    to hit it back on yet. So we need some degree of unanimity
    among the industry as well. And the Europeans are taking
    advantage of this split.
        Senator Cochran. There is a fear that if we do not use that
    allocation agreement, we are going to lose it. Someone else is
    going to end up selling that rice into that market which we had
    negotiated for U.S. rice producers. So I am glad to know that
    this does have the attention of your office and that you are
    working with an interagency group to try to resolve it.
        Secretary Glickman. Yes, sir.

                            Public Law 480, Title I

        Senator Cochran. I know that one other potential impact
    that could have negative consequences on that and other
    commodity industries is the proposed rescission that you
    included in the recent submission to cancel some $50 million of
    appropriations that we have already approved for Public Law
    480, title I. Is this going to have a serious economic impact
    on agricultural producers or exporters? And why is that request
    being made?
        Secretary Glickman. These, of course, are rescissions of
    unallocated dollars for long-term sales for market development,
    and I would ask Steve to talk a little bit about that budget
    item.
        Mr. Dewhurst. It is simply a question of having to come up
    with some offsets for other things that were in the budget. I
    think it is important to understand about title I of Public Law
    480 that of the $50 million proposed for rescission, about one-
    half consists of money carried over from prior years in that
    program, and the other one-half was a reserve maintained in
    that program. The rescission does not affect the allocations
    that were already announced. If I recall, about $200 million in
    program that was announced earlier this year is not affected by
    the rescission. So it is a constraint, in a sense there would
    be no new commitments, but it will not hurt commitments that
    were already made.
        Senator Cochran. There are other questions on the subject
    of the Public Law 480 program which I will submit and ask that
    they be answered for the record, and the nutrition programs, as
    well. I notice that there is an assumption in the budget
    submission that there will be legislative changes made in the
    Food Stamp Program, for example, which would affect the amount
    of funding that would be required by that program.
        Senator Leahy made a very compelling argument against
    trying to rewrite the farm bill when this legislation gets to
    the floor, or in any other way, to try to reverse decisions
    that have already been made on agriculture commodity programs.
    Well, it seems to me that that argument can also be made for
    other programs that come under the jurisdiction of the
    Agriculture Committee. We went through a very long and
    difficult process to legislate changes under welfare reform,
    and some of those have affected the requirements for funds in
    the budget submission that is before the committee today,
    specifically, the Food Stamp Program.
        I do not know how the committee is going to view these
    proposals, but my reaction is that we are not going to go back
    in and try to relegislate the welfare reform program. So the
    assumptions that are being made may be either wishful thinking
    on the part of the administration or an effort to play politics
    with those who might be pleased to hear that the administration
    is requesting more money than we can lawfully spend under the
    Food Stamp Program, and that is what it amounts to. We do not
    have the legislative authority to change the program and to
    provide benefits to those that are not entitled to benefits
    under the law.
        Also, I think we are going to be hard-pressed to find the
    dollars in the discretionary programs to keep up with last
    year's levels of funding, and the administration comes in and
    asks for increases in the discretionary levels of funding,
    knowing good and well we cannot appropriate at that level. It
    may look good to somebody out there who is pleased that the
    administration is asking for increases, but everybody ought to
    realize that increases are not likely to be made available
    simply because of the constraints of the budget process or
    legislation that has already been passed and signed by the
    President. He signed these bills when they were before him, and
    is now coming in asking for changes in specific areas to permit
    the expenditure of more funds.
        We will look at those. I am not saying that we will not. I
    think we have an obligation to consider anything that you
    submit for our consideration, and I am going to make every
    effort that we do that, and that we do that in a fair-minded
    way.
        Secretary Glickman. Senator, could I just make one comment?
        Senator Cochran. Yes.
        Secretary Glickman. Obviously, this is part of a
    Governmentwide welfare reform initiative that we have a piece
    of. The piece, of course, relates to two things, and one is
    ameliorating a bit the work requirement for able-bodied people
    from 18 to 50. I think right now you can be on food stamps no
    more than 3 months in any 3-year period of time, and I think
    the President's proposal is 6 months out of every year. The
    other part had to do with legal immigrants. That is an area
    where there has been, frankly, some bipartisan interest in
    trying to soften that blow a bit.
        So we put it in here because it is part of the general
    proposal, and I do not know how much we will be able to get
    done, whether it is part of the reconciliation process or
    however else it is handled. Obviously, if these proposals get
    enacted we have got to find the resources to do it as well. But
    we felt like we needed to put it in there.

                                    Research

        Senator Cochran. The issue of research has been brought up
    already. Senator Burns and others talked about various aspects
    of research. I know Senator Byrd mentioned the ARS National
    Cool and Cold Water Aquaculture Center in West Virginia. We are
    very happy that we are constructing at Stoneville, MS, the
    National Warmwater Aquaculture Center, and I was pleased to see
    the budget contains funds to conduct research at that site. I
    assume from that that the administration continues to support
    the completion of that project on schedule.
        Secretary Glickman. That is correct.
        Senator Cochran. I might say that this is a very impressive
    industry in terms of its economic impact in our State, and on
    the entire country. It is of critical importance that we do the
    research necessary in disease analysis and productivity issues.
    This is a new industry. No one really can predict what the
    problems are going to be, but we know of some already, and
    Mississippi State University is engaged in some very important
    research, and at this center, too, in Stoneville. It will be a
    clearinghouse for all research in this area, and I am very
    impressed for the future of the industry that we are going to
    have this kind of resource center.
        There are other research activities on college and
    university campuses, as well as federally owned facilities
    under the jurisdiction of ARS, that are doing important work. I
    do not know of any other area where we have to continue to be
    vigilant and thoughtful in the way we allocate our resources.
    But that is an area where we continue to be required to spend
    substantial sums, in my judgment, to ensure the vitality and
    health of American agriculture and the nutritious aspects of
    food and other commodities that are produced on our farms. So
    we will be working to review all of those requests in your
    budget on those subjects.

                               Extension Service

        I am disappointed to see that there are what I consider to
    be substantial cutbacks in funds for the Extension Service in
    this budget. I am not going to try to get you to explain why or
    argue for those here at this meeting. But I do not know of many
    programs that are more popular in the Congress than the
    extension programs are.
        There are a lot of people who derive benefits from
    extension activities in the small towns and rural communities
    all across America, and particularly in those States that are
    more rural than urban. The Extension Service is a very
    important Government activity. Without it, I do not know how we
    would get the information and the education benefits and the
    other activities extension provides to the people in these
    rural communities who derive these program benefits. So we will
    look very carefully at that request, and I am not optimistic
    that we will be able to sell a substantial reduction in
    extension to the other members of this committee.

                                   Tax Reform

        And on the subject of tax reform, I am hopeful that the
    Department will get involved in helping to argue within the
    administration and to the President that he should support some
    of these initiatives that are coming from Congress now to
    reform our tax system to help ensure that we have profitability
    on our farms and that we are able to maintain an owner base out
    there committed to production agriculture. It is less and less
    attractive for young people to stay on the farm and try to make
    a living farming. We now have an estate tax law that is
    confiscatory. It hurts those most who have been frugal, who
    have worked hard, who have saved, who have tried to preserve
    the family farm. To then take the farm away from them or force
    them to sell it to pay Federal estate taxes is to me a very
    wrong-headed national policy.
        We have had 2 days of hearings in the legislative committee
    on the subject of tax reform, specifically estate tax reform
    and capital gains tax treatment of sales of our farmlands.
    There are other issues--income averaging, and just recently we
    had to fight like crazy to get a change in policy by the
    Treasury Department on the subject of deferred contracts, where
    farmers were being taxed in 1 year when they had not even
    received payment on contracts to sell an agriculture commodity.
    I do not know of anything that made some farmers madder in my
    State than that decision.
        Well, we have got a 1-year reprieve now, but I hope that
    the Department of Agriculture will get involved in helping to
    encourage reforms and decisions on Federal tax policy that will
    benefit production agriculture and those engaged in it.
        Secretary Glickman. I would say on that last issue we were
    actively engaged with Treasury to get this--well, it was on the
    alternative minimum tax issue result. And let me just say this:
    You know, again I bring my prior career with me in this thing.
    I believe that you are correct that we need to be identifying
    those mechanisms in a general way which keeps family-sized
    agriculture alive and encourages young people to stay in
    agriculture.
        I am not endorsing any specific tax proposals, because that
    is part of a bigger package and relates to revenues and deficit
    reduction and other kinds of things. But I do agree with you
    that it is appropriate for us to look at the Tax Code as part
    of the total picture of how we can keep people in agriculture.
    And we are engaged in that, I want to assure you of that.
        Senator Cochran. Senator Specter.

                           Green Bay Cheese Exchange

        Senator Specter. Thank you very much, Mr. Chairman.
        I join in welcoming Secretary Glickman and his
    distinguished team to this hearing. I had been here earlier,
    and Senator Cochran said you would run until about this time. I
    hope I have not delayed anybody. I think from the tenor of the
    questioning when I came in, you are still hard at work on very
    important subjects.
        I thank you very much, Mr. Secretary, for coming to
    northeastern Pennsylvania a couple of weeks ago and bringing
    Mr. Collins and others on a very serious problem of milk
    pricing for the farmers nationally, but especially in
    northeastern Pennsylvania, where the price of milk has dropped
    precipitously in the immediate past. And I thank you for the
    attention which you have given to the issue of pricing and the
    question as to whether the price is artificially low because of
    the calculation of the price of cheese as it is impacted by the
    Green Bay Cheese Exchange.
        The information which I got from Mr. Collins and you about
    an increase of 10 cents on the price of cheese would amount to
    $1 per hundredweight increase for milk, and the meeting which
    we had was a very, very important meeting. And obviously, I
    know about the consequences of it more than you do unless your
    clipping service is as good as mine.
        Secretary Glickman. I saw the first day of clippings, but
    that was it.
        Senator Specter. I have an instinct that you do not have
    the clipping service in northeast Pennsylvania as good as I do.
    If you do, your clipping service is extraordinary.
        Secretary Glickman. If we do, I am spending too much money
    on clipping services. [Laughter.]
        Senator Specter. Knowing you, Mr. Secretary, I would say
    your talent is extraordinary, but I would tell you that it had
    a very, very beneficial impact to bring the Secretary up, and I
    had a request by Tobyhanna to bring the Secretary of Defense
    up. Everybody in the area now wants a Secretary for their
    relevant problem, so you have set quite a standard for me in
    northeastern Pennsylvania. [Laughter.]

                           Milk Pricing Reevaluation

        As you know, the sense-of-the-Senate resolution was passed
    83 to 15 encouraging a reevaluation of the price of milk based
    upon the formula for cheese, and my first inquiry to you is
    what have you found on a survey of the cheese market
    nationally?
        Secretary Glickman. Well, I am going to ask Keith to
    respond. I would say that the trip to Pennsylvania was a
    particularly useful one for me, and I think for Mr. Collins, as
    well. The size of the crowd was unexpected. We had 500 to 600,
    700 people there.
        Actually, as you know, a couple of weeks before the meeting
    we started the process of evaluating alternatives. We have
    gotten about 80 comments in so far, and they keep coming in
    about five or six a day. The expiration date for that is about
    a month from now. However, the team is in the process of trying
    to find options, and I would like options all the way from the
    development of the futures market to our own self-determination
    of price without going outside, which is the way we used to do
    it, by evaluating processors.
        So perhaps you might want to go through that.
        Mr. Collins. We are really proceeding on two fronts. One is
    to deal in the regulatory sense with our basic formula price
    and replace the cheese exchange.
        The second is the point of your question, to collect cheese
    price information.

                            National Cheese Exchange

        Senator Specter. What is the first front again, Mr.
    Collins?
        Mr. Collins. To deal with the potential for replacing the
    National Cheese Exchange price in the formula that we use to
    construct what is called the basic formula price. That is a
    question that is bound up in the potential for a formal
    rulemaking and not formal rulemaking. As you know, the sense-
    of-the-Senate resolution asks us to proceed using the
    Secretary's authorities consistent with the law. I would say
    consistent with the law does have some impact on us because we
    do have another dairy policy that has been litigated recently
    where it has been suggested that we acted in an arbitrary and
    capricious way. We know that whatever we do with respect to
    cheese prices and the basic formula price, we want it to be
    able to withstand being sued.
        So we have gone through this comment period that the
    Secretary mentioned. The comments that we are receiving, about
    80 of them in roughly a 2-week period, we are sorting through
    them to look for evidence on two fronts. The first would be
    flaws with the Cheese Exchange price itself, of which there
    already is a body of evidence from the academic community and
    elsewhere. The second then is trying to determine what would be
    a good replacement for the National Cheese Exchange price.
        If we are going to replace it using the Secretary's
    discretionary authority and withstand a court challenge, we
    would have to have something that clearly remedies the defects
    that we identify in the National Cheese Exchange price. So that
    is the process we are going through with the comment period and
    our own internal analysis.
        The second front is to collect cheese price information
    directly from the industry. And on that issue we have delayed
    our collection effort by several weeks at the request of the
    cheese industry. They asked to come in and meet with us because
    they were concerned about the approach we were using to collect
    the information. We met with them a couple of weeks ago, and we
    are going to proceed next week. We were going to proceed in the
    first week of February, but we got delayed. We are going to
    begin in the first week of March, a national effort to collect
    cheese, mainly because we wanted to have an opportunity to
    respond to the cheese industry.
        Senator Specter. A national collection effort on cheese
    prices?
        Mr. Collins. On cheese prices, yes, sir. We do not want to
    collect cheese.
        Secretary Glickman. The other thing, of course, is working
    with the Coffee, Sugar, and Cocoa Exchange, which we are still
    doing, to try to deal with this issue of a program either of
    futures or options markets to somehow have a definable futures
    price out there.
        Mr. Collins. Also as a possible successor to the National
    Cheese Exchange itself. The cheese industry would like to
    relocate or change, close that exchange, open a new one, and we
    have offered our resources to help whatever exchange might want
    to start a cash market for cheese.
        Secretary Glickman. In doing so there may be a need for
    some appropriated funds in some of these areas for us to help
    do that. We will talk to you about it. Particularly in the
    options area. But as you know, we used to set this formula
    price differently in years past, and we did not use the Cheese
    Exchange before. There are alternative methods of doing it. One
    of the things we are exploring is to go back to the way we did
    it before. I do not know whether it will have much of an effect
    over the long-term price of the basic formula price, but there
    may be less volatility using that formula, and that is
    something that they are looking at right now, as well.
        I want to get away from that market, as I told you before,
    and I told Senator Kohl when he was here, the nature and
    thinness of that market is unacceptable because cheese is such
    a big part of the setting of milk prices, through the basic
    formula price. But I was sued recently in the area of something
    called the Northeast Dairy Compact, where it was argued that I
    made a decision that was not based on a complete record. So
    that case is still in litigation, and I cannot really comment
    much further on that. I have got to make sure this record is
    complete so that whatever we do is defensible it is going to
    have a monumental economic impact; but, we are moving in the
    right direction and I know your interest in it. In fact, your
    interest has got this thing moving from second gear to first
    gear.
        Senator Specter. First gear, Mr. Secretary?
        Secretary Glickman. I am sorry, third gear, fourth gear,
    whatever the fastest gear is, Senator Specter. [Laughter.]
        Senator Specter. Mr. Secretary, we are interested in
    overdrive. [Laughter.]
        I am a little surprised, and I had--this is as good an
    occasion as any to make the personal reference. Your
    grandfather, Jay Glickman, would be surprised to have the gears
    wrong.
        Mr. Chairman, my compliments may be excessive to the
    Secretary or may not be excessive to the Secretary, but I have
    a deep bias in his favor because my father and his grandfather
    did business together in Kansas in the thirties. And their
    business activities included Jay Glickman, who was in the junk
    business and my father was in the junk business.
        Secretary Glickman. We now call it the recycling business.
    [Laughter.]
        My father used to say if it was junk it would not have sent
    you to college and law school.
        Senator Specter. I call it the junk business. It sent me to
    law school, and it was a tremendous incentive to get out of it.
    [Laughter.]

                            National Cheese Exchange

        Without going into any more detail except to say there were
    big trucks involved, my father had a big truck which I learned
    how to drive at an early age, and I knew the difference between
    first and second gear. [Laughter.]
        I do not think Secretary Glickman spent enough time in the
    business. [Laughter.]
        Secretary Glickman. Duly noted. [Laughter.]
        Senator Specter. But on the subject of when, Mr. Secretary,
    as you know, my concern about immediate action, we were there
    on February 10, and I was hopeful that we would have change by
    the 11th, and then by the 14th--we got the resolution passed on
    the 13th, and I know that you are doing collateral work on the
    comments, but as already noted, there is a collateral way for
    you to do it, and that is on your unilateral authority. And I
    understand that you can be sued all the time on the grounds of
    arbitrary and capricious. That is the last refuge of the
    plaintiff on trying to upset something, to make a contention
    that it was arbitrary and capricious, because there is nothing
    which an administrator does that can withstand being arbitrary
    and capricious. It is easy to say, but very, very difficult to
    prove.
        Secretary Glickman. Well actually, in the one case it has
    basically been stated that I was arbitrary and capricious. I
    have been given an opportunity to become unarbitrary and
    uncapricious. Part of it has to do with this horrendous
    complexity of dairy pricing, which makes it difficult to act as
    clearly as I can act in corn and wheat and soybeans and other
    things.
        I do not want this thing to delay, and I am not worried
    about getting sued. I am worried about having the record there
    so I can prevail. We are going to get sued probably no matter
    what we do.
        Senator Specter. Well, it is easy to allege arbitrary and
    capricious. It just takes one line on the typewriter. But it is
    very, very hard to prove in the litigation field and very
    difficult to sustain that. And I know you are looking for an
    evidentiary base, and my question, maybe to Mr. Collins, is how
    far have you gotten on finding other pricing which would
    suggest a difference with what the Cheese Exchange has set as
    the price?
        Mr. Collins. To be quite frank, not very far at all. The
    difficulty is that we are trying to determine a price of
    cheese. There is only one organized market in the United States
    in which a price of cheese is determined. Virtually all cheese
    contracts that take place between private buyers and sellers
    off of that market use that market as a benchmark. So where do
    you go for new information other than that market? That is the
    dilemma that we have found.
        We also have many people who are concerned about this
    market and criticizing this market, but the criticisms are not
    coming from the participants in the market, neither the buyers
    nor the sellers, who both believe that they have a market that
    is representative and accurate. In that kind of an environment,
    it has been very tough for us to find a clear-cut alternative
    that is superior in representing supply and demand for cheese
    in the United States. So we are continuing to look, but it has
    not been easy.

                         Minnesota and Wisconsin Price

        Secretary Glickman. Now, I would say before the Cheese
    Exchange was used, there were alternative methods out there
    that we used, and perhaps you might explain what those methods
    were. So it is not as if there are not other options.
        Mr. Collins. Yes; what the Secretary is referring to is
    that in the past, prior to May 1995, we used to survey
    processors of grade B milk in the States of Minnesota and
    Wisconsin and ask them what they paid for milk and what they
    thought they were going to pay for milk. And that was the price
    that we used to set the absolute floor for all the different
    classes of milk in the United States.
        Secretary Glickman. Called the M-W price.
        Mr. Collins. It was called the M-W price. It did not
    involve cheese prices at all. It was what was called the
    competitive pay price for milk.
        In May 1995, however, is when we switched to using both a
    competitive pay price and an adjuster. The adjuster utilizes
    the National Cheese Exchange price.
        Secretary Glickman. Now, why did we do that?
        Mr. Collins. We did that because----
        Secretary Glickman. And I am interested in knowing, too.
        Mr. Collins. Our statisticians who collect and tell us what
    that price is became increasingly convinced that they could not
    report a reliable and accurate price. The number of grade B
    plants was waning. There would be fewer and fewer of them, and
    the ability to get grade B plant producers to tell us what they
    thought they were going to pay for milk in that month was just
    falling apart. They were not reporting. So our statisticians
    told us they thought that the price series had become
    inaccurate. That is why we held a formal hearing. We held a
    national hearing and adopted the process we have now using
    formal rulemaking.
        Senator Specter. We have a vote at 12:30, and I know the
    chairman has been very patient and this is a very complex
    subject. Mr. Chairman, I wonder if we might explore the
    possibility of having a separate hearing on this subject. I
    know how crowded your schedule is. If I have to take the lead
    to preside, if the chairman cannot do so, this is a subject
    which I would like to move on before we leave for the recess,
    because there are a lot of people beyond Pennsylvania who are
    interested, and I wonder if we might not be able to put
    together such a hearing in the next 2 or 3 weeks.
        Senator Cochran. Senator, let me just say that I would be
    glad to make every effort to get that done. I think that is a
    good idea. It is timely. People are worried about what is going
    to happen. And in the South, we want to be sure it is fair to
    our region, too. Just because we had not thought up the
    amendment that you thought up or pushed on the floor as
    successfully as you did, we have a big stake in this too.

                           Green Bay Cheese Exchange

        Senator Specter. Well, Mr. Chairman, the amendment that I
    pushed, or resolution that I pushed, arose out of my
    discussions with the Secretary and Mr. Collins and we were
    working on this. And this is the kind of an issue that comes to
    a head, and I have a sense that if we scheduled a hearing in 2
    or 3 weeks it would bring a lot of people together.
        I had moved to have a hearing on the Antitrust Subcommittee
    on that Friday, and I did not do so for a number of reasons.
    But it created a lot of interest in a big hurry about having an
    antitrust hearing as to whether there was collusion or some
    impropriety in the Green Bay Cheese Exchange, and when a
    hearing is scheduled there is a lot of focus of attention and a
    lot of these questions would then be answered. So I thank you
    for your willingness to do that, and we will be eager to set
    that up.
        Senator Cochran. I may ask Brett Favre to be the leadoff
    witness. He is the quarterback of the Green Bay Packers, and he
    is from Mississippi. [Laughter.]
        Senator Specter. We would be sure to have a balanced view.
    [Laughter.]
        Senator Cochran. Well, Senator, thank you very much.
        Senator Specter. Thank you very much.

                              Submitted Questions

        Senator Cochran. Mr. Secretary, I have other questions, and
    other members do as well. Senator Faircloth and Senator
    Coverdell have asked me to submit questions for your response,
    which we will do. We hope you will be able to answer those, and
    the other questions that other members might submit as well, in
    a timely fashion.
        [The following questions were not asked at the hearing, but
    were submitted to the Department for response subsequent to the
    hearing:]
                     Questions Submitted by Senator Cochran
                             county office closures
        Question. Mr. Secretary, it is my understanding that the
    President's budget assumes the elimination of 1,000 Farm Service Agency
    (FSA) county office employees during fiscal year 1998. Further, over
    the following four fiscal years, the budget assumes the elimination of
    an additional 4,000 county office employees. The President's budget
    assumes that 5,000 county employees will be cut during fiscal years
    1998-2002. Is this correct?
        Answer. In the fiscal year 1998 Budget proposal, a reduction of
    2,119 staff years, of which 269 are Federal staff years and 1,850 are
    non-Federal staff years, is projected for fiscal year 1998. Current
    fiscal year 1997 staffing levels are 6,136 Federal staff years and
    11,729 non-Federal staff years. An additional 5,000 non-Federal staff-
    year reduction is anticipated from fiscal year 1999 through fiscal year
    2002, so the county office reduction is actually 6,850 rather than
    5,000.
        Question. If the information that I have is true, then by fiscal
    year 2002, the budget proposes that we will have reductions in federal
    FSA employees of 21 percent since fiscal year 1993, and reductions of
    county office employees of over 67 percent over the same period. Why
    are there disproportionate cuts in county office employees?
        Answer. The FSA and other USDA agencies have made significant
    staffing reductions over the past several years. From fiscal year 1993
    to the current fiscal year 1997, FSA reduced total staffing 21 percent.
    These reductions reflect an overall 19 percent reduction in Federal
    staff years, including 27 percent at Headquarters, and a 22 percent
    reduction in non-Federal staff years.
        Fiscal year 1998 and the years through fiscal year 2002 reflect
    major proposed decreases in FSA non-Federal staff years. The fiscal
    year 1998 Budget proposes a reduction of 2,119 staff years for fiscal
    year 1998, of which 269 are Federal staff years and 1,850 are non-
    Federal staff years. It should be noted that although non-Federal
    staffing is being reduced by the programmatic impacts of the 1996 Act,
    the projected fiscal year 1998 Federal workforce of 5,877 includes
    approximately 2,265 employees at the county level performing
    Agricultural Credit program workload for direct and guaranteed loans.
    Furthermore, there are an additional 1,463 Federal FTE's at the State
    office level, including personnel that support farm credit activities
    as well as CCC activities, that perform program oversight, supervisory,
    and other support functions. In addition, over 260 Federal staff years
    are dedicated to providing common administrative support functions to
    the Foreign Agricultural Service and to the Risk Management Agency
    since, under USDA's reorganization, they no longer have administrative
    support personnel of their own. There is concern as to the magnitude of
    these reduced FSA county staffing levels by 2002 relative to projected
    Agency workload beyond 1998 because we want to assure service delivery
    to producers.
        Question. It was my understanding that the reason the Department
    proposed a transfer of $51 million in unused Conservation Reserve
    Program (CRP) balances to FSA salaries and expenses to finance buyouts
    in fiscal year 1997 was to avoid massive layoffs in the future. How do
    you propose to prevent reductions in force in the future years as
    buyouts become less attractive to employees and more expensive to
    taxpayers?
        Answer. You are correct that these funds were needed in order for
    FSA to achieve the staff-year reductions estimated to be necessary in
    early fiscal year 1997 to downsize to the level appropriate to the
    anticipated workload of the 1996 Act and to stay within available
    fiscal year 1997 funding resources. Without this transfer to cover
    separation costs, the Agency would have been forced to conduct a much
    greater RIF during fiscal year 1997.
        FSA does intend to continue to offer buyouts in an effort to
    minimize involuntary separations. However, not all reductions can be
    achieved through buyouts since the number of remaining buyout
    candidates is insufficient to meet the estimated 2,119 staff year
    reductions included in the fiscal year 1998 budget. It is also not
    likely that FSA will avoid future year reductions-in-force, given its
    budget targets through fiscal year 2002.
        Question. Are you proposing reductions in force, if necessary, to
    reach these staff-year ceilings?
        Answer. Yes, after FSA offers a voluntary buyout, then we plan to
    approve the use of RIF's to meet reduction targets.
        Question. Has the Department asked the State Directors of FSA to
    provide a list of proposed county offices that could be closed in each
    of their States? If so, please provide to the committee the lists.
        Answer. No specific plans or lists have been approved by my office
    concerning the number or location of FSA field office closures. Any
    preliminary office closing numbers reported reflect internal agency
    contingency planning and are not approved USDA plans. We intend to
    consult fully with Congress regarding any office closures before any
    actions are undertaken.
            emergency conservation program/disaster contingency fund
        The Administration proposed no funding for the Emergency
    Conservation Program (ECP). Instead, a new $5.8 billion contingent
    reserve for emergency funding requirements for various disaster
    assistance was proposed. I understand that this fund would be available
    to the President for disaster relief purposes and would be limited to 7
    disaster assistance program.
        Question. Does the Administration have a problem with the way
    disaster assistance has been handled by Congress? Why should we set up
    a contingency reserve fund?
        Answer. While the Congress has been willing to respond to the needs
    for major disaster assistance, it has not always been able to enact
    measures to provide assistance in the most timely way. Even the most
    responsive action by Congress through supplemental appropriations
    following a disaster may not be timely if the need arises when the
    Congress is not in session. While some funds for non-emergency work
    related to disaster assistance are generally provided (and are
    requested in this budget) through regular appropriations, there is no
    way to truly assure a timely response to unanticipated disasters
    without a contingency funding mechanism.
        The President's proposal will allow for the use of the contingency
    reserve funds through specified disaster assistance programs based on
    actual need. This will allow for appropriate available programs to be
    used to respond to a particular disaster. The proposal does provide for
    a 15-day period before release of funds after the President notifies
    the Congress. This will allow the Congress time to respond, but also
    assures that the Government will be able to assist communities stricken
    by a natural or other disaster in a timely way.
            emergency conservation program/disaster contingency fund
        Question. What assurance would there be that USDA's emergency
    conservation and watershed prevention needs would be addressed, and not
    under funded to provide more funding for the five other disaster
    programs competing for contingency funds?
        Answer. In our view, the $5.8 billion proposal should be more than
    sufficient to handle all the Federal emergency work that might be
    needed by any of the disaster programs competing for contingency funds.
    It certainly would not be this Administration's intent to under fund
    one emergency account at the expense of another. Rather, having a
    central contingency reserve fund will enable Federal agencies,
    including FSA and NRCS, to better prepare and respond more quickly to
    natural disasters.
                                contingency fund
        The Administration proposed no funding for the Emergency
    Conservation Program (ECP). Instead, a new $5.8 billion contingent
    reserve for emergency funding requirements for various disaster
    assistance was proposed. I understand that this fund would be available
    to the President for disaster relief purposes and would be limited to 7
    disaster assistance programs.
        Question. Why didn't the Administration include APHIS emergency
    activities as an eligible activity for the emergency disaster
    contingency fund?
        Answer. The Department already has authority to fund extraordinary
    emergencies. We usually use the Commodity Credit Corporation (CCC)
    funds for this purpose.
                        revenue insurance pilot program
        Question. Mr. Secretary, you have proposed to make revenue
    insurance available nationwide. Currently, revenue insurance is a pilot
    program for certain crops in specified states. What has been the
    participation rate in this pilot program?
        Answer. The Federal Crop Insurance Corporation developed the Income
    Protection--IP--Plan of Insurance. For the 1996 crop year, IP was
    available for corn, cotton, and spring wheat in 30 counties. For 1996,
    about 998 IP policies were purchased, covering about 218,000 net acres
    with total premiums of about $3.4 million. For the 1997 crop year the
    IP pilot program was expanded and is available for corn, cotton, grain
    sorghum, soybeans, spring wheat, and winter wheat in 159 counties. Data
    for the 1997 crop year will not be available until late in the calender
    year.
        Under the authority of the Act, FCIC approved the Crop Revenue
    Coverage--CRC---and Revenue Assurance--RA plans developed by the
    private sector. For the 1996 crop year, CRC was available for corn and
    soybeans for all Iowa and Nebraska counties. For 1996, about 91,000 CRC
    policies were purchased, covering about 10.2 million net acres, with
    total premiums of about $139.8 million. For the 1997 crop year, the
    availability of CRC for corn and soybeans includes all counties in the
    States of Colorado (corn only), Illinois, Indiana, Iowa, Kansas,
    Michigan, Minnesota, Missouri, Nebraska, Ohio, Oklahoma, South Dakota,
    and Texas. In addition, for the 1997 crop year, CRC was made available
    for:

    Cotton
      Arizona--all counties
      Georgia--all counties
      Oklahoma--all counties
      Texas--selected counties
    Grain sorghum
      Colorado--all counties
      Nebraska--all counties
      Oklahoma--all counties
      Kansas--selected counties
      Missouri--selected counties
      South Dakota-selected counties
    Spring wheat
      Minnesota--all counties
      Montana--selected counties
      North Dakota--selected counties
    Winter wheat
      Kansas--all counties
      Michigan--all counties
      Nebraska--all counties
      South Dakota--all counties
      Texas--all counties
      Washington--selected counties

        FCIC approved the RA plan of insurance for corn and soybeans in all
    Iowa counties for the 1997 crop year. CRC and RA plans of insurance
    will only be available in counties if an existing multiple peril crop
    insurance program is also available for the crop.
        Question. What are the estimated losses for this program in the
    pilot stage?
        Answer. As of March 8, 1997, reinsured companies had reported
    losses of $48.5 million for Crop Revenue Coverage for corn and soybeans
    in Iowa and Nebraska. The overall program loss ratio was 0.34. Losses
    paid to producers who purchased coverage other than catastrophic under
    the Actual Production History yield-based plan had been paid $25.7
    million, for a loss ratio of 0.29. By this time, reporting of losses
    normally is over 95 percent completed.
        On that same date, losses of $55 thousand and $178 thousand had
    been reported for corn and wheat, respectively, under the Income
    Protection coverage plan. The respective loss ratios were 0.07 and
    0.13. No losses had been reported for cotton under this revenue
    insurance plan. Since Income Protection is sold only in specific
    counties and not entire states, a comparable loss ratio for the APH
    coverage plan is not readily available.
                   nationwide expansion of revenue insurance
        Question. What is the estimated cost to extend this pilot program
    nationwide?
        Answer. The Administration is seeking legislative authority to
    offer revenue insurance nationwide. Presently, the Federal Crop
    Insurance Act authorizes only a pilot program of revenue insurance
    under direct Federal sponsorship. The plan or plans that may be offered
    are not yet known. Presumably, Crop Revenue Coverage would be one such
    plan. However, it probably does not meet the needs of all producers.
    Thus, some alternative plan similar to Income Protection or Revenue
    Assurance may be needed.
        Most of the additional cost is expected to be due to greater
    participation induced by products that better meet producer's needs
    than does the standard yield-based coverage. To date, subsidies have
    been limited to the amount that would be paid if the producer had
    purchased the Actual Production History (APH) coverage plan. This cost
    generally is less than the APH plan for IP and RA. For CRC, the cost of
    the producer premium subsidy is the same as the APH plan, and an
    average of 9 percent extra is paid for administrative and operating
    expenses on the portion of the CRC premium that exceeds the premium
    that would have been paid under the APH plan. In general, the
    reimbursement to reinsured companies is slightly more than 2 percent
    greater than if the policy had been sold under the APH plan rather than
    CRC.
        The cost thus depends upon several factors: the increase in total
    participation and the mix of products that producers purchase. Higher
    sales of CRC will increase costs; greater market penetration by
    products such as IP and RA will reduce costs.
        For the purpose of the budget, FCIC assumed an increase in total
    participation on the order of 5 percent. It further assumed that most
    of the increase would be in CRC. To offset the costs associated with
    these assumptions, FCIC proposed that the statutory loss ratio target
    be reduced and made other program modifications. A part of the costs is
    offset by changes in other mandatory programs. The proposal is budget
    neutral.
                           crop insurance safety net
        Question. Some farmers have expressed concern that no ``safety
    net'' exists for those that can't afford crop insurance or that no crop
    insurance coverage exists for a specific crop. Is there some way to
    address this concern?
        Answer. Free catastrophic insurance coverage (50 percent insurance
    coverage indemnified at 60 percent of the maximum price) is available
    wherever crop insurance is offered. Producers are responsible for a
    minor $50 processing fee for each crop. The fee is waived in instances
    when limited resource producers can not afford to pay it. Where crop
    insurance is not available for a crop, a noninsured assistance program
    provides coverage equivalent to catastrophic insurance coverage at no
    charge when a county suffers a widespread loss. Other alternative
    programs, such as the group risk plan, provide low cost coverage
    alternatives in many areas.
                     administrative expense reimbursements
        Question. Mr. Secretary, when the administration proposed and the
    Congress enacted crop insurance reform, the savings from emergency ad
    hoc disaster relief payments provided through appropriations acts were
    used as PAYGO offset.
        Now, for fiscal year 1998, the Administration's request indicates
    that this Committee is facing a new discretionary funding increase of
    $203 million to reimburse private companies for crop insurance delivery
    expenses. This kind of supports my position at the time we enacted crop
    insurance reform, that it sounds too good to be true--in terms of
    avoiding additional costs in the future.
        Why weren't the paygo emergency ad hoc disaster savings sufficient
    to fully offset the costs of this proposed program reform at the time
    it was enacted?
        Answer. Prior to fiscal year 1995, the administrative and operating
    expenses associated with program delivery were paid from discretionary
    funds. The administration's budget for fiscal year 1995 requested a
    discretionary appropriation for this purpose. Continuation of the
    discretionary appropriation at baseline levels was assumed in the
    reform package. The appropriations committees did not fund this
    request. The authorizing committees were able to use paygo emergency ad
    hoc assistance savings to fully fund delivery expenses for fiscal years
    1995 and 1996 and about 30 percent such expenses in fiscal year 1997.
    All such expenses for fiscal year 1997 ultimately were funded under the
    mandatory baseline with savings from other programs identified during
    the 1996 revisions to the Farm Bill. Under the reform package as
    enacted, approximately one-half of delivery expenses was to be paid
    from discretionary funds beginning in fiscal year 1998.
        The request for $203 million for fiscal year 1998 is consistent
    with the original reform proposal made by the administration and with
    the law as enacted. It is a request to restore the discretionary
    baseline that existed in fiscal years 1994 and prior.
        Question. Since this cost was considered to be mandatory and is now
    discretionary, what would be the impact if the requested funding
    increase is not provided?
        Answer. The General Accounting Office--GAO--recently concluded an
    audit of expenses associated with the delivery of the crop insurance
    program. The GAO found that the current reimbursement rates exceeded
    delivery expenses. This suggests that there are opportunities to
    achieve savings--$203 million to $150 million--in the reimbursements
    paid to companies without having an adverse effect on program delivery.
    However, if the amount requested from the discretionary account for
    administrative expense reimbursements is not provided, this would
    drastically impact the reinsured companies and their ability to deliver
    crop insurance products. If Congress were to appropriate anything less
    than the $203 million, we would have to negotiate with the companies on
    how that money will be allocated. There is no other alternative in
    place.
        Question. If an increase of $203 million is required for fiscal
    year 1998, what additional discretionary funding will be required under
    current law in future fiscal years?
        Answer. The $203 million increase in discretionary funding for
    fiscal year 1998 is primarily due to the transfer of responsibilities
    and funds for the payment of sales commissions of agents. Consistent
    with the Federal Crop Insurance Reform Act of 1994, as amended, no
    amount can be paid from the insurance fund for sales agent commissions
    for the years 1998-2001. Under current law, it is estimated that in
    fiscal year 1999, the total request for discretionary funding will
    actually decrease, due to an estimated decrease in premium. For fiscal
    year 2000--FY 2007, it is estimated that premium levels will
    continually rise, therefore, slight increases in the funding requested
    for sales commissions of agents would occur. The amount of funding
    required for Administrative and Operating Expenses are only expected to
    increase due to inflation and pay cost increases.
                               revenue insurance
        Question. The Chairman of the Senate Agriculture Committee, Senator
    Lugar, has raised the question about the taxpayer burden of expanding
    crop revenue insurance. While it is desirable for producers to be able
    to purchase additional revenue protection, to what extent does the
    Department believe a Federal subsidy is required to make this
    commercially viable?
        Answer. For many years, public policy had provided a 100 percent
    subsidized revenue protection plan to agriculture under the target
    price system. This subsidized program was eliminated under the Federal
    Agriculture Improvement and Reform Act of 1996. The issue now is to
    define the safety net that will be provided to agriculture in place of
    this program, and the extent to which it will be subsidized.
        The issue of ``subsidization of revenue insurance'' must be
    carefully defined to assure that producers are fairly treated relative
    to the yield-based program and to assure there are no unintended
    consequences. There are many forms of revenue insurance. Many cost less
    than the standard yield-based coverage due to the tendency of prices
    and yields to change in different directions--i.e., low yields tend to
    be associated with high prices and vice-versa. The cost can be greater
    in areas having little benefit from this ``natural hedge.'' One form of
    revenue insurance--Crop Revenue Coverage--always costs more than the
    standard yield-based coverage. This is due to the ``replacement cost''
    feature; that is, payment of lost production at the higher of the
    planting period price or the harvest period price. Because of this
    feature, Crop Revenue Coverage always will pay a greater indemnity than
    the standard yield-based coverage and therefore requires a higher
    premium.
        Under current law, the subsidy to the producer for the premium used
    to determine the loss ratio is limited to the amount that would be paid
    had the producer purchased yield-based coverage. The subsidy for
    administrative and operating expenses of reinsured companies for
    products such as Income Protection and Revenue Assurance has been
    limited similarly. Only Crop Revenue Coverage has a higher cost for the
    administrative and operating expenses of reinsured companies, and that
    is limited to a small percentage (currently 9 percent, subject to more
    analysis of actual costs for delivery of this product) on the portion
    of the premium that exceeds the premium due under yield-based coverage.
        The principal cost associated with expansion of revenue coverage is
    due to increased participation as producers respond to products that
    may meet their needs better than the standard yield-based coverage.
    This is not a subsidy of revenue insurance per se since subsidy would
    be authorized under the law if these producers had purchased the yield
    based coverage. The only additional subsidy that can be regarded as due
    directly to revenue insurance is the small additional amount paid on a
    product such as Crop Revenue Coverage.
        Current treatment of the different revenue policies creates
    inequities among them in terms of compensation for delivery expenses.
    Consider, for example, a policy of Revenue Assurance that generates 80
    percent of the premium of yield-based coverage. This policy would
    generate 20 percent less compensation for delivery expenses. The
    frequency of loss adjustment may be slightly lower under such a policy
    than under the standard yield-based coverage, but the difference does
    not equate to 20 percent. Allowances for delivery expenses of Crop
    Revenue Coverage always will exceed the yield-based coverage. Such
    discrepancies may have the unintended consequence of encouraging
    greater efforts to market higher priced products.
            funding of sales commissions of agents/delivery expenses
        Question. The Administration is proposing legislative changes to
    reduce the reimbursement rate for delivery expenses, which I understand
    would lower the discretionary requirement from $203 million to $149
    million. It is also proposing to make a portion of the overall
    reimbursement rate, not just the sales commission portion,
    discretionary and subject to appropriations. What would be the impact
    of this latter proposed change on discretionary appropriations
    requirements in fiscal year 1998 and future years and what is the
    rationale for making an increasing portion of these costs
    discretionary?
        Answer. The 1998 budget includes an Administration proposal to
    reduce the administrative expense reimbursement paid to reinsured
    companies. As you know, under current law, the sales commissions have
    been paid by the FCIC Fund, which is a mandatory spending account,
    although still subject to appropriation.
        However, current law requires that the sales commissions be treated
    as discretionary spending beginning in 1998.
        The Department of Agricultures's (USDA) proposal does not specify a
    particular amount to be paid for sales commissions but reduces the
    overall reimbursement rate used to determine administrative expenses
    paid to the private insurance companies. The proposal would lower the
    reimbursement rate from 28 percent of premiums sold for multiple-peril
    crop insurance to 24.5 percent in 1998. The proposal specifies that
    10.5 percentage points of the proposed rate be considered discretionary
    spending. This proposal achieves a reduction in discretionary spending
    of $52,852,000 from current law to $149,719,000 for 1998.
        The USDA wanted the savings on the discretionary side of the budget
    to reduce the burden of the shift to discretionary spending that is
    required by current law. While we wanted to reduce delivery expenses,
    we did not want agents to bear more than a fair share of the reduction
    but wanted this to be a matter of negotiation between the agents and
    their companies, without our involvement. Therefore, our proposal
    provides for eliminating the distinction in current law that subjects
    only the sales commissions portion of delivery expenses to
    discretionary spending ceilings.
        Question. Since the Subcommittee will, at a minimum, need to offset
    the cost of any increase provided, what funding reductions would you
    recommend in USDA's existing programs to offset the increase requested
    for crop insurance delivery expenses?
        Answer. To offset the additional delivery expenses involved in
    expanding the revenue insurance program, the Department proposes to
    reduce the reimbursement rate used to determine administrative expenses
    paid to reinsured companies. This proposal would lower the rate from 28
    percent to 24.5 percent in 1998. RMA also proposes to reduce the loss
    ratio from its current 1.10 level to 1.085 in 1998 and 1.06 thereafter.
    The reduction in the loss ratio partially offsets the cost of expanding
    nationwide revenue insurance. The Department is also coordinating
    efforts to further offset this proposal.
                           rural housing loan levels
        The Section 502 Rural Housing fiscal year 1996 program levels was
    $1 billion. The 1997 program level was reduced to $585 million due to
    higher interest rate changes in the economy. The fiscal year 1997
    appropriated loan levels were based on the overly optimistic fiscal
    year 1997 President's loan levels.
        Question. Are the proposed fiscal year 1998 loans levels more
    realistic than the levels the Administration submitted for fiscal year
    1997 so that a reduction in the program level will not occur in fiscal
    year 1998?
        Answer. The Section 502 Direct Program is the most sensitive to
    interest rate variations for a number of factors. Any change in
    interest rates can effect the subsidy rate and therefore the program
    level. In fiscal year 1997, the budget authority appropriated for the
    RHS single family housing program was $83 million. It was intended to
    support a loan level of $1 billion. However, the subsidy rate was based
    projected long-term interest rates of 5.53 percent. By the summer of
    1996, the trend of falling interest rates had changed directions and it
    was realized that the forecast would be much lower that the execution
    rate which eventually turned out to be 7.11 percent. The impact of this
    increase lowered the Section 502 program level to $585.3 million
    nationwide, or 52 percent of what Congress authorized as a program
    level when appropriating $83 million budget authority. For fiscal year
    1998, we are requesting $128 million in budget authority with
    forecasted interest rate of 6.16 percent and subsidy cost of 12.81. We
    feel this is a realistic assumption based on the current economic
    trend, however, all direct loan programs will continue to be at risk
    given the dynamics of the current economy.
        Question. Please explain the necessity of the Administration's
    proposal to transfer budget authority from HUD to the Rural Housing
    Service in order to administer section 8 Housing Assistance Payment
    contracts which are beginning to expire?
        Answer. This transfer is in the best interest of the taxpayers.
    Rental Assistance (RA) administered by RHS is less expensive. Cost
    savings are due to differing Agency approaches for increasing the
    amount of the contract upon renewal. RA contracts are increased (with
    Agency approval) based on a determination of project costs, while
    Section 8 contracts were originally based on rents in the broader
    market. These Section 8 contracts are automatically increased through
    the application of the Annual Adjustment Factor, which in the past
    years led to subsidized rents which are sometimes in excess of the
    market rents for the area.
        Under the fiscal year 1998 Budget, a one unit, five year Section 8
    contract costs $27,630. For RA, it cost $14,324. Therefore, over five
    years, renewing the 3,665 units would costs $52 million as RA units and
    $101 million as Section 8 contracts: This would result in a five year
    savings of $49 million.
        Question. Is this proposal budget driven or will it assist Rural
    Housing Service to better satisfy the rental assistance renewal
    contracts for its customers?
        Answer. Both. First, the cost savings to the taxpayers are
    significant. Under the fiscal year 1998 Budget, a one unit, five year
    Section 8 contract costs $27,630. For RA, it cost $14,324. Therefore,
    over five years, renewing the 3,665 units would costs $52 million as RA
    units and $101 million as Section 8 contracts: This would result in a
    five year savings of $49 million.
        Additionally, management fees will be reduced by approximately $2
    per unit on a monthly basis by eliminating HUD requirements for these
    projects. Savings to project owners/operators could be passed on in the
    form of lower project rents and thus reduce rental assistance needs.
                              farm credit proposal
        Question. Mr. Secretary, in your opening statement you say that
    USDA will be proposing legislation to improve farm credit services,
    What is your proposal to improve farm credit services mentioned in your
    opening statement, Mr. Secretary?
        Answer. We are proposing to provide some latitude for assisting
    those former borrowers who have received a debt forgiveness in the
    past. The 1996 Farm Bill banned such assistance, except for operating
    loans to ongoing borrowers whose loans have been restructured. We
    believe that the Farm Bill went too far in denying former borrowers a
    second chance. It is a stricter standard than even bankruptcy imposes.
    Our proposal would simply provide our borrowers with the same
    opportunity for rebuilding their credit record, in accordance with the
    standards of conventional lenders, and being able to return to us for
    farm loan assistance in times of need.
        We are also asking for authority to conduct pilot programs, using
    farm credit program funding, to test innovative methods for meeting
    program objectives. For example current law does not permit using
    guaranteed loans for leases, which could be an effective means to
    assist beginning farmers. This could be tested on a pilot basis and, if
    successful, consideration could be given to authorizing a nationwide
    program.
        Two other provisions of the proposal would make the guaranteed
    program more attractive to private lenders: allowing operating loan
    funds to be used for real estate installments and providing some
    flexibility for waiving the borrower training requirement.
        We also are asking for some technical changes relating to homestead
    protection, and the shared appreciation agreements that apply to loan
    writedowns; as well as the elimination of the softwood timber program
    and net recovery buyouts, both of which are duplicated by other,
    broader based authorities.
                 nutrition education and training (net) program
        The welfare reform bill eliminated permanent funding for the
    Nutrition Education Training (NET) program, as requested by the
    Administration. A $10 million permanent annual appropriation had been
    provided for NET in previous years. This scored as PAYGO savings, but
    left the program unfunded for fiscal year 1997. In December of last
    year, the Administration reprogrammed $3.75 million from the School
    Meals Initiative line item to avoid a disruption in the NET program.
    Now, the Administration's fiscal year 1997 supplemental/rescission
    package includes legislative language to reduce the $100 million in
    mandatory funding provided for emergency food assistance commodity
    purchases by $6.26 million to make this funding available for the NET
    program.
        Question. Given the fact that grants to states are available
    through the school meals initiative and you have reprogrammed funds to
    make available $3.75 million in fiscal year 1997 funding for the NET
    program, why is it a priority to provide additional supplemental
    funding to restore NET program funding to the fiscal year 1996 level?
        Answer. We were able to reprogram the $3.75 million in Team
    Nutrition money to NET, by not starting important Team Nutrition
    activities. This left NET with $6.25 million less money than its 1996
    level and $6.25 million less than we had planned for it in 1997. Thus,
    the ongoing NET program was cut about 63 percent.
        NET money is spent entirely at the State and local levels, so it
    meant big reductions in effort visible at the local level--fewer
    activities and projects, less material for use in the classroom, and
    fewer nutritionists. A 63 percent cut is not something that can go
    unnoticed.
        This supplemental is a priority because we do not have
    discretionary funds that we can use to support NET. While the
    Administration supported changing NET from a permanent appropriation
    back to discretionary, we did not intend to see the program defunded--
    or cut 63 percent.
                                      net
        Question. What activities are not being funded by states with NET
    program funding of $3.75 million?
        Answer. NET funds are allocated to States based on school
    enrollment. At the $10 million level, some States have been able to
    maintain professional nutritionists who can conduct nutrition education
    programs and provide fairly extensive training and technical assistance
    to school food service workers. Even the smallest State received a
    minimum grant, amounting to $62,500 in fiscal year 1996, enough to
    provide for one statewide nutrition coordinator.
        At the $3.75 million funding level, about half the States received
    a minimum grant of $50,000 for fiscal year 1997, with the larger States
    receiving more, but not in proportion to their enrolled base. States
    are telling us that unless additional funds are provided they will be
    forced to curtail the ``mini-grants'' or small grants to local schools.
    They will also stop conducting teacher training workshops; and they
    will curtail classroom support. This means that teachers will have
    fewer nutrition education resources to use in conducting their classes.
                        agriculture weather forecasting
        Question. The fiscal year 1998 request for the Chief Economist's
    office includes additional funding of $525,000 to modernize weather and
    climate acquisition.
        What National Weather Service services to the agricultural
    community were terminated and what has been the impact on producers?
        Answer. In May 1996, the National Weather Service (NWS) eliminated
    all agricultural weather services, all fruit frost programs, and fire
    weather services to non-federal agencies for non-wildfire activities,
    saving $2.3 million annually and reducing staffing by 37 FTEs. Seven
    offices providing agricultural weather services exclusively were
    closed, including: Agricultural Weather Service Centers (AWSC) College
    Station, Texas; AWSC Stoneville, Mississippi, AWSC Auburn, Alabama;
    AWSC West Lafayette, Indiana: Weather Service Office (WSO) Yuma,
    Arizona; WSO Twin Falls, Idaho; and WSO Riverside, California. The
    products eliminated were: all fruit frost forecasts, specialized
    agricultural weather advisories, agricultural weather guidance and
    cranberry bog forecasts. In addition, NWS eliminated coordination on
    agricultural issues with federal, state, and local agencies. A detailed
    listing of terminated programs was published in the Federal Register,
    Wednesday, July 5, 1995.
        Since May 1996, agricultural interests have had to rely on NWS
    services provided to the general public or on specialized services
    provided by private forecasters for a fee. Both the NWS and private
    forecasters rely on data collected and disseminated by the NWS.
    However, since the program termination, data from agricultural areas is
    not being collected. As a result, forecasters do not have access to the
    meteorological data they need to make accurate forecasts for
    agricultural areas.
        Question. How will the additional funding requested for the fiscal
    year 1998 to modernize weather and climate data acquisition benefit the
    agricultural community? Will the funding requested cover both the
    collection and dissemination of weather data to farmers? What
    additional funding will be required in future years?
        Answer. The $525,000 requested is to install state-of-the-art
    weather and climate data acquisition hardware in USDA. This is
    necessary due to the National Weather Service's modernization program.
    USDA must adopt communication technologies compatible with those being
    implemented throughout the NWS in order to continue receiving the
    global data and forecasts disseminated by the NWS. Specifically, USDA
    must upgrade its telecommunications equipment to receive data from
    NWS's Advanced Weather Interactive Processing System (AWIPS) and its
    primary telecommunications component NOAAPORT. Access to these data
    enables USDA to: provide comprehensive and timely information on the
    impact of weather and climate on agriculture, including the provision
    of weather data and analysis to agricultural users; monitor and
    interpret significant global weather developments and their
    implications for agriculture; publish the ``Weekly Weather and Crop
    Bulletin;'' and analyze the impacts of droughts, freezes and other
    significant events. The private sector utilizes USDA weather data and
    analysis to generate value-added products for use the agricultural
    community. In addition, many agencies within USDA operate programs that
    are weather sensitive and rely on access to NWS data. The modernization
    of USDA's technology would allow continued timely access to NWS data.
        It is also important that the data obtained is accurate and
    comprehensive. Therefore, USDA is also requesting $350,000 to begin an
    incremental process of re-acquiring agricultural data lost when the NWS
    terminated all agricultural weather programs. USDA will target one
    region of the country where data losses have had a significant negative
    impact and make all data collected available to both the NWS and
    private forecasters. In future budgets, additional funding may be
    requested to create a nationwide network of data collection and
    information delivery for the agricultural community.
        Question. There was an AP story on Feb 19 which indicated that if
    Florida farmers had received formerly Federal-sponsored weather
    forecasts from the National Weather Service, they would have been able
    to protect their crops from the recent freeze. It also notes that
    farmers are unwilling or unable to pay for the commercial weather
    forecasting service and, now, Florida officials are waiting to see what
    the federal government does regarding farm forecasts before looking
    into a freeze warning system for the state.
        To what extent is it true that the continued availability of
    National Weather Service data would have enabled Florida producers to
    protect their crops from freeze?
        Answer. The National Weather Service acknowledges a reduction in
    surface weather observations in agricultural areas. During the Florida
    episode, surface observations available to NWS and private sector
    forecasters were limited to urban and airport sites; sites with well-
    documented warm bias. Had forecasters had hourly observations available
    from significantly cooler agricultural locations, these data would have
    triggered forecasters to issue freeze warnings early enough for growers
    with mitigation devices to react. Damage and losses can never be
    completely prevented, but it is clear that losses would have been
    reduced had weather data been available for rural sites. However, there
    is no way to quantify the extent to which crops could have been saved.
        Question. In your view, what costs should be borne by the federal
    government, and to what extent should this data be paid for by state
    and local entities or by the farmers?
        Answer. USDA supported the National Weather Service when it
    responded to congressional and administrative challenges to eliminate
    advisory and forecast services to specialized communities, provided
    there was no agricultural data loss in the transition. Unfortunately,
    primary data losses have occurred, and neither the NWS nor the private
    meteorological community can provide adequate services to the farm
    community without access to a sufficiently dense weather and climate
    data base that includes observations from agricultural sites. USDA
    believes specialized ``value added'' services to the agricultural
    community can and should be provided by the private sector, but that
    collection, quality assurance, archival and dissemination of basic
    weather and climate data is a federal responsibility. Basic weather and
    climate data are part of the environmental infrastructure, a national
    treasure, and must be maintained in order to respond to issues of
    sustainability, global change, and crop impact assessment on a regional
    and global scale.
                  information systems/technology architecture
        Secretary Glickman, concern over the department's effective
    management and modernization of its information technology systems and
    investments prompted this Subcommittee in its reports accompanying the
    1996 and 1997 appropriations acts to direct the Department to defer all
    computer acquisitions until the Department examined and had in place a
    Department-wide information systems technology architecture.
        In November of last year, Deputy Secretary Rominger notified this
    Subcommittee that a freeze on new investments in information technology
    had been issued until work was completed on that architecture, and
    indicated that the architecture was targeted to be completed on
    February 1, 1997.
        Obviously, the conversion of old information systems to a new
    architecture is a complex and costly undertaking. None of us want to
    hear about another debacle, such as that recently experienced by the
    Internal Revenue Service with its tax systems modernization effort.
        Question. What is the status of the Department's information system
    technology business architecture plans?
        Answer. The Department has developed a high level, base line
    architecture. This architecture is the framework or umbrella beneath
    which we will now fill out the detailed pieces. It has three distinct
    parts--a business/data architecture, a technical standard architecture,
    and a telecommunications architecture. Much work has yet to be done on
    the details but the current work does give us some basis for
    considering necessary, short term investments, even before we have all
    the pieces.
        Question. Does the Department still have a moratorium in place on
    new information technology investment?
        Answer. Yes, the new Executive Information Technology Investment
    Review Board (EITIRB), which is chaired by the Deputy Secretary and
    comprised of the Department's Subcabinet policy officials, has decided
    to keep the moratorium in place until the members fully understand the
    technical architecture and are comfortable that the necessary
    implementation process is in place to ensure successful post moratorium
    operations.
        Question. Is the Department reviewing existing systems as part of
    its plans?
        Answer. Yes, the Office of the Chief Information Officer has
    reviewed the existing major systems as part of the process mandated by
    the Office of Management and Budget (OMB) in its memorandum 97-02. This
    memorandum sets forth criteria, now known as the ``Raines Rules'', that
    technology investments are to be judged by. The new USDA EITIRB, will
    also monitor and evaluate existing technology projects as well as new
    ones, to ensure that they meet expected outcomes.
        Question. Have further investments in existing systems also been
    frozen? If not, why?
        Answer. Yes, the current moratorium covers significant information
    technology acquisitions and certain telecommunications equipment
    acquisitions. This includes new investments in existing systems.
        Question. Is USDA incorporating the 1996 farm bill in its strategic
    planning for the modernization of its information systems technology?
        Answer. Yes. The 1996 legislation significantly impacted the
    business of many USDA agencies. Agencies have assessed the impact of
    this legislation, as well as other factors including the existing
    budget constraints and have incorporated this information into their
    draft strategic plans. These documents will help USDA identify the
    business needs of the future and serve as the basis for identifying the
    technology that will be needed to support the changed business needs.
                       information technology investments
        Question. Aside from the preparation of an architecture plan, what
    other measures has the Department taken or does it plan to take before
    information technology investments are made?
        Answer. Two new Boards have been established to help develop and
    implement our architecture and IRM management plans. The EITIRB,
    chaired by the Deputy Secretary and consisting of the Subcabinet
    officials from each mission area, will review technology investment
    proposals and ongoing projects to ensure that they are economical and
    effective. An Information Resources Management (IRM) Council Board,
    consisting of the Senior Mission Area IRM leaders, will provide
    technical advice to the Chief Information Officer.
        Question. Although the Deputy Secretary announced that all
    acquisitions were suspended early this year, the Department awarded a
    $61 million contract to EDS. Why?
        Answer. The contract was actually awarded to a consortium of
    vendors, including EDS. It is for the procurement of support services,
    not computers, software, etc. It represented a joint effort by the Farm
    Service Agency and Natural Resources Conservation Service to provide a
    procurement vehicle from which support services could be obtained. No
    actual procurement takes place until task orders are issued against the
    contract. This new vehicle was needed because the existing support
    services contract vehicles of the two agencies have expired or will do
    so by the end of this fiscal year.
        Question. What funding is included in the fiscal year 1998 budget,
    by account, for information technology system investments?
        Answer. The total projected funding for technology investments
    under the fiscal year 1998 budget is $1,236,808,000. A breakdown by
    Agency and account will be provided for the record.
        [The information follows:]

                                     USDA AGENCY INFORMATION TECHNOLOGY EXPENDITURES
                                             [Net obligations, in thousands]
    ----------------------------------------------------------------------------------------------------------------
                                                                                                         Fiscal year
                 Agency/office                          Program/budget account               Amount by   1998 agency
                                                                                              account       total
    ----------------------------------------------------------------------------------------------------------------
    Farm and Foreign Agricultural
     Services:
        Foreign Agricultural Service......  FAS Appropriation.............................      $15,397      $15,397
        Farm Service Agency...............  CCC...........................................      106,207  ...........
                                            Appropriated--Salaries and Expenses...........      104,646      210,853
        Risk Management Agency............  Federal Crop Insurance Corp Revolving Fund....        3,000  ...........
                                            RMA Appropriated--Administrative and                 20,338       23,338
                                             Operations.
    Food Nutrition and Consumer Services:
        Food and Consumer Service.........  Food Stamps:
                                              EBT system development......................       39,000  ...........
                                              Other system development....................      164,341  ...........
                                            WIC:                                                 15,000  ...........
                                              EBT system development......................
                                              Other system development....................       76,600  ...........
                                            FPA...........................................        9,300  ...........
                                            FS,CN, FPA, NPE, FDPIR, CSFP, TEFAP...........       27,600      331,841
    Food Safety: Food Safety and            Appropriated--Salaries and Expenses...........       23,620       23,620
     Inspection Service.
    Marketing and Regulatory Programs:
        Agricultural Marketing Service....  Marketing Services............................        7,001  ...........
                                            Trust Funds...................................        9,421  ...........
                                            Perishable Agricultural Commodities Act.......          530  ...........
                                            Section 32....................................        1,281       18,233
        Animal and Plant Health Inspection  Appropriated--Salaries and Expenses...........       30,709       30,709
         Service.
        Grain Inspection, Packers and       Appropriated..................................        1,562  ...........
         Stockyards Administration.
                                            Grain Trust Fund..............................        1,530        3,092
    Natural Resources and Environment:      Forest and Rangeland Research.................       18,633  ...........
     Forest Service.
                                            State and Private Forestry....................       16,194  ...........
                                            National Forest System........................      133,456  ...........
                                            Wildland Fire Management......................       53,284  ...........
                                            Reconstruction and Construction...............       15,136  ...........
                                            Land Acquisition Accounts.....................        4,262  ...........
                                            Range Betterment Funds........................          382  ...........
                                            Forest Service Permanent Appropriation........       20,808  ...........
                                            Forest Service Trust Funds....................       27,862      290,017
    Natural Resources Conservation Service  Conservation Operations:
                                              Technical Assistance........................       88,061  ...........
                                              Soil Surveys................................       26,400  ...........
                                              Snow Surveys................................        1,005  ...........
                                              Plant Materials.............................        1,005  ...........
                                              Water Resource Assistance...................       10,060  ...........
                                            Resource Conservation and Development.........        4,023      130,554
    Research, Education and Economics:
        Agricultural Research Service.....  Appropriated--Salaries and Expenses...........       36,026       36,026
        Cooperative State Research,         Appropriation.................................        5,679        5,679
         Education, and Extension Service.
        Economic Research Service.........  Appropriated--Salaries and Expenses...........        5,353        5,353
        National Agricultural Statistics    Agricultural Estimates........................       22,394       29,664
         Service.
                                            Census........................................        7,270  ...........
    Rural Development.....................  Appropriated--Salaries and Expenses...........       68,388       68,388
    Administration........................  Appropriation.................................          925  ...........
                                            Agriculture Buildings and Facilities..........          290        1,215
        Office of the Chief Financial       Appropriation.................................          344          344
         Officer.
        Office of the Chief Information     Appropriation.................................        4,828        4,828
         Officer.
        Office of the General Counsel.....  Appropriation.................................        1,537        1,537
        Office of the Inspector General...  Appropriated--Salaries and Expenses...........        4,322        4,322
        Office of Communications..........  Appropriated..................................          621          621
        Office of Budget and Program        Appropriation--Budget and Program Analysis....          549          549
         Analysis.
        Office of the Chief Economist       Appropriated--Salaries and Expenses...........          628          628
         (Includes WAOB).
                                           -------------------------------------------------------------------------
            Total.........................  ..............................................  ...........    1,236,808
    ----------------------------------------------------------------------------------------------------------------

                  facilities closures and program terminations
        Question. Please provide the Committee with a consolidated list, by
    USDA agency, of proposed office and laboratory closures.
        Answer. The Agriculture Research Service is proposing that the
    following two work sites and two locations be closed in fiscal year
    1998:
            Work Site Closures: Brawley, CA; Orono, ME
            Location Closures: Mandan, ND; Prosser, WA
        The Agricultural Marketing Service is proposing to close one
    location in fiscal year 1998 and two locations in fiscal year 1999
    respectively:
            Milk Market Administrators Office: Boise, ID
            Cotton Grading Office: Hayti, MO
            Cotton Grading Office: Lamesa, TX
        The Animal and Plant Health Inspection Service is proposing to
    close five locations in fiscal year 1997 and three locations in fiscal
    year 1998 respectively:
            International Services: Fort Lauderdale, FL
            Veterinary Services: Jacksonville, FL
            Animal Care: Tampa, FL
            Plant Protection and Quarantine: Goldsboro, NC
            Plant Protection and Quarantine: Spokane, WA
            Animal Damage Control: Little Rock, AR
            Animal Damage Control: Manhattan, KS
            Animal Damage Control: St. Paul, MN
        The Food Safety and Inspection Service is proposing to close
    twenty-nine office locations in fiscal year 1997:
            Area Office: Long Beach, CA
            Area Office: Sacramento, CA
            Area Office: Tallahassee, FL
            Area Office: Athens, GA
            Area Office: Ames, IA
            Area Office: Springfield, IL
            Area Office: Topeka, KS
            Area Office: Louisville, KY
            Area Office: Baton Rouge, LA
            Area Office: Jefferson City, MO
            Area Office: Billings, MT
            Area Office: New York, NY
            Area Office: Fort Washington, PA
            Area Office: Harrisburg, PA
            Area Office: Austin, TX
            Compliance Office: Alameda, CA
            Compliance Office: Atlanta, GA
            Compliance Office: Des Moines, IA
            Compliance Office: Moorestown, NJ
            Compliance Office: Dallas, TX
            Correlation Center: Ames, IA
            Egg Products Inspection Office: Modesto, CA
            Import Field Office: Long Beach CA
            Import Field Office: Miami, FL
            Import Field Office: Detroit, MI
            Import Field Office: New York, NY
            Import Field Office: Philadelphia, PA
            Import Field Office: Tocoma, WA
            Microbiology Laboratory: Beltsville, MD
        Question. Please provide a list, by agency and for each year since
    fiscal year 1993, of the USDA offices and laboratories which have been
    closed and the amount of savings which has been achieved as a result of
    each closure.
        Answer. The list of offices and laboratories closed since 1993 and
    the amount of savings which has been achieved as a result of each
    closure follows. Certain agencies within USDA have not had any
    cumulative savings due to the costs of alternative space acquisition
    and employee relocations associated with the closures. Outyear savings
    are expected and will be footnoted as applicable.

                          AGRICULTURAL RESEARCH SERVICE
    ------------------------------------------------------------------------
                                                    Locations converted to
     Year    Savings        Office closures               work sites
    ------------------------------------------------------------------------
     1995 $729,500   Fairbanks, AK............  ..........................
                                                 .........
          450,000    Pasadena, CA.............  ..........................
                                                 .........
          756,200    Georgetown, DE...........  ..........................
                                                 .........
          450,000    Savannah, GA.............  ..........................
                                                 .........
          1,548,000  Lexington, KY............  ..........................
                                                 .........
          1,766,800  Oxford, NC...............  ..........................
                                                 .........
          263,400    Delaware, OH.............  ..........................
                                                 .........
          143,900    Lewisburg, TN............  ..........................
                                                 .........
          666,700    Suffolk, VA..............  ..........................
                                                 .........
          342,600    Rotterdam, The             ..........................
                      Netherlands.               .........
         -----------
          7,117,100

     1996 12,000     .........................  Brawley, CA
          124,900    .........................  Houma, LA
          39,200     .........................  Orono, ME
          53,500     .........................  E. Grand Forks, MN
          21,700     .........................  Chatsworth, NJ
          41,400     .........................  Brownwood, TX
         -----------
          292,700

     1998 288,900    Brawley, CA..............  ..........................
                                                 .........
          122,200    Orono, ME................  ..........................
                                                 .........
          2,102,000  Mandan, ND...............  ..........................
                                                 .........
          1,293,400  Prosser, WA..............  ..........................
                                                 .........
         -----------
          3,806,500
    ------------------------------------------------------------------------

                         AGRICULTURAL MARKETING SERVICE
    ------------------------------------------------------------------------
     Year    Savings         Office closures               Locations
    ------------------------------------------------------------------------
     1993 $810,000   Processed Fruit &           Los Angles, CA
                      Vegetables.
          471,000    Processed Fruit &           Denver, CO
                      Vegetables.
          8,000      Milk Marketing              Evansville, IN
                      Administrators.
          .........  Poultry Market News.......  Kansas City, MO
           ........
           .
          11,000     Milk Marketing              Omaha, NE
                      Administrators.
          11,000     Milk Marketing              Beaverton, OR
                      Administrators.
          35,000     Milk Marketing              Knoxville, TN
                      Administrators.
          1,032,000  Meat Grading..............  Arlington, TX
         -----------
          2,378,000

     1994 278,000    Meat Grading..............  Bell, CA
          68,000     Livestock & Grain Market    Visalia, CA
                      News.
          135,000    Livestock & Grain Market    Natl. Stockyards, IL
                      News.
          13,000     Fresh Fruit & Vegetable     Indianapolis, IN
                      Grading.
          23,000     Fresh Fruit & Vegetable     Fort Mitchell, KY
                      Grading.
          249,000    Poultry Market News.......  Kansas City, MO
          350,000    Cotton Grading............  Greenwood, MS
          71,000     Fresh Fruit & Vegetable     Buffalo, NY
                      Grading.
          55,000     Fresh Fruit & Vegetable     Wilkes Barre, PA
                      Grading.
          37,000     Fresh Fruit & Vegetable     Warwick, RI
                      Grading.
          6,000      Fresh Fruit & Vegetable     Memphis, TN
                      Grading.
          16,000     Fresh Fruit & Vegetable     El Paso, TX
                      Grading.
          316,000    Cotton Grading............  Waco, TX
          6,000      Fresh Fruit & Vegetable     Salt Lake City, UT
                      Grading.
          44,000     Fresh Fruit & Vegetable     Norfolk, VA
                      Grading.
          14,000     Milk Marketing              Germantown, WI
                      Administrators.
          21,000     Milk Marketing              Stevens Point, WI
                      Administrators.
         -----------
          1,702,000

     1995 33,000     Fresh Fruit & Vegetable     Sacramento, CA
                      Grading.
          20,000     Poultry Grading...........  Denver, CO
          32,000     Poultry Grading...........  Valrico, FL
          61,000     Poultry Grading...........  Des Moines, IA
          215,000    Fresh Fruit & Vegetable     Glen Ellyn, IL
                      Grading.
          39,000     Poultry Grading...........  West Lafayette, IN
          90,000     Fruit & Vegetable Market    New Orleans, LA
                      News.
          22,000     Poultry Grading...........  Augusta, ME
          60,000     Livestock & Grain Market    Albany, NY
                      News.
          319,000    Cotton Grading............  Altus, OK
          346,000    Cotton Standardization....  Clemson, SC
          9,000      Poultry Grading...........  Columbia, SC
          193,000    Meat Grading..............  Arlington, TX
          373,000    Cotton Grading............  El Paso, TX
          117,000    Fresh Fruit & Vegetable     Falls Church, VA
                      Grading.
         -----------
          1,929,000

     1996 100,000    Meat Grading..............  Des Moines, IA
          34,000     Poultry Market News.......  Glen Illyn, IL
          .........  Fruit & Vegetable Market    Presque Isle, ME
           ........   News.
           .
          45,000     Livestock & Grain Market    West Fargo, ND
                      News.
          95,000     Poultry Market News.......  Edison, NJ
          10,000     Fruit & Vegetable Market    Rochester, NY
                      News.
          20,000     Fruit & Vegetable Market    Cincinnati, OH
                      News.
          3,000      Milk Market Administrators  Columbus, OH
          .........  Cotton Grading............  Harlingen, TX
           ........
           .
          .........  Fruit & Vegetable Market    McAllen, TX
           ........   News.
           .
         -----------
          307,000

     1997 .........  Fruit & Vegetable Market    Nogales, AZ
           ........   News.
           .
          5,000      Fruit & Vegetable Market    Inwood, WV
                      News.
         -----------
          5,000
    ------------------------------------------------------------------------
          Cumulative savings are expected in the outyears.

                   ANIMAL AND PLANT HEALTH INSPECTION SERVICE
    ------------------------------------------------------------------------
     Year    Savings         Office closures               Locations
    ------------------------------------------------------------------------
     1993 $15,000    Plant Protection &          Mobile, AL
                      Quarantine.
          77,000     Plant Protection &          Tifton, GA
                      Quarantine.
          47,000     Plant Protection &          Hanna, IN
                      Quarantine.
          164,000    Plant Protection &          Fairmont, NC
                      Quarantine.
          217,000    Plant Protection &          Fayetteville, NC
                      Quarantine.
          547,000    Plant Protection &          Lumberton, NC
                      Quarantine.
          21,000     Plant Protection &          Wallace, NC
                      Quarantine.
          22,000     Plant Protection &          Florence, SC
                      Quarantine.
          574,000    Plant Protection &          Brentwood, TN
                      Quarantine.
          15,000     Veterinary Services.......  Puerto Rico
         -----------
          1,699,000

     1994 12,000     Veterinary Services.......  Bartow, FL
          23,000     Veterinary Services.......  Okeechobee, FL
          12,000     Plant Protection &          Oakbrook, IL
                      Quarantine.
          12,000     Veterinary Services.......  Alexandria, LA
          160,000    Plant Protection &          Chestertown, MD
                      Quarantine.
          454,000    Animal Care...............  Minneapolis, MN
          454,000    Investigative &             Minneapolis, MN
                      Enforcement.
          451,000    Plant Protection &          North Platte, NE
                      Quarantine.
          160,000    Plant Protection &          Batavia, NY
                      Quarantine.
          285,000    Plant Protection &          Dillon, SC
                      Quarantine.
          277,000    Plant Protection &          Orangeburg, SC
                      Quarantine.
         -----------
          2,300,000

     1995 12,000     Veterinary Services.......  Gainesville, FL
          121,000    Plant Protection &          Dublin, GA
                      Quarantine.
          101,000    Plant Protection &          Alexandria, LA
                      Quarantine.
          120,000    Plant Protection &          St. Peters, MO
                      Quarantine.
          128,000    Plant Protection &          Meadville, PA
                      Quarantine.
          129,000    Plant Protection &          Clarion, PA
                      Quarantine.
          133,000    Plant Protection &          Jacksonville, TX
                      Quarantine.
          15,000     Plant Protection &          Levelland, TX
                      Quarantine.
          9,000      Plant Protection &          Ralls, TX
                      Quarantine.
          101,000    Veterinary Services.......  Charleston, WV
          97,000     Veterinary Services.......  Puerto Rico
          589,000    Veterinary Services.......  Puerto Rico
          11,000     Veterinary Services.......  Puerto Rico
          921,000    Veterinary Services.......  Puerto Rico
          260,000    Veterinary Services.......  Puerto Rico
         -----------
          2,747,000

     1996 160,000    Investigative &             Sacramento, CA
                      Enforcement.
          80,000     Investigative &             Tampa, FL
                      Enforcement.
          71,000     Animal Damage Control.....  Twin Falls, ID
         -----------
          311,000

     1997 .........  Plant Protection &          Winter Haven, FL
           ........   Quarantine.
           .
          .........  Plant Protection &          Brookhaven, MS
           ........   Quarantine.
           .
    ------------------------------------------------------------------------
          Cumulative savings are expected in the outyears.

             GRAIN INSPECTION, PACKERS AND STOCKYARDS ADMINISTRATION
    ------------------------------------------------------------------------
     Year    Savings         Office closures               Locations
    ------------------------------------------------------------------------
     1994 $69,000    PSA Regional Office.......  Portland, OR

     1995 102,000    FGIS Suboffice............  West Memphis, AR
          221,000    FGIS Field Office.........  Peoria, IL
          298,000    FGIS Suboffice............  Indianapolis, IN
          415,000    FGIS Field Office.........  Omaha, NE
          182,000    FGIS Field Office.........  Houston, TX
          104,000    FGIS Field Office.........  Plainview, TX
         -----------
          1,391,000

     1996 .........  FGIS Suboffice............  Savannah, GA
           ........
           .
    ------------------------------------------------------------------------
          Cumulative savings are expected in the outyears.

                       FOOD SAFETY AND INSPECTION SERVICE
    ------------------------------------------------------------------------
     Year    Savings         Office closures               Locations
    ------------------------------------------------------------------------
     1993 .........  Compliance Office.........  Charleston, WV
           ........
           .

     1995 .........  Import Office No. 7.......  New Orleans, LA
           ........
           .
          .........  Import Office No. 1.......  Boston, MA
           ........
           .
          .........  Import Office No. 4.......  Baltimore, MD
           ........
           .
          .........  Import Office No. 5.......  Charleston, SC
           ........
           .
          .........  Training Development......  Denton, TX
           ........
           .
          .........  Import Office No. 6.......  Puerto Rico
           ........
           .

     1996 .........  Egg Products Inspection...  Gastonia, NC
           ........
           .
          .........  Salmonella Enteritidis....  Lancaster, PA
           ........
           .
    ------------------------------------------------------------------------
          Cumulative savings are expected in the outyears.

                            FOOD AND CONSUMER SERVICE
    ------------------------------------------------------------------------
     Year    Savings         Office closures               Locations
    ------------------------------------------------------------------------
     1994 $79,800    Satellite Office..........  El Paso, TX

     1995 .........  Satellite Office..........  Mobile, AL
           ........
           .
          65,400     Satellite Office..........  Tuscaloosa, AL
          .........  Satellite Office..........  New Orleans, LA
           ........
           .
          122,300    Satellite Office..........  Knoxville, TN
          .........  Satellite Office..........  Memphis, TN
           ........
           .
          123,000    Satellite Office..........  Corpus Christi, TX
          23,900     Satellite Office..........  San Antonio, TX
          21,400     Field Office..............  Alexandria, VA
         -----------
          356,000

     1996 21,100     Satellite Office..........  Shawanno, WI
    ------------------------------------------------------------------------
          Cumulative savings are expected in the outyears.

                                 FOREST SERVICE
    ------------------------------------------------------------------------
     Year    Savings        Office closures                Locations
    ------------------------------------------------------------------------
     1993 .........  Rita Blanca National       Texline, TX
           ........   Grasslands.
           .

     1994 $644,000   La Porte Ranger District.  Challenge, CA
          455,000    Greenville Ranger          Greenville, CA
                      District.
          600,000    Willow Springs Ranger      Willow Springs, MO
                      District.
          300,000    Edgefield Ranger District  Edgefield, SC
          300,000    Lone Cane Ranger District  Greenwood, SC
         -----------
          2,299,000

     1995 300,000    Biloxi Ranger District...  McHenry, MS
          205,300    Mayhill Ranger District..  Mayhill, NM
          17,000     Forestry Resources         University Park, PA
                      Laboratory.
          160,000    Forestry Science           Madison, WI
                      Laboratory.
         -----------
          682,300

     1996 .........  Institute of Northern      Fairbanks, AK
           ........   Forestry.
           .
          250,000    Milford Ranger District..  Milford, CA
          .........  Forestry Science           Gainsville, GA
           ........   Laboratory.
           .
          .........  Southern Forestry Fire     Macon, GA
           ........   Lab..
           .
          .........  Moose Creek Ranger         Grangeville, ID
           ........   District.
           .
          .........  Forestry Science           Carbondale, IL
           ........   Laboratory.
           .
          .........  Forestry Science           Orono, ME
           ........   Laboratory.
           .
          .........  Forestry Science           Gulfport, MS
           ........   Laboratory.
           .
          30,000     Deerlodge National Forest  Butte, MT
          20,000     Glacier View Ranger        Columbia Falls, MT
                      District.
          280,000    Fisher Ranger District...  Libby, MT
          .........  Bend Silviculture          Bend, OR
           ........   Laboratory.
           .
          300,000    San Jacinto Ranger         Cleveland, TX
                      District.
          300,000    Tenaha Ranger District...  San Augustine, TX
         -----------
          1,180,000

     1997 .........  Mancos Ranger District...  Mancos, CO
           ........
           .
          .........  North Fork Ranger          Orofino, ID
           ........   District.
           .
    ------------------------------------------------------------------------
          Cumulative savings are expected in the outyears.

                          OFFICE OF THE GENERAL COUNSEL
    ------------------------------------------------------------------------
     Year    Savings         Office closures               Locations
    ------------------------------------------------------------------------
     1996 .........  Legal Services............  Jackson, MS
           ........
           .
          .........  Legal Services............  Lincoln, NE
           ........
           .
          .........  Legal Services............  Raleigh, NC
           ........
           .
          .........  Legal Services............  Stillwater, OK
           ........
           .
          .........  Legal Services............  Puerto Rico
           ........
           .
    ------------------------------------------------------------------------
          Cumulative savings are expected in the outyears.

                         OFFICE OF THE INSPECTOR GENERAL
    ------------------------------------------------------------------------
     Year    Savings         Office closures               Locations
    ------------------------------------------------------------------------
     1994 $5,000     Audit Residency Office....  Huron, SD
     1995 4,000      Audit Residency Office....  Little Rock, AR
    ------------------------------------------------------------------------

        Question. Please provide the Committee with a consolidated list, by
    USDA agency, of proposed program and project terminations. Reflect
    funds for fiscal years 1996, 1997, and 1998.
        Answer. A list of proposed program and project terminations
    proposed by ARS in fiscal year 1998 will be provided for the record.
        [The information follows:]

     U.S. DEPARTMENT OF AGRICULTURE, AGRICULTURAL RESEARCH SERVICE PROPOSED
                      FISCAL YEAR 1998 PROJECT TERMINATIONS
    ------------------------------------------------------------------------
                                                  Fiscal year--
                                   -----------------------------------------
       Location/Research project                      1997          1998
                                     1996 actual    estimate      estimate
    ------------------------------------------------------------------------
              CALIFORNIA
    Albany:
        Flavor Optimization of
         Major Food Crops through
         Control of Metabolic
         Processes................  ............  ............      $357,600
        Modification of Vegetable
         Oils as Raw Materials for
         Industrial Uses..........  ............  ............       681,900
        In Vitro Creation &
         Commercialization of High
         Solids Tomatoes & High-
         Solids, Low Sugar
         Potatoes.................  ............  ............       398,900
        New Bacterial
         Polysaccharides for Food
         & Industry...............  ............  ............       324,200
        Novel Biopolymers Based on
         Agricultural Sources.....  ............  ............       282,500
        Biological Control of
         Yellow Starthistle and
         Other Nonindigenous Plant
         Pests in Western US......  ............  ............        88,200
        Quality Assurance of Food
         Products from Livestock
         Grazing Rangeland Weeds..      $352,421  ............  ............
                                   -----------------------------------------
            Total for Albany, CA..       352,421  ............     2,133,300
                                   =========================================
    Fresno: Shallow Groundwater
     Management Systems for Arid
     Irrigated  Areas.............  ............  ............       245,700
                                   -----------------------------------------
          Total for Fresno, CA....  ............  ............       245,700
                                   =========================================
    Brawley: Crop Irrigation
     Research in the Imperial
     Valley.......................  ............  ............       321,000
                                   -----------------------------------------
          Total for Brawley, CA...  ............  ............       321,000
                                   =========================================
               COLORADO
    Ft. Collins:
        Global Change Research,
         Decision Support,
         Modeling, and Database
         Management...............  ............  ............       727,500
        Development of Improved
         Cropping System Models &
         Technology for
         Sustainable Production...  ............  ............       158,400
        Development of a Decision
         Support System for
         Farmers and Ranchers in
         the Great Plains.........  ............  ............        80,000
        Global Change Research,
         Modeling, and Database
         Management with Emphasis
         on Terrestrial Systems...  ............      $218,600  ............
                                   -----------------------------------------
            Total for Ft. Collins,
             CO...................  ............       218,600       965,900
                                   =========================================
                FLORIDA

    Canal Pt.: Plant Resistance
     and Biological Control in
     Sugarcane Insect Pest
     Management...................  ............       148,300  ............
                                   -----------------------------------------
          Total for Canal Point,
           FL.....................  ............       148,300  ............
                                   =========================================
    Gainesville:
        Management of Termites as
         Urban Pests in the
         American Pacific.........  ............  ............       144,100
        Modeling & Simulation of
         Integrated Mgt System for
         Arthropods of Medical &
         Veterinary Importance Mgt
         of Termites..............  ............       328,300  ............
                                   -----------------------------------------
            Total for Gainesville,
             FL...................  ............       328,300       144,100
                                   =========================================
                GEORGIA
    Athens:
        Reproductive Physiology-
         Pollen-Pistil Interaction
         Leading to Fertilization.       194,541  ............  ............
        Genetic Determinants &
         Limits to Selection for
         Growth in Poultry........  ............       181,800  ............
        Reducing Rust-Induced
         Losses to Small Grains...  ............       153,000  ............
                                   -----------------------------------------
            Total for Athens, GA..       194,541       334,800  ............
                                   =========================================
    Tifton:
        Reduction of Synthetic
         Chemical Residues on
         Cured Leaf and Screening
         of Nicotina..............        37,883  ............  ............
        Cultural Practices,
         Environmental Stresses &
         Germplasm Enhancement of
         Brassica Oilseed SPP.....  ............       147,400  ............
        Automated Growing &
         Transplanting Systems for
         Plant Seedlings..........  ............       151,700  ............
                                   -----------------------------------------
            Total for Tifton, GA..        37,883       299,100  ............
                                   =========================================
                HAWAII

    Hilo: Aquaculture Productivity
     Research Phase II............  ............  ............     1,612,400
                                   -----------------------------------------
          Total for Hilo, HI......  ............  ............     1,612,400
                                   =========================================
                 IDAHO

    Aberdeen: Development & Use of
     Molecular Techniques in Oat
     Enhance-  ment...............  ............  ............       160,700
                                   -----------------------------------------
          Total for Aberdeen, ID..  ............  ............       160,700
                                   =========================================
               ILLINOIS
    Peoria:
        Animal Health Consortium..  ............  ............       919,800
        Exploratory Thermal
         Chemical Conversion of
         Starch to Enhance
         Derivatization...........  ............  ............       161,700
        Enhanced Use of Plant
         Proteins: Identifying,
         Isolating and Relating
         Structures to Properties.  ............  ............       577,900
        Genetic Engineering of
         Anaerobic Bacteria for
         Improved Rumen Function..  ............  ............       490,800
        Plant Defense via
         Lipoxygenase Pathway
         Enzymes..................       410,776  ............  ............
                                   -----------------------------------------
          Total for Peoria, IL....       410,776  ............     2,150,200
                                   =========================================
    Urbana:
        Reduced Herbicide Inputs
         for Effective Weed
         Management Systems to
         Improve Water Quality....  ............  ............       185,700
        Sensors and Systems for
         Site-Specific Crop
         Management to Improve
         Environmental Quality....  ............  ............       229,200
        Soybean Diseases..........  ............  ............       344,100
                                   -----------------------------------------
          Total for Urbana, IL....  ............  ............       759,000
                                   =========================================
                 IOWA
    Ames:
        Limits to Digestibility &
         Interactions Among
         Quality, Growth, &
         Persistence of Forages...  ............  ............       171,000
        Genetic Characterization
         of Soybean Germplasm.....  ............  ............       178,900
                                   -----------------------------------------
          Total for Ames, IA......  ............  ............       349,900
                                   =========================================
                KANSAS

    Manhattan: Protecting Hard Red
     Winter Wheat from Biotic
     Stress.......................  ............  ............       250,000
                                   -----------------------------------------
          Total for Manhattan, KS.  ............  ............       250,000
                                   =========================================
               LOUISIANA
    New Orleans:
        Improving Sugarcane
         Productivity by
         Conventional and
         Molecular Approaches to
         Genetic Development......  ............  ............       233,300
        Disease and Insect Control
         Mechanisms for the
         Enhancement of Sugarcane
         Germplasm Resistance.....  ............  ............        83,400
        Developing Integrated Weed
         Management Systems for
         Efficient and Sustainable
         Sugarcane Production.....  ............  ............        83,300
        Pesticide Formulation for
         Protection of
         Environmental Quality....       376,646  ............  ............
                                   -----------------------------------------
          Total for New Orleans,
           LA.....................       376,646  ............       400,000
                                   =========================================
                 MAINE

    Orono: Research on Soil &
     Water Conservation for Potato
     Production in the Northeast..  ............  ............       135,500
                                   -----------------------------------------
          Total for Orono, MA.....  ............  ............       135,500
                                   =========================================
               MARYLAND
    Beltsville:
        Ecologically-Based
         Technologies for
         Controlling Ixodes
         Scapularis & Reducing
         Lyme Disease.............  ............  ............       175,200
        Remote Sensing &
         Associated Technologies
         for Production Decisions.  ............  ............       206,100
        Stability/Maturity/Safety
         of Composts and Organic
         Residuals: Criteria and
         Tests for Agriculture....  ............  ............       281,700
        Automated Firmness
         Classification of Apples.  ............  ............       378,600
        Production & Evaluation of
         Tissue-Cultured Fruit
         Crops....................  ............  ............       237,900
        National Turfgrass
         Evaluation Program.......  ............  ............        55,300
        Genetic Modification of
         Soybean Inoculants to
         Improve Their
         Effectiveness............  ............  ............       171,800
        Molecular Genetics of
         Populations of Fungi
         Important in Biological
         Control..................  ............  ............       182,300
        Reduction of Chilling
         Injury by Techniques Safe
         for Food Consump-  tion..  ............  ............       454,000
        Systematics of
         Agriculturally Important
         Grasses Related to Sugar-
          cane....................       153,708  ............  ............
        Modeling Soil Processes in
         Two Dimensions...........  ............        71,700  ............
        Investigate Mechanisms by
         Which Hormones Affect
         Synthesis of Milk Casein.  ............       380,400  ............
        Integrated Management of
         Rhizoctonia Seedling
         Disease in Alfalfa.......  ............       183,400  ............
        Exploitation of Host-
         Parasite Factors For
         Regulation of Pest
         Insects..................  ............       555,600  ............
                                   -----------------------------------------
          Total for Beltsville....       153,708     1,191,100     2,142,900
                                   =========================================
               MICHIGAN
    East Lansing:
        Innovation Technology to
         Improve the Production
         and Handling of
         Vegetables...............  ............  ............       222,200
        Crop/Animal Systems to
         Improve Nutrient
         Management and
         Sustainability of Dairy
         Farms....................  ............  ............       170,800
                                   -----------------------------------------
            Total for East
             Lansing, MI..........  ............  ............       393,000
                                   =========================================
               MINNESOTA

    St. Paul: Germplasm Evaluation
     and Genetic Improvement of
     Oats and Wild Rice...........  ............  ............       147,000
                                   -----------------------------------------
          Total for St. Paul, MN..  ............  ............       147,000
                                   =========================================
              MISSISSIPPI

    Stoneville: Agronomic and
     Economic Evaluation of Kenaf
     as a Field Crop in
     Mississippi..................  ............  ............       491,500
                                   -----------------------------------------
          Total for Stoneville, MS  ............  ............       491,500
                                   =========================================
               MISSOURI

    Columbia: Surface and
     Subsurface Hydrology for
     Watersheds with Limited
     Relief.......................  ............  ............       393,200
                                   -----------------------------------------
          Total for Columbia, MO..  ............  ............       393,200
                                   =========================================
               NEBRASKA

    Clay: Influence of
     Gastrointestinal
     Neuroendocrine Peptides on
     Food Intake & Swine Growth...  ............  ............       208,400
                                   -----------------------------------------
          Total for Clay Center,
           NE.....................  ............  ............       208,400
                                   =========================================
    Lincoln: Biology and Control
     of Virus Diseases of Sorghum.  ............  ............       143,100
                                   -----------------------------------------
          Total for Lincoln, NE...  ............  ............       143,100
                                   =========================================
               NEW YORK
    Ithaca:
        Entomopathogenic Fungi as
         Biocontrol Agents of Pest
         Insects of Agricultural
         Crops....................  ............  ............        50,000
        Agricultural
         Sustainability and Stress
         Adaptation: Role of
         Differential Root
         Development..............  ............  ............       221,100
                                   -----------------------------------------
            Total for Ithaca, NY..  ............  ............       271,100
                                   =========================================
            NORTH CAROLINA
    Raleigh:
        Enhancement of Roasted
         Peanut Flavor Intensity
         Using Genetic Resources..  ............  ............       285,800
        Factors Responsible for
         Control of the Textural
         Properties of Processed
         Sweetpotato Products.....  ............  ............       217,200
        Evaluation of Temperate
         Legumes and Warm-Season
         Grass Mixtures in
         Sustainable Production
         Systems..................  ............  ............       374,200
        Impact of Environmental
         Factors and Genetic
         Variability on
         Photosynthesis...........       182,375  ............  ............
        Effects of Environment on
         Weed/Crop Competition and
         Competitive Ability......       117,777  ............  ............
        Identification Treatments
         to Reduce Pesticide......       122,677  ............  ............
                                   -----------------------------------------
          Total for Raleigh, NC...       422,829  ............       877,200
                                   =========================================
             NORTH DAKOTA

    Fargo: The Genetics of Natural
     Insect Population & Modern
     Methods......................  ............       288,200  ............
                                   -----------------------------------------
          Total for Fargo, ND.....  ............       288,200  ............
                                   =========================================
    Mandan: Genetic Improvement of
     Trees For Soil & Water.......  ............       191,600     2,335,200
                                   -----------------------------------------
          Total for Mandan, ND....  ............       191,600     2,335,200
                                   =========================================
                 OHIO

    Wooster: Development of
     Soybean Germplasm &
     Production Systems for High
     Yield & Drought Prone
     Environments.................  ............  ............       210,100
                                   -----------------------------------------
          Total for Wooster, OH...  ............  ............       210,100
                                   =========================================
               OKLAHOMA

    Stillwater: Improving
     Resistance of Peanut to
     Biological Stress Through
     Germplasm & Cultural
     Enhancement..................  ............  ............       150,000
                                   -----------------------------------------
          Total for Stillwater, OK  ............  ............       150,000
                                   =========================================
                OREGON
    Corvallis:
        Characterization of
         Environment & Nutritional
         Induced Cytokinin Changes
         in Wheat.................  ............  ............       214,800
        Partitioning of
         Photosynthate as
         Influenced by Genotype,
         Mycorrhizae & Air
         Enriched with CO2........  ............  ............       175,800
        On-Farm Grass Straw
         Utilization Development..  ............  ............       215,200
        Germplasm Enhancement and
         Cultivar Development of
         Blackberry, Strawberry,
         Blueberry and Raspberry..  ............  ............       325,000
                                   -----------------------------------------
            Total for Corvallis,
             OR...................  ............  ............       930,800
                                   =========================================
             PENNSYLVANIA

    University Park: The Role of
     Variability in the
     Distributed Process Modeling
     of Soil Water................  ............  ............       384,300
                                   -----------------------------------------
          Total for University
           Park, PA...............  ............  ............       384,300
                                   =========================================
    Wyndmoor:
        Value-Added Products from
         Fruit & Vegetable
         Processing Wastes........  ............  ............       691,500
        Nutrient Uptake by Plant
         Roots from Soils.........       654,564  ............  ............
                                   =========================================
          Total for Wyndmoor, PA..       654,564  ............       691,500
                                   =========================================
              PUERTO RICO

    Mayaguez: Transferring
     Technology for Improvement of
     Agriculture in P.R. and other
     Countries....................  ............  ............       158,700
                                   -----------------------------------------
          Total for Mayaguez, PR..  ............  ............       158,700
                                   =========================================
                 TEXAS

    College Station: Biological
     Control of Horn Flies in
     Pasture Ecosystems...........  ............  ............       221,500
                                   -----------------------------------------
          Total for College
           Station, TX............  ............  ............       221,500
                                   =========================================
    Weslaco: Development of
     Improved Cultivars and
     Efficient Cultural Practices
     for Kenaf & Cotalaria........  ............  ............       343,900
                                   -----------------------------------------
          Total for Weslaco, TX...  ............  ............       343,900
                                   =========================================
              WASHINGTON

    Prosser: Research to Improve
     Crop Production Efficiencies
     through Germplasm Enhancement
     & Cultural Management
     Technologies.................  ............  ............     1,436,700
                                   -----------------------------------------
          Total for Prosser, WA...  ............  ............     1,436,700
                                   =========================================
    Pullman:
        Genetically Enhanced Wheat
         for Quality Productivity
         and Resistance to Biotic
         & Abiotic Stresses.......  ............  ............       146,100
        Biochemical and Molecular
         Regulation of Preharvest
         Sprouting and Grain
         Dormancy in Wheat........  ............  ............        67,200
        Control of Foliar Diseases
         and Smuts of Wheat.......  ............  ............       136,700
                                   -----------------------------------------
          Total for Pullman, WA...  ............  ............     1,786,700
                                   =========================================
             HEADQUARTERS

    Floriculture..................  ............  ............       200,000
    Control of Perennial/Annual
     Weeds (Narcotics)............     1,500,000  ............  ............
    Drug Abuse in Rural America...       100,000  ............  ............
    Umbrella for Funding Kenaf,
     Crambe & Rapeseed Cooperative
     Agreements...................  ............       150,300  ............
    An Engineering Feasibility
     Study To Provide Design &
     Cost Estimates For An Ethanol
     Pilot Plant..................  ............       496,500  ............
                                   -----------------------------------------
          Total for Headquarters..     1,600,000       646,800       200,000
                                   =========================================
          Subtotal Terminations...     4,203,368     3,646,800    22,107,800

              MANAGEMENT

    Management Savings (Athens,
     GA)..........................  ............  ............       365,200
    Management Savings............  ............  ............       550,000
    Program/Administrative
     Management Support...........       467,032  ............  ............
                                   -----------------------------------------
          GRAND TOTAL.............     4,670,400     3,646,800    23,023,000
    ------------------------------------------------------------------------

                           departmentwide obligations
        Question. Please provide a summary of obligations, Department-wide,
    for each of fiscal years 1996-1998, for the following object
    classifications: salaries and benefits; travel; ADP hardware/software
    purchases; contracts, grants, and other extramural agreements; and
    equipment (other than ADP related).
        Answer. The following table provides an estimate of the obligations
    for 1996, 1997 and the 1998 budget in millions of dollars, excluding
    the Forest Service:

                                                  [Dollars in millions]
    ----------------------------------------------------------------------------------------------------------------
                              Object class                             1996 estimate   1997 estimate    1998 budget
    ----------------------------------------------------------------------------------------------------------------
    Salaries & benefits.............................................          $5,103          $5,302          $5,345
    Travel..........................................................             240             216             210
    ADP hardware/software purchases.................................             184             136              94
    Contracts, grants & other extramural agreements.................          51,064          51,737          52,313
    Equipment (other than ADP related)..............................              85              90              75
    ----------------------------------------------------------------------------------------------------------------

        Question. Please provide the Committee with a consolidated listing
    of obligations for fiscal years 1996-1998 for the following
    crosscutting program activities: civil rights enforcement; support for
    1890 Institutions and Historically Black Colleges and Universities;
    pest management; food safety; nutrition (excluding benefits); USDA
    information activities; Congressional relations and legislative affairs
    offices; natural resources and environmental programs; and management
    activities to support Department programs.
        Answer. The following table contains the information. Please note
    the amounts are dollars in millions.

                                                  [Dollars in millions]
    ----------------------------------------------------------------------------------------------------------------
                               Activities                              1996 estimate   1997 estimate    1998 budget
    ----------------------------------------------------------------------------------------------------------------
    Civil rights enforcement........................................             $12             $13             $14
    1890 Institutions & HBCU........................................              90              88              93
    Pest management.................................................             204             216             249
    Food safety.....................................................             771             806             826
    Nutrition.......................................................             424             408             446
    Congressional relations & legislative affairs offices...........              51              52              52
    Natural resources & environment programs........................           3,387           3,550           3,672
    Management activities to support Department programs                         147             138             148
    ----------------------------------------------------------------------------------------------------------------

        Question. Please provide the Committee a Department-wide table
    reflecting total staff-years and funding for fiscal years 1993, and
    1996-98 for the following position classifications: Executive Senior
    Service positions; personnel specialists; computer specialists; budget
    analysts; program analysts; contract specialists; accountants and
    technicians; administrative; and economists.

    ----------------------------------------------------------------------------------------------------------------
                                     1993 estimate        1996 estimate        1997 estimate        1998 estimate
                                 -----------------------------------------------------------------------------------
              Positions             Staff     Funds      Staff     Funds      Staff     Funds      Staff     Funds
                                    years     (000)      years     (000)      years     (000)      years     (000)
    ----------------------------------------------------------------------------------------------------------------
    Senior Executive Service....       389    $40,984       352    $39,286       339    $38,814       343    $40,574
    Personnel Specialists.......     1,542     74,740     1,228     69,592     1,214     71,603     1,208     71,177
    Computer Specialist.........     2,651    127,636     2,526    335,888     2,443    134,036     2,366    126,964
    Budget Analysts.............       664     32,806       643     34,298       625     34,654       614     34,111
    Program Analysts............       618     33,050       793     44,551       723     44,721       594     33,917
    Contract Specialists........       884     43,092       754     38,491       704     40,419       677     37,786
    Accountants/Technicians.....     2,242     93,880     1,814     85,811     1,715     85,521     1,692     83,220
    Administrative..............     3,590    129,132     2,785    132,720     2,750    129,828     2,611    119,219
    Economists..................       791     53,257       683     50,477       657     50,303       653     51,405
    ----------------------------------------------------------------------------------------------------------------

                       government performance review act
        Question. The Department have been involved in compliance with the
    Government Performance Review Act (GPRA) requirements, including the
    development of strategic plans, goals, performance measurements, etc.
    By USDA agency, please document staff years and obligations (including
    salaries, travel, contracts, training, etc.) incurred to date by fiscal
    year, in accomplishing this effort. How much is included in the fiscal
    year 1998 budget request for this purpose.
        Answer. The information follows:

                      UNITED STATES DEPARTMENT OF AGRICULTURE STAFF YEARS AND OBLIGATIONS FOR GPRA
                                                 [Dollars in thousands]
    ----------------------------------------------------------------------------------------------------------------
                                                      1995             1996             1997              1998
                      Agency                   ---------------------------------------------------------------------
                                                  SY     Funds     SY     Funds      SY     Funds      SY     Funds
    ----------------------------------------------------------------------------------------------------------------
    Farm and Foreign Agricultural Services:
        Farm Service Agency...................    1.00      $50    4.00     $200    46.00   $2,695    74.00   $3,048
        Risk Management Agency................    2.00       97    5.00      210    12.00      571     8.00      366
        Foreign Agricultural Service..........       4      260       4      268        5      345        5      355
    Rural development \1\.....................    1.50      190    1.00       82     1.50      168     1.50      172
        Rural Utilities Service...............  ( \1\
                                                     )  ( \1\ )  ( \1\
                                                                      )  ( \1\ )  ( \1\ )  ( \1\ )  ( \1\ )  ( \1\ )
        Rural Housing Service.................  ( \1\
                                                     )  ( \1\ )  ( \1\
                                                                      )  ( \1\ )  ( \1\ )  ( \1\ )  ( \1\ )  ( \1\ )
        Rural Business-Cooperative Service....  ( \1\
                                                     )  ( \1\ )  ( \1\
                                                                      )  ( \1\ )  ( \1\ )  ( \1\ )  ( \1\ )  ( \1\ )
    Food, Nutrition, and Consumer Services:
        Food and Consumer Service.............    1.25      100    2.00      160     3.25      293     6.50      585
    Natural Resources and Environment:
        Natural Resources Conservation Serv-
         ice..................................    5.50      590   39.00    3,048    43.00    3,409    40.00    3,015
    Food Safety:
        Food Safety and Inspection Service....    1.00       73    3.00      219     4.00      301     5.00      387
    Research, Education, and Economics:
        Agricultural Research Service.........    1.60      124    1.60      128     1.60      133     1.70      138
        Cooperative State Research, Education,
         and Extension Service................    1.51      119    1.27      135     1.28      225     2.10      302
        Economic Research Service.............    2.00      130    2.00      133     2.00      137     2.00      139
        National Agricultural Statistics
         Service..............................    1.06      115    1.05      121     1.45      164     1.86      179
    Marketing and Regulatory Programs:
        Animal and Plant Health Inspection
         Service..............................    3.00      226    4.00      291     3.00      240     3.00      131
        Agricultural Marketing Service........    6.96      966    9.76      746    10.01    1,008     7.86      565
        Grain Inspection, Packers and
         Stockyards Administration............    4.50      338    4.70      376     5.40      459     5.40      486
    Administration:
        Office of the Secretary...............  ......  .......  ......  .......  .......  .......  .......  .......
        Office of the Chief Economist.........  ......  .......    0.57       55     0.57       57     0.57       58
        National Appeals Division.............  ......  .......    0.25       23     0.25       24     0.25       25
        Office of Budget and Program Analy-
         sis..................................    0.07        3    0.07        3     0.07        3     0.07        3
        Office of Small & Disadv. Bus.
         Utilization..........................  ......  .......    0.25       24     0.25       25     0.25       26
        Chief Information Officer.............  ......  .......  ......  .......  .......  .......  .......  .......
        Chief Financial Officer...............  ......  .......    2.50      211     2.50      187     3.00      191
        Office of Communications..............    1.00       20    1.00       21     1.00       21     1.00    21.87
        Office of the Inspector General.......    0.50       32    0.60       42     0.80       60     8.00       62
        Office of the General Counsel.........    0.05        9    0.07       14     0.10       20     0.10       21
        Departmental Administration...........  ......  .......    1.00       79     3.00      203     2.00      167
                                               ---------------------------------------------------------------------
          Subtotal, GPRA......................   38.50    3,442   88.69    6,588   148.03   10,748   179.16   10,443
    Forest Service............................  ......  .......  ......  .......  .......  .......  .......  .......
                                               ---------------------------------------------------------------------
          Total, GPRA.........................   38.50    3,442   88.69    6,588   148.03   10,748   179.16   10,443
    ----------------------------------------------------------------------------------------------------------------
    \1\ Data provided for mission area, not for agencies.

                          employee details/assignments
        The fiscal year 1997 appropriations act specifies that ``No
    employee of the Department of Agriculture may be detailed or assigned
    to any agency or office funded by this Act to any other agency or
    office of the Department for more than 30 days unless the individual's
    employing agency or office is fully reimbursed by the receiving agency
    or office for the salary or expenses of the employee for the period of
    assignment.''
        Question. Has the USDA Office of General Counsel issued any
    opinions, interpretations, or guidance to USDA agencies relative to
    this statutory provision? If so, what? Please submit for the record any
    written opinions or communications and summaries of oral communications
    issued.
        Answer. The Office of the General Counsel has issued no written
    opinions or memorandum generally addressing the limitation on employee
    details contained in section 730 of the Agriculture, Rural Development,
    Food and Drug Administration, and Related Agencies Appropriations Act,
    1997, or the parallel provision also applying to USDA contained in the
    Interior portion of the fiscal year 1997 Omnibus Consolidated
    Appropriations Act. Attorneys from OGC have advised Department
    officials as to how those provisions should be interpreted. Simply
    stated, that advice has been that employees may not be detailed from
    any agency or office of the Department to any other such agency or
    office for more than 30 days without reimbursement to the employing
    agency or office. However, we have also recognized that, under the law,
    so long as an employee is performing duties for which any agency or
    office receives appropriations, the employee may be paid from the
    appropriation for that agency or office no matter where the employee is
    geographically or physically located.
        Question. Please provide the Committee with a list, by agency, of
    each employee detail or assignment (by employing agency, title, and
    position) in each of fiscal years 1996 and 1997 for a period up to 30
    days, and identify the agency to which that detail or assignment was
    made, its length, and the purpose of the detail/assignment. Provide
    this same information for employee details/assignments made for a
    period of more than 30 days, and indicate the dollar amount of
    reimbursement made to the employing agency for such detail/assignment.
        Answer. The information follows:

                                                        DETAILED FOR LESS THAN 30 DAYS--FISCAL YEAR 1997
    --------------------------------------------------------------------------------------------------------------------------------------------------------
           Position/agency                           Detailed to                         Date/length                             Purpose
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Agr. Economist (FAS).........  FAS...........................................  10/1/96-11/1/96........  Technical assistance--Nicaragua.
    Program Analyst (FCS)........  Under Secretary, FNCS.........................  10/1/96-10/26/96.......  Support for FCS programs.
    Conf. Asst. to Adm. (FCS)....  Office of Public Affairs......................  10/1/96-10/27/96.......  Write speeches for the Secretary of Agriculture.
    Policy Analyst (FCS).........  Dept. of Treasury.............................  10/1/96-10/12/96.......  Assist the leader of the Electronic Benefits
                                                                                                             Task Force.
    Budget Officer (FCS).........  Modernization of Administrative Processes       10/1/9 6-10/12/96......  Analyze telecommunication activities.
                                    (MAPP).
    Writer (FCS).................  Under Secretary, FNCS.........................  10/1/96-10/25/96.......  Write speeches, letters, etc.
    Secretary (FCS)..............  OSEC..........................................  1/21/9 7-2/21/97.......  Secretarial support.
    Secretary (NRCS).............  Under Secretary, NRE..........................  11/8/96-12/5/96........  Clerical support.
    Contracting Specialist (NRCS)  OO and GSA....................................  12/16/96-1/31/97.......  WEL--Gain managerial experience.
    Confidential Assistant (NRCS)  FSA...........................................  2/18/97-3/16/97........  Assist at the Field Service Center.
    Program Analyst (RMA)........  OBPA..........................................  10/1/96-10/31/96.......  Experience at Dept. level.
    Management Analyst (FS)......  Under Secretary, NRE..........................  10/1/96-10/31/96.......  Provide support.
    Writer (FS)..................  Under Secretary, NRE..........................  10/1/96-10/31/96.......  Provide support.
    Writer (FS)..................  Office of Civil Rights........................  10/1/96-10/31/96.......  Provide support.
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                                                            DETAILED FOR MORE THAN 30 DAYS--FISCAL YEAR 1997
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
             Position/agency                          Detailed to                        Date/length                                 Purpose                                    Reimbursed
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    Foreign Agr. Affairs Officer       Calif. Dept of Agr.......................  2 years..................  IPA--Outreach..........................................  None.
     (FAS).
    Foreign Agr. Affairs Officer       Iowa Dept. of Agr........................  2 years..................  TDY--Outreach..........................................  None.
     (FAS).
    Foreign Agr. Affairs Officer       Oregon Dept. of Agr......................  2 years..................  IPA--Outreach..........................................  None.
     (FAS).
    Export Outreach Specialist (FAS).  Colo. Dept. of Agr.......................  2 years..................  TDY--Outreach..........................................  None.
    Foreign Agr. Affairs Officer       UN FAO...................................  2 years..................  Outreach...............................................  None.
     (FAS).
    Agr. Marketing Specialist (FAS)..  U.S. Trade and Development Agency........  2 years..................  Outreach...............................................  None.
    Foreign Agr. Affairs Officer       World Bank...............................  2 years..................  Outreach...............................................  None.
     (FAS).
    Foreign Agr. Affairs Officer       Peace Corps, Albania.....................  2 years..................  Outreach...............................................  None.
     (FAS).
    Agr. Marketing Specialist (FAS)..  Congressional Fellowship.................  1 year...................  Professional Development...............................  None.
    Executive Assistant (RHS)........  FSA......................................  10/1/95-9/30/97..........  Resolution of outstanding large farm loans.............  $130,089 in fiscal year 1997.
    Financial Analyst (RUS)..........  FAS......................................  10/1/95-9/30/97..........  Assist AID in revitalizing rural infrastructure........  $81,000 in fiscal year 1997.
    Special Asst. to Adm. (RHS)......  USDA Civil Rights........................  10/27/96-9/30/97.........  Civil rights activities................................  $99,545 in fiscal year 1997.
    Conf. Asst. to Adm. (RBS)........  FCS......................................  9/17/96-2/28/97..........  Scheduling and office management.......................  $42,195 in fiscal year 1997.
    Service Center Oper. Dir. (RBS)..  Field Service Center Team................  10/17/95-9/30/97.........  Implement the Field Service Centers....................  None.
    Deputy Asst. Adm. (RHS)..........  FSA......................................  7/1/96-9/30/97...........  Farm loan portfolio problem cases......................  On FSA payroll.
    Confidential Assistant (RHS).....  Office of Congressional Affairs..........  2/28/96-1/18/97..........  Serve as policy advisor................................  $16,964 in fiscal year 1997.
    Secretary (RHS)..................  Under Secretary, RD......................  3/4/96-9/30/97...........  Clerical assistance....................................  None.
    Staff Assistant (RHS)............  Under Secretary, RD......................  10/1/95-9/30/97..........  Staff assistance.......................................  None.
    Conf. Asst. to Adm. (RUS)........  White House..............................  4/1/96-9/30/97...........  Assist the Office of Presidential Personnel............  ( \1\ )
    Conf. Asst. to Adm. (RHS)........  White House..............................  12/14/96-9/30/97.........  Assist the Office of Presidential Personnel............  ( \1\ )
    Conf. Asst. to Adm. (RHS)........  White House..............................  1/20/97-9/30/97..........  Assist the Office of Presidential Personnel............  ( \1\ )
    Grants Management Specialist       Dept. of Justice.........................  10/1/96-1/3/97...........  Support to the Financial Crime Enforcement Network.....  None.
     (FCS).
    Financial Management Specialist    Dept. of Treasury........................  10/1/96-2/8/97...........  Assistance to the EBT Task Force.......................  None.
     (FCS).
    Special Assistant (FCS)..........  OCFO.....................................  10/1/96-9/30/97..........  Special financial project..............................  $108,424.
    Senior Budget Analyst (FCS)......  Under Secretary, FNCS....................  10/1/96-3/25/97..........  Budget and legislative support.........................  $5,518.
    Conf. Asst. To Adm. (FCS)........  Under Secretary, FNCS....................  10/1/96-2/24/97..........  Administrative support.................................  None.
    Conf. Asst. To Adm. (FCS)........  Under Secretary, FNCS....................  10/1/96-5/28/97..........  Legislative support....................................  None.
    Accounting Officer (FCS).........  OCFO.....................................  10/1/96-9/30/97..........  Work on a special financial project....................  $63,316.
    Staff Assistant (FCS)............  Under Secretary, FNCS....................  10/1/96-3/30/97..........  Administrative support to the Deputy Under Secretary...  $3,754.
    Program Specialist (FCS).........  Dept. of Health, Commonwealth of Puerto    10/1/96-12/31/96.........  IPA--Develop and help implement a vendor selection       $15,186.
                                        Rico.                                                                 system for WIC.
    Accountant (FCS).................  Dept. of Health, Commonwealth of Puerto    2/25/97-1/3/97...........  IPA--Assist in reorganizing WIC........................  $39,593.
                                        Rico.
    Supervisory Program Specialist     Calif. Dept. of Education................  3/10/97-8/31/97..........  IPA--Assistance on the Summer Food Service Program.....  None.
     (FCS).
    Program Specialist (FCS).........  New Mexico Dept. of Health...............  10/1/96-2/27/97..........  IPA--Assistance on WIC and CSFP........................  $16,715.
    Executive Assistant (FCS)........  Texas Dept. of Health....................  10/1/96-6/5/97...........  IPA--Assistance on Civil Rights and EEO................  $15,320.
    Program Analyst (FCS)............  Office of Communication..................  10/1/96-9/30/97..........  Work on FCS AmeriCorps Program.........................  None.
    Systems Accountant (FCS).........  OCFO.....................................  10/1/96-9/30/97..........  Edit and complete USDA's Accounting Standards Manual...  $77,420.
    Program Manager (FCS)............  Dept. of Health and Human Services.......  10/14/9 6-10/13/97.......  Analyze the impact of Self-Governance on Tribal Health   $40,111.
                                                                                                              Programs.
    Program Analyst (FCS)............  N. Car. Dept of Environment, Health, and   10/14/9 6-10/10/98.......  IPA--Assist on several food assistance programs........  $82,481.
                                        Natural Resources.
    Supervisory Program Analyst (FCS)  OMB......................................  10/1/96-11/22/96.........  OMB's Career Development Exchange Program..............  None.
    Secretary (FCS)..................  Under Secretary, FNCS....................  10/1/96-3/30/97..........  Secretarial support....................................  $4,950.
    Program Manager (NRCS)...........  CSREES...................................  10/1/96 -3/19/97.........  Program support and assistance.........................  $83,271.
    Program Manager (NRCS)...........  OPM......................................  10/2/96-Present..........  Policy and program guidance............................  $114,514.
    Computer Specialist (NRCS).......  Under Secretary, NRE.....................  12/1/96-2/10/97..........  Technical advice on automated technology...............  $7,697.
    Contracting Specialist (NRCS)....  OO.......................................  2/1/97-4/21/97...........  Purchase Card Implementation  Team.....................  $3,899.
    Contracting Specialist (NRCS)....  OBPA.....................................  12/16/97-1/31/97.........  WEL--To gain managerial experience.....................  None.
    Management Analyst (NRCS)........  Office of Communication..................  4/2/95-2/2/97............  Ameri-Corp issues......................................  $70,000.
    Secretary (NRCS).................  Under Secretary, NRE.....................  7/7/96-10/23/97..........  Clerical support.......................................  None.
    Program Specialist (NRCS)........  Under Secretary, NRE.....................  5/30/96-3/15/97..........  To provide assistance..................................  None.
    Program Specialist (NRCS)........  Under Secretary, NRE.....................  8/22/96-2/1/97...........  To provide assistance..................................  None.
    Program Specialist (NRCS)........  Under Secretary, NRE.....................  5/1/96-10/20/96..........  To provide assistance..................................  None.
    Program Specialist (NRCS)........  Under Secretary, NRE.....................  3/24/96-3/16/97..........  To provide assistance..................................  None.
    Secretary (FS)...................  Under Secretary, NRE.....................  10/1/96-11/8/96..........  To provide support.....................................  None.
    Secretary (FS)...................  Assistant Secretary, ADM.................  10/1/96-11/8/96..........  To provide support.....................................  None.
    Contracting Specialist (FS)......  OO.......................................  10/1/96-9/30/97..........  Purchase card automation project.......................  None.
    Accountant (FS)..................  Under Secretary, NRE.....................  10/1/96-9/30/97..........  Financial Information System Vision and Strategy.......  $72,000.
    Accountant (FS)..................  Under Secretary, NRE.....................  10/1/96-9/30/97..........  Financial Information System Vision and Strategy.......  $69,000.
    Management Analyst (FS)..........  Under Secretary, NRE.....................  10/1/96-9/30/97..........  Financial Information System Vision and Strategy.......  $86,000.
    Computer Specialist (FS).........  Under Secretary, NRE.....................  10/1/96-9/30/97..........  Financial Information System Vision and Strategy.......  None.
    Secretary (FS)...................  OSEC.....................................  11/1/96-11/12/97.........  To provide support.....................................  None.
    Program Manager (FS).............  DA.......................................  10/1/96-Present..........  FS Liaison Hazardous Waste Management Support..........  $90,000.
    Program Manager (FS).............  DA.......................................  10/1/96-Present..........  FS Liaison Hazardous Waste Management Support..........  $80,000.
    Engineer (FS)....................  DA.......................................  10/1/96-Present..........  FS Liaison Hazardous Waste Management Support..........  $80,000.
    Program Manager (FS).............  OC.......................................  10/1/96-12/7/96..........  To assist with public affairs..........................  None.
    Program Manager(FS)..............  Under Secretary, NRE.....................  10/1/96-9/30/97..........  To provide support.....................................  $12,600.
    Accountant (FS)..................  Under Secretary, NRE.....................  10/1/96-9/30/97..........  Financial Information System Vision and Strategy.......  $56,000.
    Computer Specialist (FS).........  MAPP.....................................  10/1/96-9/30/97..........  Modernization of administrative processes..............  $86,000.
    Administrator (ARS)..............  Under Secretary, REE.....................  10/21/96-Present.........  To serve as Acting Under Secretary.....................  None.
    Program Manager (ARS)............  Under Secretary, REE.....................  10/1/96-1/31/97..........  Mission Support/NS TC Liaison..........................  None.
    Accounting Technician (ARS)......  OIRM.....................................  8/5/96-1/31/97...........  Administrative support.................................  $7,418.
    Confidential Assistant (ARS).....  Assistant Secretary, Adm.................  10/1/96-3/1/97...........  To provide support.....................................  None.
    Information Specialist (ARS).....  Under Secretary, REE.....................  1/1/96-4/1/97............  Mission Support/NS TC Liaison..........................  None.
    Property Dispatch Technician       FSIS.....................................  7/8/96-5/27/97...........  To learn computer entry trouble shooting...............  $24,758.
     (ARS).
    Supervisory Computer Specialist    MAPP.....................................  8/1/96-9/30/97...........  Computer management support............................  $91,579.
     (ARS).
    Admin & Facilities Manager (ARS).  MAPP.....................................  11/3/96-11/2/97..........  Technical expertise....................................  None.
    Budget Analyst (ARS).............  OIRM.....................................  6/23/96-6/22/97..........  Budgetary support......................................  On OIRM payroll.
    Secretary (ARS)..................  Civil Rights.............................  11/3/96-3/31/97..........  Clerical support.......................................  None.
    Account Technician (ARS).........  OIRM.....................................  8/5/96-1/31/97...........  Administrative support.................................  None.
    Property Dispatch Technician       FSIS.....................................  7/8/96-5/27/97...........  To learn computer entry trouble shooting...............  $7,508.
     (ARS).
    Home Economist (ARS).............  CSREES...................................  5/20/96-10/31/96.........  Administrative & managerial support....................  None.
    Secretary (ARS)..................  Purchasing Card Implement Team...........  4/1/96-3/31/97...........  Clerical support.......................................  $20,107.
    Secretary(CSREES)................  OSEC.....................................  10/1/96-9/30/97..........  Secretarial assistance.................................  $38,352.
    Secretary (CSREES)...............  Under Secretary, REE.....................  Indefinite...............  Mission support, secretarial assistance................  None.
    Associate Administrator (CSREES).  Under Secretary, REE.....................  Indefinite...............  Mission support........................................  None.
    Special Assistant (CSREES).......  Under Secretary, REE.....................  Indefinite...............  Communications Coordinator.............................  None.
    Social Sci. Analyst (ERS)........  Office of Civil Rights...................  11/1/96-1/3/97...........  Civil Rights Task Force................................  None.
    Social Sci. Analyst (ERS)........  NAL......................................  2/24/97-8/2/97...........  File Automation........................................  None.
    Agr. Economist (ERS).............  FAS......................................  9/30/96-2/1/97...........  Technical assist., Turkey..............................  $41,000.
    Budget Coordinator (ERS).........  Under Secretary, REE.....................  Indefinite...............  Mission Support/Budget Coordination....................  None.
    Supervisory Agricultural           FAS......................................  10/1/96-9/30/97..........  Agribusiness advisor...................................  $127,000.
     Economist (GIPSA).
    Agr. Commodity Grader(AMS).......  NRCS.....................................  37 Days..................  Assist with an 1890 scholars data base project.........  None.
    Secretary (AMS)..................  Civil Rights Office......................  155 Days.................  Assist with civil rights case load.....................  None.
    Program Assistant (AMS)..........  Civil Rights Office......................  211 Days.................  Assist with civil rights case load.....................  None.
    Program Analyst(APHIS)...........  NFC......................................  1/27/97-3/26/97..........  Conduct misconduct investigations......................  $17,600.
    Integrated System and Acquisition  MAPP.....................................  11/95-9/97...............  On team to redesign procurement system.................  $180,978.
     Project (ISAP) Manager (APHIS).
    Supervisory Computer Specialist    MAPP.....................................  3/96-3/97................  On team to redesign T&A system.........................  $43,833.
     (APHIS).
    Computer Specialist (APHIS)......  MAPP.....................................  10/96-9/97...............  On team to redesign procurement system.................  $42,432.
    Veterinarian Medical Officer       OSEC.....................................  1/7/96-2/28/97...........  Assist on food safety project..........................  $42,432.
     (APHIS).
    Supervisory Computer Specialist    MAPP.....................................  7/96-9/97................  On team to redesign procurement system.................  None.
     (APHIS).
    Personnel Management Specialist    MAPP.....................................  3/3/96-9/30/97...........  On team to redesign procurement system.................  $98,103.
     (APHIS).
    Management Analyst (APHIS).......  OCFO.....................................  10/1/95-3/16/97..........  On team to develop financial systems...................  $116,441.
    Systems Accountant (APHIS).......  OCFO.....................................  10/1/96-9/30/97..........  On team to develop financial systems...................  $133,649.
    Budget Analyst (APHIS)...........  OSEC.....................................  6/10/96-6/6/97...........  Assist Service Center Implementation Team..............  $67,588.
    Branch Chief (APHIS).............  MAPP.....................................  10/96-2/97...............  On team to implement VISA card reform..................  None.
    Special Assistant to the           Assistant Secretary, MRP.................  5/96-9/97................  To provide support.....................................  None.
     Administrator (APHIS).
    Confidential Assistant to the      Assistant Secretary, MRP.................  10/96-9/97...............  To provide support.....................................  None.
     Administrator (APHIS).
    Confidential Assistant (FSIS)....  AMS......................................  5/94-1/97................  Assist with communications.............................  None.
    Secretary (FSIS).................  OSEC.....................................  11/95-Present............  Clerical support.......................................  Agreement being developed.
    Secretary (FSIS).................  DA.......................................  1/96-Present.............  Clerical support.......................................  None.
    Food Technologist (FSIS).........  FAS......................................  3/96-3/97................  Food technology support................................  None.
    Budget Analyst (FSIS)............  ARS......................................  9/96-1/97................  Staff assistance.......................................  $22,800.
    Program Analyst (FSIS)...........  NRCS.....................................  12/96-2/97...............  Civil Rights Work Group................................  None.
    Industrial Engineer (FSIS).......  ARS......................................  1/97-5/97................  Staff assistance.......................................  None.
    Deputy Inspector General.........  Dept. of Trans. (DOT)....................  10/1/96-Present..........  Acting Principal Deputy Inspector General..............  $75,000.
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

                                                                            DETAILED FOR MORE THAN 30 DAYS--FISCAL YEAR 1996
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
              Position/agency                           Detailed to                           Dates                                          Purpose                                   Reimbursed
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    Conf. Asst. to Adm. (RHS)..........  White House.............................  5/20/94--3/30/96..........  Assist Voting Office..............................................  ( \1\ )
    Conf. Asst. to Adm. (RHS)..........  White House.............................  11/10/9 4-8/31/96.........  Assist Domestic Policy Office.....................................  ( \1\ )
    Conf. Asst. to Adm. (RHS)..........  White House.............................  3/8/96-9/27/96............  Assist Office of Presidential Personnel...........................  ( \1\ )
    Correspondence Control Assistant     Under Secretary, FNCS...................  12/24/95-9/26/96..........  Secretarial support...............................................  None.
     (FCS).
    Conf. Asst. To Adm. (FCS)..........  Office of Communications................  11/8/95-9/30/96...........  Write speeches for the Secretary..................................  None.
    Supervisory Program Analyst (FCS)..  Office of Civil Rights..................  11/30/92-3/31/96..........  Civil rights enforcement..........................................  None.
    Program Manager (FCS)..............  FAS--South Africa.......................  11/15/95-2/15/96..........  Guidance on FCS programs..........................................  $31,807.
    Grants Management Specialist (FCS).  Dept. of Justice........................  2/25/96-9/30/96...........  Support Financial Crime Enforcement Network.......................  None.
    Property Management Specialist       OIRM....................................  2/4/96-8/17/96............  Telecomm. work....................................................  $42,276.
     (FCS).
    Supervisor Program Manager (FCS)...  Under Secretary, FNCS...................  3/31/96-7/29/96...........  Serve in the absence of the Executive Assistant to Under Secretary  None.
    Accountant (FCS)...................  OIG.....................................  9/5/95-1/2/96.............  Assistance on use of automated accounting systems.................  None.
    Assistant to the Administrator       Under Secretary for FNCS................  10/30/9 4-8/2/96..........  Program support...................................................  None.
     (FCS).
    Assistant Administrator (FCS)......  Dept. of Treasury.......................  11/15/9 3-1/20/96.........  Leader of the Electronic Benefits Task Force (EBTF)...............  None.
    Policy Analyst (FCS)...............  Dept. of Treasury.......................  1/24/94-9/30/96...........  Assistant Leader of the EBTF......................................  None.
    Financial Management Specialist      Dept. of Treasury.......................  11/15/93-9/30/96..........  Assistance on EBTF................................................  None.
     (FCS).
    Special Assistant for Policy &       OCFO....................................  10/1/95-9/30/96...........  Special financial project.........................................  $104,510.
     Planning (FCS).
    Senior Budget Analyst (FCS)........  Under Secretary, FNCS...................  7/9/95-9/30/96............  Budget and legislative support....................................  None.
    Assistant Project Manager (FCS)....  Under Secretary, FNCS...................  2/13/96-7/31/96...........  Support for Team Nutrition........................................  None.
    Conf. Asst to Adm. (FCS)...........  Under Secretary, FNCS...................  1/22/95-9/28/96...........  Administrative support............................................  None.
    Conf. Asst. to Adm. (FCS)..........  Under Secretary, FNCS...................  9/5/93-9/30/96............  Administrative support............................................  None.
    Conf. Asst. to Adm. (FCS)..........  Under Secretary, FNCS...................  10/3/93-9/30/96...........  Legislative support...............................................  None.
    Correspondence Assistant (FCS).....  Under Secretary, FNCS...................  10/18/93-11/25/95.........  Secretarial support...............................................  None.
    Conf. Asst. to Adm. (FCS)..........  Under Secretary, FNCS...................  3/2/95-10/14/95...........  Administrative support............................................  None.
    Accounting Officer (FCS)...........  OCFO....................................  11/8/93-9/30/96...........  To work on a special project......................................  $83,346.
    Staff Assistant (FCS)..............  Under Secretary, FNCS...................  2/20/94-9/30/96...........  Administrative support............................................  None.
    Budget Officer (FCS)...............  MAPP....................................  5/6/96-9/30/96............  Telecommunication activities......................................  $24,037.
    Writer (FCS).......................  Under Secretary, FNCS...................  5/19/96-9/30/96...........  To write speeches, letters, etc...................................  None.
    Program Analyst (FCS)..............  Under Secretary, FNCS...................  8/19/96-9/30-96...........  Support for FCS programs..........................................  None.
    Policy Analyst (FCS)...............  New Mexico Dept. of Human Services......  2/15/94-8/30/96...........  IPA--Provide assistance to EBT....................................  $63,937.
    Program Specialist (FCS)...........  Dept. of Health, Commonwealth of Puerto   10/23/95-9/30/96..........  IPA--Develop and help implement a vendor selection system for  WIC  $54,858.
                                          Rico.
    Accountant (FCS)...................  Dept. of Health Commonwealth of Puerto    5/12/96-8/31/96...........  IPA--Assist in reorganizing WIC...................................  $21,431.
                                          Rico.
    Supervisory Program Specialist       Calif. Dept. of Education...............  10/26/9 5-9/30/96.........  IPA--Provide technical assistance on Summer Food Service Program..  None.
     (FCS).
    Program Specialist (FCS)...........  New Mexico Dept. of Health..............  2/8/93-9/30/96............  IPA--Assistance on WIC and CSFP...................................  $50,146.
    Executive Assistant (FCS)..........  Texas Dept. of Health...................  6/6/94-9/30/96............  IPA--Assistance on civil rights and EEO...........................  $37,980.
    Program Analyst (FCS)..............  Office of Communications................  6/12/94-9/30/96...........  To work on FCS Ameri-Corps Program................................  None.
    Supervisory Program Analyst (FCS)..  OMB.....................................  7/15/96-9/30/96...........  Career Development Exchange Program...............................  None.
    Executive Assistant (NRCS).........  Under Secretary, NRE....................  3/24/93-3/16/96...........  Assistance on NRE issues..........................................  None.
    Secretary (FS).....................  Under Secretary, NRE....................  10/1/95-9/30/96...........  Support...........................................................  None.
    Program Specialist (FS)............  Under Secretary, NRE....................  10/1/95-9/30/96...........  Support...........................................................  None.
    Writer (FS)........................  Office of Communications................  5/1/96-9/30/96............  Support...........................................................  $8,866.
    Program Specialist (FS)............  OIRM....................................  5/1/96-9/30/96............  Support...........................................................  None.
    Secretary (FS).....................  Assistant Secretary, ADM................  10/1/95-9/30/96...........  Support...........................................................  None.
    Accountant (FS)....................  Under Secretary, NRE....................  10/1/95-9/1/96............  Financial Information System Vision and Strategy..................  $75,086.
    Accountant (FS)....................  Under Secretary, NRE....................  10/1/95-9/30/96...........  Financial Information System Vision and Strategy..................  $65,263.
    Accountant (FS)....................  Under Secretary, NRE....................  3/18/96-9/30/96...........  Financial Information System Vision and Strategy..................  $36,007.
    Management Analyst (FS)............  Under Secretary, NRE....................  10/1/96-9/30/96...........  Financial Information System Vision and Strategy..................  $84,886.
    Management Analyst (FS)............  MAPP....................................  10/1/96-9/30/96...........  Modernization of administrative processes.........................  None.
    Program Specialist (FS)............  DA......................................  10/1/96-9/30/96...........  Hazardous waste management support................................  $86,000.
    Program Specialist (FS)............  DA......................................  10/1/96-9/30/96...........  Hazardous waste management support................................  $76,000.
    Engineer (FS)......................  DA......................................  10/1/96-9/30/96...........  Hazardous waste management support................................  $76,000.
    Messenger (FS).....................  Under Secretary, NRE....................  intermittently............  Support...........................................................  None.
    Writer (FS)........................  Office of Communications................  10/17/95-9/30/96..........  Support...........................................................  None.
    Entomologist (FS)..................  Hispanic Association of Colleges and      10/1/95-9/30/96...........  Support...........................................................  None.
                                          Universities.
    Confidential Assistant (FSIS)......  APHIS...................................  6/94-4/96.................  Director of Legislative Affairs...................................  None.
    Program Analyst (FSIS).............  OP......................................  11/94-10/95...............  Analytical work on Year 2000......................................  None.
    Food Technologist (FSIS)...........  CSREES..................................  6/95-10/95................  Biotechnology expertise...........................................  None.
    Staff Assistant (FSIS).............  OSEC....................................  11/95-3/96................  Staff assistance..................................................  None.
    Staff Assistant (FSIS).............  OSEC....................................  3/96-6/96.................  Staff assistance..................................................  None.
    Program Assistant (FSIS)...........  OP......................................  4/96-6/96.................  Clerical support..................................................  None.
    Asst. to the Deputy Admin. (FSIS)..  DA......................................  4/96-10/96................  Senior staff assistance...........................................  None.
    Program Analyst (ARS)..............  Under Secretary, REE....................  8/15/96-9/30/96...........  Mission Support, NSTC Liaison.....................................  None.
    Chemist (ARS)......................  Under Secretary, REE....................  5/20/96-9/15/96...........  Special Management Intern Program.................................  None.
    Supervisory Computer Specialist      MAPP....................................  8/96-9/30/96..............  Computer management support.......................................  None.
     (ARS).
    Supervisory Purchasing Agent (ARS).  MAPP....................................  3/6/95-9/30/96............  Administrative and clerical support...............................  $39,435.
    Contract Specialist (ARS)..........  MAPP....................................  10/15/95-9/30/96..........  Credit Card Project...............................................  $52,188.
    Budget Analyst (ARS)...............  OIRM....................................  6/23/96-9/30/96...........  Budgetary support.................................................  $16,655.
    Secretary (ARS)....................  Purchasing Card Implementation Team.....  4/1/96-9/30/96............  Clerical support..................................................  $18,574.
    Confidential Assistant (ARS).......  Assistant Secretary, ADM................  7/28/96-9/30/96...........  Department support................................................  None.
    Confidential Assistant (ARS).......  Under Secretary, REE....................  10/1/95-9/30/96...........  Mission support...................................................  None.
    Secretary (CSREES).................  OSEC....................................  9/22/95-9/30/96...........  Secretarial support...............................................  None.
    Computer Specialist (CSREES).......  Washington Service Center...............  11/20/95-3/31/96..........  Computer assistance...............................................  None.
    Computer Specialist (CSREES).......  MAPP....................................  10/31/95-2/28/96..........  Computer assistance...............................................  $14,234.
    Legislative Affairs Assistant        National Performance Review.............  5/5/96-9/15/96............  Technical support.................................................  None.
     (CSREES).
    Secretary (CSREES).................  Under Secretary, REE....................  5/96-9/96.................  Mission support...................................................  None.
    Ecologist (CSREES).................  Under Secretary, REE....................  8/12/96-9/15/96...........  NSTC Liaison......................................................  None.
    Secretary (CSREES).................  OP......................................  12/19/95-1/19/96..........  Secretarial assistance............................................  None.
    Agr. Ext. Specialist (CSREES)......  OSEC....................................  5/1/95-4/30/96............  Chair the Water Quality Initiative................................  None.
    Secretary (ERS)....................  Under Secretary, REE....................  12/23/95-3/28/96..........  Secretarial Assistance............................................  None.
    Division Director (ERS)............  Under Secretary, REE....................  9/15/96-9/30/96...........  Mission support...................................................  None.
    Agr. Economist (ERS)...............  FAS.....................................  9/2/96-9/30/96............  Technical Assistance--Turkey......................................  $10,500.
    Secretary (NASS)...................  Under Secretary, REE....................  3/12/96-12/23/95..........  Secretarial support...............................................  None.
    Secretary (NASS)...................  Under Secretary, REE....................  10/1/95-9/28/96...........  Secretarial support...............................................  None.
    Commodity Grader (AMS).............  APHIS...................................  4/96-6/96.................  To assist with Karnal Bunt........................................  $16,000.
    Commodity Grader (AMS).............  APHIS...................................  4/96-6/96.................  To assist with Karnal Bunt........................................  $17,000.
    Commodity Grader (AMS).............  APHIS...................................  4/96-6/96.................  To assist with Karnal Bunt........................................  $20,000.
    Commodity Grader (AMS).............  APHIS...................................  4/96-6/96.................  To assist with Karnal Bunt........................................  $22,000.
    Commodity Grader (AMS).............  APHIS...................................  4/96-6/96.................  To assist with Karnal Bunt........................................  $22,000.
    Commodity Grader (AMS).............  APHIS...................................  4/96-6/96.................  To assist with Karnal Bunt........................................  $22,000.
    Commodity Grader (AMS).............  APHIS...................................  4/96-6/96.................  To assist with Karnal Bunt........................................  $22,000.
    Commodity Grader (AMS).............  APHIS...................................  4/96-6/96.................  To assist with Karnal Bunt........................................  $16,000.
    Commodity Grader (AMS).............  APHIS...................................  4/96-6/96.................  To assist with Karnal Bunt........................................  $23,000.
    Commodity Grader (AMS).............  APHIS...................................  4/96-6/96.................  To assist with Karnal Bunt........................................  $23,000.
    Commodity Grader (AMS).............  APHIS...................................  4/96-6/96.................  To assist with Karnal Bunt........................................  $23,000.
    Commodity Grader (AMS).............  APHIS...................................  4/96-6/96.................  To assist with Karnal Bunt........................................  $23,000.
    Commodity Grader (AMS).............  APHIS...................................  4/96-6/96.................  To assist with Karnal Bunt........................................  $23,000.
    Commodity Grader (AMS).............  APHIS...................................  4/96-6/96.................  To assist with Karnal Bunt........................................  $23,000.
    Commodity Grader (AMS).............  APHIS...................................  4/96-7/96.................  To assist with Karnal Bunt........................................  $27,000.
    Secretary (AMS)....................  Office of Civil Right...................  4/96-9/96.................  Secretarial support...............................................  None.
    Program Support Assistant (AMS)....  Office of Civil Rights..................  4/96-9/96.................  Secretarial support...............................................  None.
    Marketing Specialist (AMS).........  MAPP....................................  10/95-9/96................  Telecommunication project.........................................  $12,000.
    Management Analyst (APHIS).........  Assist . Sec. Adm.......................  4/29/96-9/30/96...........  Perform Dept. Adm. workload analysis study........................  None.
    Secretary (APHIS)..................  National Performance Review.............  10/23/9 5-1/21/96.........  Provide secretarial support.......................................  None.
    Program Analyst (APHIS)............  OP......................................  9/12/94-4/12/96...........  Develop guidelines for accommodating persons with disabilities....  None.
    Director (APHIS)...................  ARS.....................................  3/3/96-9/27/96............  Acting Director Plum Island Animal Disease Center.................  $32,751.
    Supervisory Agricultural Economist   FAS.....................................  10/1/95-9/30/96...........  To serve as an agribusiness advisor...............................  $107,000.
     (GIPSA).
    Branch Chief (OIG).................  MAPP....................................  6/14/96-8/25/96...........  Telecommunication project.........................................  None.
    Lawyer (OGC).......................  NRCS....................................  10/1/95-8/30/96...........  Legal assistance on Wetlands Reserve Program......................  $34,617.
    Lawyer (OGC).......................  Committee on Agriculture................  10/1/95-11/30/95..........  Legal assistance on Food Stamps and CSFP..........................  $13,613.
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    \1\ As authorized by 3 U.S.C. 112, the effective date for Reimbursed of White House details begins 180 calendar days after the starting date of the detail in the fiscal year. This provision
      applies anew at the beginning of each fiscal year. Reimbursement is requested for details exceeding this 180-day period per fiscal year.

                                         DETAILS UNDER 30 DAYS--FISCAL YEAR 1996
    ----------------------------------------------------------------------------------------------------------------
              Position/agency                Detailed to             Date/length                   Purpose
    ----------------------------------------------------------------------------------------------------------------
    Agr. Commodity Grader-Grain (GIPSA)  APHIS.............  5/28/96-6/27/96...........  To work on Karnal Bunt.
    Agr. Commodity Grader-Grain (GIPSA)  APHIS.............  5/28/96-6/27/96...........  To work on Karnal Bunt.
    Agr. Commodity Grader-Grain (GIPSA)  APHIS.............  5/28/96-6/27/96...........  To work on Karnal Bunt.
    Agr. Commodity Grader-Grain (GIPSA)  APHIS.............  6/12/96-7/12/96...........  To work on Karnal Bunt.
    Agr. Commodity Grader-Grain (GIPSA)  APHIS.............  6/03/96-7/03/96...........  To work on Karnal Bunt.
    Agriculture Commodity Tech. Grain    APHIS.............  5/28/96-6/26/96...........  To work on Karnal Bunt.
     (GIPSA).
    Agriculture Commodity Tech. Grain    APHIS.............  5/28/96-6/26/96...........  To work on Karnal Bunt.
     (GIPSA).
    Agr. Commodity Grader-Grain (GIPSA)  APHIS.............  6/04/96-7/02/96...........  To work on Karnal Bunt.
    Agr. Commodity Grader-Grain (GIPSA)  APHIS.............  6/20/96-7/12/96...........  To work on Karnal Bunt.
    Indl. Specialist, Agriculture        APHIS.............  5/28/96-6/18/96...........  To work on Karnal Bunt.
     (GIPSA).
    Agr. Commodity Grader-Grain (GIPSA)  APHIS.............  5/29/96-6/19/96...........  To work on Karnal Bunt.
    Agr. Commodity Tech. Grain (GIPSA).  APHIS.............  5/28/96-6/17/96...........  To work on Karnal Bunt.
    ----------------------------------------------------------------------------------------------------------------

               discrimination complaints/civil rights enforcement
        Question. Mr. Secretary, you have worked to investigate and address
    complaints of discrimination and lack of service to minorities and
    small farmers in USDA farm loan programs. I know that your civil rights
    action team will soon be releasing its recommendations. Is the
    moratorium on loan foreclosures still in effect?
        Answer. It is not really a moratorium, it is a review. All pending
    foreclosures will continue to be reviewed by state and federal
    officials to ensure that discrimination or unfair treatment was not a
    factor. If discrimination may have played a factor, the foreclosure is
    stopped. However, if there is no finding of discrimination, the
    foreclosure goes forward.
        Question. Can you summarize the major findings of the team and what
    safeguards it recommends be instituted to make sure discrimination does
    not continue or occur again?
        Some have suggested that this problem might be attributed to the
    county committee system. Did the action team find this to be the case?
    Is it recommending any changes in the county committee structure?
        Answer. The Civil Rights Action Team made 92 recommendation in the
    areas of management, accountability, program delivery, workforce
    diversity and the organization structure of civil rights. The report
    also includes actions plans for implementing the recommendations. Most
    are feasible. Some may need further review. I have set a goal of
    implementing those recommendations that do not require legislative
    action within the next six months.
        The most dramatic changes at USDA will come from our efforts to
    reign in authority to ensure accountability. USDA will seek legislative
    authority to convert all non-federal county positions in the Farm
    Services Agency to federal employee status.
        Other immediate actions include: working to eliminate the backlog
    in both program and EEO complaints; vesting the Assistant Secretary for
    Administration with the authority to review the civil rights records of
    agency heads and Subcabinet officials; creating a civil rights arm of
    the Office of the General Counsel; establishing a national commission
    on small farms to develop an aggressive strategy for keeping this
    important American tradition alive and well; creating a department-wide
    workforce planning and recruitment effort; and requiring annual civil
    rights training for all employees.
        A copy of the civil Rights Action Team Report is also provided for
    the use of the committee.

        [Clerk's note.--The Civil Rights Action Team Report does not appear
    in the hearing record, but is available for review in the
    subcommittee's files.]
                                  civil rights
        Question. At your request Mr. Secretary, additional funds were
    provided for fiscal year 1997 to reduce the backlog of equal employment
    opportunity and program discrimination complaint cases.
        How did this backlog accumulate?
        Answer. The backlog in employment cases resulted from a dramatic
    increase in the number of complaints being filed in the past five
    years, without a similar increase in the resources assigned. For
    example, the average number of counseling contacts annually for fiscal
    years 1987-1991 was 1360. For fiscal years 1992-1996, we experienced a
    39 percent increase in counseling contacts to an annual average of
    1884. More dramatically, the average number of formal complaints filed
    rose from an annual average of 271 for fiscal years 1987-1991 to an
    annual average of 630 for fiscal years 1992-96, a 132 percent increase.
    I will provide a table for the record showing the annual figures.
        [The information follows:]

    ----------------------------------------------------------------------------------------------------------------
                               Fiscal year                               Counseled     Formal filed    Formal closed
    ----------------------------------------------------------------------------------------------------------------
    1987............................................................           1,469             332             363
    1988............................................................           1,332             277             369
    1989............................................................           1,078             247             327
    1990............................................................           1,349             211             280
    1991............................................................           1,572             288             261
    1992............................................................           1,628             462             229
    1993............................................................           2,005             683             459
    1994............................................................           2,223             666             501
    1995............................................................           1,732             772             383
    1996............................................................           1,830             566           1,035
    ----------------------------------------------------------------------------------------------------------------

        There are multiple reasons for the increase, and we do not pretend
    to be able to state with absolute certainty how much each factor
    contributed. However, we believe two changes in law and regulation were
    major factors. First, the Civil Rights Act of 1991 provided for
    compensatory damages in cases of intentional discrimination. This
    element of relief, whatever its merits otherwise, has raised the
    determination of employees to pursue their complaints further into the
    process. Second, the Equal Employment Opportunity Commission issued new
    regulations on October 1, 1993. These regulations established time
    frames for the informal process which made it more difficult to reach
    closure before a complaint became formal.
        USDA management also must accept responsibility for allowing the
    situation progress to the point it has. During the period from March
    1992 until November 1995, the organization responsible for adjudicating
    formal complaints underwent several official and unofficial
    reorganizations, including 12 destabilizing changes in management. It
    has become clear that increased resources will be needed on a permanent
    basis to made the necessary improvements in this area.
        Question. Is progress being made with the additional funds
    provided?
        Answer. The funds are being used to track, process and resolve the
    USDA employee complaints. In addition, there are plans to assemble two
    major staffs to review and to the extent possible resolve all of the
    1450 outstanding employee complaints and 550 outstanding program
    complaints. It is my understanding that findings indicate that
    significant progress has been made toward investigating and holding
    hearings regarding the employment complaints. It is our expectation
    that this will lead to a significant reduction. However, the findings
    further indicate that most of the 550 program complaints have not been
    investigated. Further investigation will be necessary for most of the
    program complaints prior to the time these complaints can be resolved.
        Question. What is being done to ensure that this problem does not
    recur in the future?
        Answer. We are trying to attack the problem from three directions.
    First, it is critical that we improve our rate of resolving complaints
    during the informal stages. We will be exploring more use of mediation,
    and will soon be deciding on the optimum placement of the EEO
    counseling function. Second, we will be maintaining an increased staff
    of adjudicators to handle formal complaints, and trying to improve
    their productivity through training and process reengineering. Third,
    we will be initiating efforts to prevent complaints in the first place.
    Supervisors need to be better trained in performing their jobs, and we
    are taking steps to institutionalize such training. Supervisors also
    need to be held accountable, so problems can be corrected before they
    multiply. Finally, we need to provide and strengthen alternative
    methods of addressing disputes in the workplace; employees need an
    effective avenue to get their concerns addressed without filing a
    discrimination complaint when discrimination is not the real problem.
                             market access program
        Changes have been made in the Market Access Program (MAP) to make
    it more targeted and to increase small business participation in the
    program. For fiscal year 1998, the budget includes the full authorized
    permanent funding level of $90 million for MAP.
        Question. How important is the Market Access Program to the
    promotion and expansion of U.S. agricultural exports?
        Answer. The Market Access Program has been an important contributor
    to the gain in U.S. world market share of sales of consumer-oriented
    products since 1985. During this period, MAP and its predecessor, the
    Targeted Export Assistance Program, have helped this share grow from 11
    percent to 18 percent in 1994. Each percent gain represents sales of
    more than $1 billion. While changes in the value of the dollar have
    added to the growth, analysis carried out by FAS has indicated that
    market promotion contributed to more than half of the total increase.
        Mr. Secretary, your prepared testimony indicates that ``additional
    program improvements have recently been made which are designed to
    broaden participation, clarify program participation criteria,
    strengthen evaluation and accountability, and simplify program
    requirements for participation.''
        Question. How have these program changes been executed and could
    you briefly summarize the changes made and the reasons for those
    changes?
        Answer. Consistent with the Administration's commitment to
    streamlining government activity, new MAP regulations were published on
    February 1, 1995, that increased flexibility and simplified program
    requirements for participants. The revised regulations also reflected
    public comments and changes made by the Omnibus Budget Reconciliation
    Act of 1993. Among the changes made by the rule are:
        (a) U.S. exporters no longer need to show that a U.S. agricultural
    commodity faces an unfair trade practice in an overseas market in order
    to participate in the program;
        (b) small businesses and cooperatives are accorded priority
    consideration in the allocation of brand promotion funding;
        (c) application and allocation approval criteria are clarified;
        (d) procedures for appealing compliance findings are added; and
        (e) paperwork requirements have been reduced by simplifying
    contracting standards and procedures and streamlining the format for
    various program documents.
        With regards to evaluation, FAS allocates funds in a manner that
    effectively supports decision-making initiatives of the Government
    Performance and Results Act (GPRA) of 1993. FAS considers a number of
    factors when reviewing MAP proposals, several of which relate to export
    performance, both past performance and projected export goals. In fact,
    in the MAP competitive allocation process, 60 percent of the total
    weight relates to export performance.
        In addition, each participant is required to conduct an annual
    program evaluation to determine the effectiveness of the participant's
    strategy in meeting overall goals. Participants must identify goals to
    be met within a specified time, a schedule of measurable milestones for
    gauging success, plans for achievement, and results of activities at
    regular intervals. The evaluation results are analyzed by FAS and help
    guide the development and scope of a participant's program.
        With these changes in place, program management and accountability
    have been strengthened. For example, over the last 6 years compliance
    findings against program participants have decreased and repayments by
    program participants for unauthorized or inappropriate expenditures
    have been less than 1 percent of the total MAP funding level, a clear
    indication that these steps are working.
                           export enhancement program
        The President's fiscal year 1998 budget proposes to make $500
    million available for the Export Enhancement Program, the maximum level
    permitted by provisions of the 1996 Farm Bill. Quite frankly, EEP was
    limited in the appropriations act for fiscal year 1997 and in previous
    years because there was a general consensus that the maximum permitted
    level would not be required.
        Question. Do you expect to utilize the $100 million currently
    available for the Export Enhancement Program, and why do you believe
    that the $500 million maximum program level will be required in the
    fiscal year 1998?
        Answer. EEP allocations for the July 1996-June 1997 period,
    announced last summer, were at the maximum quantity levels allowed
    under the Uruguay Round Agreement reduction commitments. However, at
    present, we do not believe that current world market conditions warrant
    the use of subsidies by anyone. In general, U.S. supplies are
    relatively tight, and we are exporting what we have available without
    the need to use subsidies. Unfortunately, the responsible restraint by
    the United States has been tested by renewed subsidization by the
    European Union, which began in September 1996. We believe it is
    extremely important that we maintain a strong position in order to
    protect our agricultural trade interests. Resumption of EEP is an
    option we may need to consider and we have, therefore, provided funding
    for EEP in 1998 at the maximum level permitted by the 1996 Farm Bill.
                   proposed public law 480 title i rescission
        The Administration proposes a $50 million total reduction in fiscal
    year 1997 appropriations for Public Law 480 Title I (a $3.5 million
    rescission of Title I ocean freight differential funds and a rescission
    of $46.5 million in subsidy budget authority in the direct credit
    program). The budget indicates that commodity shipments would be
    reduced by 200,000 metric tons as a result of this proposed rescission.
    However, it also indicates that allocations of Title I commodity
    assistance that have already been announced for fiscal year 1997 would
    not be affected by the proposed rescission because the reduction in
    program funding will be taken from a reserve of unallocated funds and
    from unobligated funds carried over from fiscal year 1996.
        Question. With respect to the proposed rescission of Public Law 480
    Title I funding, what is the total reserve of unallocated funds and
    unobligated funds carried over from fiscal year 1996?
        Answer. The total reserve of unallocated fiscal year 1997 funds is
    $24.6 million, and the unobligated funds carried over from fiscal year
    1996 total $32.9 million. The total from both sources is $57.5 million.
        Question. How much of the proposed rescission would come from the
    reserve and how much would come from fiscal year 1996 carryover
    balances?
        Answer. The fiscal year 1996 carryover funds have been made
    available for programming in fiscal year 1997 through the apportionment
    process and, thus, funding from both sources is now commingled. The
    rescission proposes to reduce budget authority for the Title I credit
    account by $46.5 million and for the ocean freight differential account
    by $3.5 million. Upon enactment of the rescission, just over $7 million
    would remain in the ocean freight differential account for fiscal year
    1997. We believe this remaining reserve is needed to meet current
    programming plans because the rate of ocean freight differential
    payments has been increasing recently. If our original estimate of the
    costs of meeting cargo preference requirements for Title I proves to
    have been too low, we will need the reserve to meet the higher costs.
        Question. Does the proposed rescission have the impact of reducing
    commodity shipments by 200,000 metric tons because, in its absence, the
    unobligated and reserve funds would be spent?
        Answer. Our tonnage estimates for Public Law 480 programming are
    always based on the assumption that program funds will be fully
    obligated. Consequently, when we reduce Title I budget authority by $50
    million, we need to make a corresponding reduction in our tonnage
    estimate.
        Question. The law permits available funds to be transferred between
    titles of the Public Law 480 program. Has the Administration concluded
    that if unobligated and carryover funds are not required for Title I of
    the program, they also will not be required to supplement funds for
    Titles II and III of the program this year?
        Answer. The decision to propose the Title I rescission was based on
    the need to identify an offset for the supplemental that has been
    requested that includes the Special Supplemental Nutrition Program for
    Women, Infants, and Children. However, at this time we have no reason
    to believe that funding will be inadequate for the Titles II and III
    programs this year. It is also important to note that, even with the
    rescission in Title I, we estimate total Public Law 480 commodity
    programming of 3.2 million metric tons for the year, which is still
    above the 3.0 million metric tons we programmed last year.
                    public law 480--fiscal year 1998 request
        The fiscal year 1998 request proposes to maintain funding for
    Titles II and III of the Public Law 480 program, but to reduce funding
    available for Title I credit sales. Direct credit authority is reduced
    from the fiscal year 1997 level of $227 million to $113 million (a
    reduction of $114 million); the subsidy appropriation is reduced from
    $186 million to $88 million (a reduction of $98 million); and ocean
    freight differential costs are reduced from $14 million to $10 million
    (a reduction of $4 million). The budget also proposes to transfer
    budget and expenditures for the Title I concessional sales program from
    the international affairs function to the agricultural function. The
    rationale given for this shift is to allow the Title I program to be
    managed and budgeted as part of a consistent package of agricultural
    export programs.
        Question. Why does the fiscal year 1998 request propose to reduce
    funding for the Public Law 480 Title I program?
        Answer. The reduction proposed for Title I programming in fiscal
    year 1998 reflects constraints on discretionary spending and the
    difficult choices that had to be made in order to meet the President's
    commitment of balancing the Federal budget by fiscal year 2002. It is
    important to note that 1998 funding for Titles II and III of Public Law
    480 will remain largely unchanged from 1997 enacted levels, which
    ensures that adequate resources will be available to meet the most
    serious food assistance needs, including emergencies.
        Question. Is this proposed reduction in any way related to the
    proposed transfer of the program from the international affairs
    function to the agricultural function of the budget?
        Answer. The reduction does not result from the transfer of Title I
    from the international affairs function to the agriculture function. In
    fact, one of the primary reasons for making the transfer is to improve
    the Department's ability to support future budgetary resources for the
    program. Because the market development objectives of Title I are more
    closely aligned with the purposes of the agriculture function, it will
    be easier to allocate funding for Title I there rather than in the
    international affairs function where the primary objectives are foreign
    policy and national security.
        Question. I thought changes in budget presentation were made by OMB
    after consultation with the Budget Committees of the Congress. Why is
    this change proposed formally in the President's budget?
        Answer. It is our understanding that OMB did consult with senior
    staff of the Budget Committees and the Agriculture Appropriations
    Subcommittees. Following those consultations, the President's budget
    was modified to move the Title I credit account to the agriculture
    function. Because of time constraints, ocean freight differential
    funding for Title I could not be transferred and remains in the
    international affairs function. However, we plan to modify the budget
    presentation for the 1999 budget so the ocean freight differential
    funding will also be included in the agriculture account.
        Question. Are you asking that we legislate the change?
        Answer. The President's budget has already transferred the Title I
    credit account to the agriculture function, so we will not be
    submitting proposed legislation on this matter.
        Question. The prepared testimony indicates that the fiscal year
    1998 budget request for the Public Law 480 program would provide for
    approximately the same level of metric tons of commodity assistance as
    currently estimated for fiscal year 1997. However, the budget
    justification indicates that the program level for Title I would
    decrease from 0.919 million metric tons grain equivalent (MMTGE) to
    0.634 MMTGE in fiscal year 1998; the Title II program level would
    remain the same at 2.4 MMTGE; and the Title III program would be
    increased from 0.117 MMTGE to 0.150 MMTGE in fiscal year 1998. The
    fiscal year 1998 request in fact proposes a net reduction from fiscal
    year 1997 in Public Law 480 metric tons of commodity assistance and,
    specifically, a reduction of 0.285 metric tons in Title I commodity
    assistance from fiscal year 1997. Is this correct?
        Answer. The table in the budget justification materials which
    provides estimates of Public Law 480 tonnages does not reflect the
    effect of the proposed rescission in Title I budget authority for
    fiscal year 1997. The rescission would reduce the tonnage estimate for
    fiscal year 1997 Title I programming by approximately 200,000 metric
    tons. If the effect of the rescission is taken into account, total
    Public Law 480 tonnage is estimated to be 3.2 million metric tons in
    both FYs 1997 and 1998.
     supplemental nutrition program for women, infants, and children (wic)
        Mr. Secretary, the Administration is seeking $100 million in fiscal
    year 1997 supplemental funding for the supplemental nutrition program
    for women, infants, and children (WIC).
        Question. I understand that food package costs and participation
    have increased above projected levels. However, perhaps you could tell
    us the impacts of not acting on this request. Would available funding
    still be adequate to maintain the existing WIC caseload? In other
    words, are we talking about throwing WIC participants off the rolls
    without this additional funding, or are we talking about slowing the
    growth of or not further expanding program participation?
        Answer. Our rationale for requesting the supplemental really is
    simple. We are committed to full funding WIC, serving about 7.5 million
    eligibles by the end of fiscal year 1998. This goal would be
    compromised by participation fall off forced by lack of funds.
        Food and Consumer Service historical data shows that States usually
    underspend their grants, due to correctly cautious management and to
    the uncertainties of rebate cash flows, fluctuating demand for service
    and unanticipated food cost changes. This has resulted in carry over
    funds from one year to the next. While States will work harder than
    ever to fully use their grants this year, and should reduce carry over,
    program history suggests that carry over will be about 2.5 percent. If
    there is no supplemental, States may not be able to sustain their
    current caseload levels in fiscal year 1997.
                      managing wic within available funds
        Question. What did the Department do at the outset of the fiscal
    year to manage the WIC program within its available funding level so as
    to prevent a large drop in participation at the end of the year?
        Answer. The States handle the WIC program at the recipient service
    level. USDA, through the Food and Consumer Service's seven Regional
    Offices, provides oversight, policy guidance, and technical assistance
    to WIC State Agencies. FCS does not allocate caseload to the States,
    only funding. And we believe that this is as it should be.
        When we advise States of their grant levels at the start of the
    year, we provide them with a projection of the caseload we think they
    can handle, given their prior year's food costs, expected rebate
    revenue, and food inflation projections. We take a snapshot several
    times during the year to see if any State has funds it will not need,
    so that they can be recovered and reallocated to a State needs them. We
    provided States extra warnings this year, that funding was likely to be
    tight--and we are continuing with this process. Ultimately, however,
    the States decide which and how many individuals they can serve within
    their grants.
                   offsets for wic 1997 supplemental request
        Question. As you are aware, if this supplemental funding is
    provided, this subcommittee most likely would have to offset its cost,
    both in budget authority and outlays, by reducing existing
    appropriations for other USDA activities. The Administration has
    proposed a $50 million rescission of Public Law 480 Title I funding,
    but this would offset only half the budget authority and only about
    one-third of the outlay impact of the requested WIC supplemental. Is
    this WIC supplemental funding request a priority if further reductions
    need to be made in existing funding for other USDA activities? If so,
    what other offsetting reductions would you suggest?
        Answer. The WIC supplemental is a priority of the Administration's
    and has been accounted for in the President's plan to balance the
    budget by the year 2002. This plan includes other high priority USDA
    programs in addition to WIC. If the Administration's plan is adopted by
    Congress, no further cuts to USDA will be required to offset the WIC
    supplemental.
                              wic offsets for 1998
        For fiscal year 1998, the administration proposes a $378 million
    increase in WIC funding above the fiscal year 1997 level. I don't think
    there is a member of the Congress who would not like to fully fund the
    WIC program. However, I do not expect that this Subcommittee will
    receive a discretionary spending allocating higher than the fiscal year
    1997 level, requiring at least an offsetting reduction for any increase
    provided.
        Question. Is the proposed fiscal year 1998 WIC funding increase a
    priority for the Department to the extent that you would suggest
    offsetting reductions in funding for other USDA programs? What funding
    reductions would you suggest?
        Answer. WIC full funding is a priority of the Administration's.
    Funding sufficient so that all eligibles may participate by the end of
    fiscal year 1998, has been taken into consideration in preparing the
    President's plan to balance the budget by the year 2002. If the
    President's plan is followed, no further offsetting reductions to
    Agriculture will be required.
                            office of the secretary
        Question. The explanatory notes indicate that $207,000 in fiscal
    year 1997 and $273,000 in fiscal year 1998 of the funds available for
    the Office of the Secretary will be obligated under another USDA
    appropriations for an Assistant to the Secretary for Western Affairs.
    Under which USDA appropriation will these funds be obligated? Is this a
    new position? Why was it created?
        Answer. These funds will be obligated equally between the Forest
    Service and Rural Business-Cooperative Services. This is a new position
    established to represent the Secretary in natural resource and rural
    economic development issues that cut across USDA and other Federal
    agency lines. The position of Assistant to the Secretary for Western
    Affairs was created to coordinate with other Federal agencies, local,
    State and tribal governments issues of concern in the Western region.
                         service center implementation
        Question. The explanatory notes indicate of the $7,500,000
    appropriated in fiscal year 1998 for Infoshare and now designated for
    Service Center Implementation, $3,098,302 was obligated in fiscal year
    1996 and $4,401,698 will be obligated in fiscal year 1997. Please
    provide a detailed breakdown, by fiscal year, on the purposes for which
    these funds were obligated.
        Answer. I will be glad to provide this information for the record.
        [The information follows:]

                             [Dollars in Thousands]
    ------------------------------------------------------------------------
                                               Fiscal     Fiscal
                    Project                  year 1996  year 1997   Project
                                               actual    estimate    totals
    ------------------------------------------------------------------------
    Infoshare Program......................       $495  .........       $495
    Kentucky Pilot.........................        438  .........        438
    Telecommunications.....................        500  .........        500
    Business Process Reengineering/Business
     Process Improvement/Data Management...        831       $637      1,468
    Change Management......................        657      2,760      3,417
    Service Center Implementation Project
     Management............................         62        319        381
    1996/1997 Departmental Administration/
     Office of the Chief Information
     Officer Oversight.....................        115        285        400
    Reserve for determination of future
     oversight needs.......................  .........        401        401
                                            --------------------------------
          Total, Appropriation.............      3,098      4,402      7,500
    ------------------------------------------------------------------------

                              advisory committees
        Question. For fiscal year 1997, the appropriations act establishes
    a $1 million limitation on activities of advisory committees, panels,
    commissions, and task forces, excluding panels to comply with
    negotiated rulemaking or to evaluate competitively-awarded grants.
    Please provide a listing of the advisory committees, panels,
    commissions and task forces funded in fiscal year 1997, by agency, and
    the amount of funds allocated for each.
        Answer. I will provide for the record a listing of those advisory
    committees, panels, commissions and task forces that are subject to the
    $1 million limitation.
        [The information follows:]

                            USDA Advisory Committees

    Food, Nutrition and Consumer Services:e                    1997 Estimate
        National Advisory Council on Maternal, Infant and Fetal
          Nutrition.........................................................
        National Advisory Council on Commodity Distributio..................
                        --------------------------------------------------------------
                        ____________________________________________________

          Total.............................................................
                        ==============================================================
                        ____________________________________________________
    Food Safety:
        National Advisory Committee on Meat and Poultry Inspection   $32,158
        National Advisory Committee on Microbiological Criteria
          for Foods...............................................    38,517
                        --------------------------------------------------------------
                        ____________________________________________________

          Total...................................................    70,675
                        ==============================================================
                        ____________________________________________________
    Research, Education and Economics:
        National Ag. Research, Extension, Education & Econ.
          Advisory Board..........................................   329,149
        National Genetics Resources Advisory Council..............    19,000
        Dietary Guidelines Advisory Committee.....................     5,376
        National Nutrition Monitoring Advisory Council............    36,000
        Forestry Research Advisory Council........................    24,748
        Census Advisory Committee on Agriculture Statistics.......    56,000
                        --------------------------------------------------------------
                        ____________________________________________________

          Total...................................................   470,273
                        ==============================================================
                        ____________________________________________________
    Marketing and Regulatory Programs:
        Federal Grain Inspection Advisory Committee...............    30,000
        Advisory Committee on Foreign Animal and Poultry Diseases.    20,350
        General Conference Committee of the Nat'l Poultry
          Improvement Plan........................................     7,969
        National Animal Damage Control Advisory Committee.........    25,000
        National Organic Standards Board..........................    43,000
                        --------------------------------------------------------------
                        ____________________________________________________

          Total...................................................   126,319
                        ==============================================================
                        ____________________________________________________
    Farm and Foreign Agricultural Services:
        Agricultural Policy Advisory Committee for Trade..........    14,119
        Ag. Tech. Adv. Comm. for Trade in: Animals & Animal
          Products................................................    14,110
        Fruits and Vegetables.....................................    14,110
        Grain, Feed & Oilseeds....................................    14,110
        Sweeteners................................................    14,110
        Tobacco, Cotton & Peanuts.................................    14,110
        Edward R. Madigan Ag. Export Excellence Award.............    14,110
        Board.....................................................    28,090
        Beginning Farmers and Ranchers......................................
                        --------------------------------------------------------------
                        ____________________________________________________

          Total...................................................   126,869
                        ==============================================================
                        ____________________________________________________
    Natural Resources & Environment:
        Task Force on Agricultural Air Quality....................    50,000
                        --------------------------------------------------------------
                        ____________________________________________________

          Total...................................................    50,000
          Subtotal, Advisory Committees...........................   844,136
    Contingencies.................................................   155,864
                        --------------------------------------------------------------
                        ____________________________________________________

          Total, Advisory Committees Limitation................... 1,000,000

        Question. Why is the Department proposing to eliminate this
    limitation in fiscal year 1998?
        Answer. We have proposed this change in order to provide the
    agencies with the flexibility needed, within available resources, to
    carry out the appropriate level of committee activities in support of
    USDA programs.
                              advisory committees
        Question. Please provide a list of the advisory committees, panels,
    commissions, and task forces, by agency, included in the fiscal year
    1998 budget request, and the amount of funds proposed for each one.
        [The information follows:]

            Agency/group                                       1998 estimate
    ARS--National Genetic Resources Advisory Council..............   $23,000
    ARS--National Nutrition Monitoring Advisory Council...........    37,000
    ARS--Dietary Guidelines Advisory Committee....................   159,140
    CSREES--National Agricultural Research, Education, Extension,
        and Economics Advisory Board..............................   329,149
    CSREES--Forestry Research Advisory Council....................    25,396
    APHIS--Foreign Animal and Poultry Diseases Advisory Committee.    20,913
    APHIS--General Counsel of the National Poultry Improvement
        Plan......................................................     9,928
    APHIS--National Animal Damage Control Advisory Committee......    25,000
    AMS--National Organic Standards Board.........................    44,000
    GIPSA--Federal Grain Inspection Service Advisory Committee....    30,000
    NASS--Census Committee on Agriculture Statistics..............    58,000
    FAS--Agricultural Policy Advisory Committee for Trade.........    14,119
    FAS--Ag Tech. Advisory Committee for Tradein Animal & Animal
        Products..................................................    14,110
    FAS--Ag Tech. Advisory Committee for Tradein Fruits and
        Vegetables................................................    14,110
    FAS--Ag Tech. Advisory Committee for Tradein Grain Feed and
        Oilseeds..................................................    14,110
    FAS--Ag Tech. Advisory Committee for Trade in Sweeteners......    14,110
    FAS--Ag Tech. Advisory Committee for Trade in Tobacco, Cotton
        and Peanuts...............................................    14,110
    FAS--Edward R. Madigan Ag. ExportExcellence Award Board.......    14,110
    FSIS--National Advisory Committee on Microbiological Criteria
        for Foods.................................................    75,000
    FSIS--National Advisory Committee on Meatand Poultry
        Inspection................................................    75,000
    NRCS--Task Force on Agricultural Air Quality..................    80,000
    FSA--Advisory Committee on Beginning Farmers and Ranchers.....    35,393
                           hazardous waste management
        Question. The fiscal year 1998 request proposes an increase of $9.3
    million for hazardous waste management to meet mandated compliance
    deadlines for high risk sites. How many sites on USDA properties
    require hazardous waste cleanup, and what is your estimate of the
    amount of funds needed to complete all work identified?
        Answer. The USDA currently estimates that over 4,500 sites under
    our jurisdiction, custody, or control will require a response action.
    The current estimate to complete this work is approximately, $3.6
    billion. This includes 1,728 abandoned or inactive mines at a cost of
    $1.9 billion and up to 1,000 sites leased by the Commodity Credit
    Corporation at an estimated cost of $1.5 billion. The Department has
    begun an initiative to increase the number of site cleanups by
    potentially responsible parties in order to accelerate the pace and
    share the financial responsibility for cleanup.
                            national finance center
        Question. The fiscal year 1997 appropriations act requires the
    Chief Financial Officer to actively market cross-servicing activities
    of the National Finance Center--NFC. Is this being done?
        Answer. NFC is pursuing many avenues to actively market its full
    range of services to non-USDA agencies including actively participating
    in national conferences and symposiums to market NFC services
    Nationwide. In addition, publicizing NFC successes through established
    media and NFC publications is important to maintain the NFC's image as
    a leader in providing financial services.
        In 1996, NFC began servicing the Federal Mediation and Conciliation
    Service and the Office of Congressional Compliance. We are scheduled to
    bring another four agencies into the National Finance Center over the
    next two years: the U.S. Capitol Police, the U.S. Architectural and
    Transportation Barriers Compliance Board, the Federal Housing Finance
    Board, and the Federal Elections Commission. NFC is also currently
    pursuing several other potential clients for our payroll systems as
    well as other administrative payment systems.
        In addition, NFC is pursuing a number of marketing strategies to
    make our services more visible and appealing to potential users. For
    example, NFC held an NFC Payroll/Personnel EXPO here in Washington last
    October and participated in an information processing interagency
    conference in Austin, Texas, in December. NFC is scheduled to
    participate in at least four more conferences this fiscal year,
    allowing it to market the full range of NFC services to conference
    participants. NFC will also be initiating use of the Internet for
    marketing of services.
                 office of the inspector general: asset sharing
        Question. What amount has been deposited in the Department of
    Justice and/or Treasury Department Assets Forfeiture Fund in each of
    fiscal years 1996 and 1997 as a result of investigations in which the
    USDA Office of Inspector General (OIG) participates?
        Answer. Cumulatively, over $10 million has been identified for
    possible forfeiture to the Government as a result of our investigative
    actions since OIG was provided authority to receive proceeds from
    forfeitures in November 1995. In fiscal year 1996, property and/or
    funds valued at approximately $7 million have been provided to the U.S.
    Department of Treasury's Assets Forfeiture Fund, and property and/or
    funds valued at approximately $712,000 have been provided to the U.S.
    Department of Justice's Assets Forfeiture Fund as a result of
    investigations involving this agency. To date in fiscal year 1997,
    property and/or funds valued at approximately $160,000 have been
    provided to the Treasury Asset Forfeiture Fund, and property and/or
    funds valued at approximately $2.4 million have been provided to the
    Justice Assets Forfeiture Fund.
        Question. Is a memorandum of understanding between the OIG and the
    U.S. Department of Justice and/or U.S. Department of Treasury in place
    to allow USDA to receive an equitable share of these funds? If not,
    why?
        Answer. Previously, a memorandum of understanding between OIG and
    the Department of Treasury was agreed to and signed by both agencies;
    however, Treasury has since withdrawn its agreement. No memorandum of
    understanding has been completed between OIG and the Department of
    Justice. Currently, OIG is involved in discussions with Justice,
    Treasury, and the Office of Management and Budget on OIG's receipt of
    forfeiture proceeds through equitable sharing. These discussions
    continue. Justice objects to equitable sharing with any Federal agency,
    including OIG.
                                     ______

                      Questions Submitted by Senator Bond
                                wic sugar limit
        The USDA raised the possibility that it might alter the sugar cap
    for breakfast cereals approved for the WIC program many months ago and
    in response it received an avalanche of negative comments from parents,
    teachers, health professionals, public service and child care groups.
    The essential facts noted by the commentators is that the WIC diet is
    supplementary diet designed to be nutrient dense. For this reason it
    specifically limited the amount of sugar, fats and sodium. There seems
    to be no rational reason for adding empty sugar calories to a
    prescriptive diet designed for undernourished children.
        Question. Can we expect that the retention of the sugar cap will be
    proclaimed by the Department in the near future?
        Answer. As you noted, WIC foods are intended to provide nutrients
    lacking in the WIC population. And WIC foods are also a nutrition
    education tool used to help recipients learn how to select nutritional
    foods. We periodically consider recent research findings and advice
    from leading professional health and nutrition authorities to determine
    whether revisions in Federal program guidelines orregulations are
    needed.
        The March 1996 WIC Cereal Sugar Limit Notice stated that USDA was
    aware that the newer clinical evidence indicated that sugar consumption
    is not believed to be an independent risk factor in the development of
    the chronic diseases of coronary heart disease, noninsulin diabetes,
    obesity and hyperactivity. We used the public forum of a Federal
    Register Notice to solicit feedback from the broad sectors of the
    community on whether continuation of a Federal restriction on the
    amount of sugar allowed in adult WIC cereal is still warranted. Among
    the many comments we received were suggestions that neither sugar nor
    any other attribute of WIC foods should be viewed in isolation, but
    rather they should be reviewed in the context of all of the WIC foods
    and their use in achieving WIC goals.
        In follow-up, the Department will publish a notice in the Federal
    Register to summarize the public comments USDA received on the March
    1996 Notice and to announce the Department's decision to examine WIC
    foods for consistency with the 1995 Dietary Guidelines for Americans
    and supporting scientific knowledge. USDA's Food and Consumer Service,
    in conjunction with the Center for Nutrition Policy and Promotion, will
    be conducting a scientific review of the WIC foods. Until this review
    is completed, the Department will not be making any changes in the
    current Federal sugar cap for WIC cereals.
                 american dental association on wic sugar limit
        The American Dental Association is, as you know unconditionally
    opposed to an upward alteration in the sugar cap. The principal
    argument for such a revision seems to be that while additional sugar
    would do no good, it would also do no harm. This would be a strikingly
    weak argument even if it were true but it clearly is not. Added sugar
    would mean increased tooth decay among a group of children who already
    have a higher incidence of caries than the general juvenile population
    does.
        Question. Has the position of the American Dental Association in
    this matter been given the full consideration it obviously deserves?
        Answer. Yes. We have reviewed the materials provided by the
    American Dental Association in looking at the WIC sugar limits. Also,
    we welcome the American Dental Association's interest in WIC and in WIC
    foods, and encourage them to help us with our planned review of all WIC
    foods, including the sugar limits. Further, we hope the American Dental
    Association will help with our other programs in any way that they can.
                        national corn genome initiative
        On December 18, Senator Mosley-Braun and I sent a letter to you
    regarding the status of USDA's efforts to provide funding for the
    National Corn Genome Initiative (NCGI) which is he critical research
    priority by corn growers and processors. As we said in the letter, we
    believe that this project is of vital interest to our efforts to retain
    our leadership position in agricultural research and to ensure that our
    producers have the tools necessary for environmentally-responsible and
    sustainable agricultural production.
        We had hoped that the research components of the Fund for Rural
    America might be recognized as a part of the Fund for Rural America. It
    was specifically mentioned in Farm Bill report language and is
    precisely the kind of basic science that will be the basis for us being
    competitive into the next century or falling behind. While I understand
    that many rural development projects yield immediate and visible
    benefits and are important, we should also have the vision to provide
    the tools that will be the key to success in the future.
        The letter also notes that the fiscal year 1997 funding bill for
    the USDA included language urging that the Department provide increased
    attention and develop a long-term approach for corn genome mapping.
        Question. We have not received a response to the December 18
    letter. While I understand the Department has been active during the
    period since, I have several questions regarding the Corn Genome
    Mapping project. Does the Department consider the NCGI eligible for
    Fund for Rural America grants?
        Answer. A broad-reaching proposal to map the corn genome could be
    submitted to the Fund for Rural America--FRA. Given that the FRA is
    designed to support multifunctional and multidisciplinary projects that
    combine research, education, and extension to some degree, the proposal
    should be one that also looks at the impact of the mapping project on
    the community, on breeders, and/or on producers. It might be beneficial
    to include technology transfer to indicate how the generated
    information will be disseminated and used.
        Question. If so, will the Department give such an endeavor priority
    under the criterium that has been issued?
        Answer. The FRA is a peer-reviewed competitive grants program. Many
    high quality proposals are expected to be submitted. All proposals will
    be reviewed competitively for quality, merit, and relevance. A proposal
    on corn genome mapping will compete under the same procedures through
    the peer review process.
        Question. Are there funding limits (ceilings) on research projects
    funded by the Fund for Rural America? If so, what are they?
        Answer. The Fund for Rural America includes several funding limits.
    The limit on planning grants for up to six months is $25,000. Standard
    grants can be funded at up to $600,000 for the life of a project;
    projects can extend for up to four years but cannot exceed the $600,000
    cap on total funding regardless of length of time. Center projects can
    be funded at up to $1.0 million per year for up to four years. This
    puts the cap on total funding for a four-year center grant at up to
    $4.0 million.
        Question. What efforts are currently underway at the Department to
    fundgenome mapping projects?
        Answer. The major effort currently underway in the Department to
    fund genome mapping projects is the Plant Genome Program supported
    through the Cooperative State Research, Education, and Extension
    Services's--CSREES--National Research Initiative Competitive Grants
    Program--NRICGP--along with database development supported by the
    Agricultural Research Service--ARS. Other sources of fundinginclude
    Special Research Grants, Hatch Act formula funds, and the NRICGP Animal
    Genetics Program under CSREES.
        Question. Does the fiscal year 1998 request include funding for
    NCGI?
        Answer. The fiscal year 1998 request does not include specific
    funding for NCGI. However, a portion of the increases requested for the
    CSREES NRICGP will be directed towards the priority area of plant
    genetic enhancement.
        Question. If not, is the Department taking steps towards developing
    a long-term approach for funding this project?
        Answer. ARS and CSREES are in the process of establishing an
    interagency corn genome mapping team to lay the groundwork for fiscal
    year 1999 and to develop strategies for corn genome mapping work.
                                     ______

                    Question Submitted by Senator McConnell
                                wic sugar limit
        It strikes me, Mr. Secretary, that an upward revision of the sugar
    cap on WIC cereals might set a precedent that could effect a wide
    variety of government actions and programs. The purpose of the WIC
    program has from the beginning been clearly and narrowly defined. It is
    to provide a defined service--a nutrient dense diet--to a defined
    group--women, infants and children who without a special supplementary
    diet would be poorly nourished and would inevitably suffer the serious
    physical and mental consequences of under nourishment.
        This is a program which meets its goal in a most impressive way and
    it is clearly not a program that should be tinkered with.
        Question. Would you agree with this observation? And if you would,
    would you also agree a lowering of WIC's very high standards for foods
    in the program would establish an unfortunate precedent that could be
    applied to dilute the original purpose of other precisely targeted
    programs?
        Answer. Yes. I would agree with your observation. WIC foods are
    intended to provide nutrients lacking in the WIC population. Also, WIC
    foods are a nutrition education tool, used to help recipients learn how
    to select nutritional foods. We periodically consider recent research
    findings and advice from leading professional health and nutrition
    authorities to determine whether revisions in Federal program
    guidelines or regulations are needed.
        The March 1996 WIC Cereal Sugar Limit Notice stated that USDA was
    aware that the newer clinical evidence indicated that sugar consumption
    is not believed to be an independent risk factor in the development of
    the chronic diseases of coronary heart disease, noninsulin diabetes,
    obesity and hyperactivity. We used the public forum of a Federal
    Register Notice to solicit feedback from the broad sectors of the
    community on whether continuation of a Federal restriction on the
    amount of sugar allowed in adult WIC cereal is still warranted. Among
    the many comments we received were suggestions that neither sugar nor
    any other attribute of WIC foods should be viewed in isolation, but
    rather they should be reviewed in the context of all of the WIC foods
    and their use in achieving WIC goals.
        In follow-up, the Department will publish a notice in the Federal
    Register to summarize the public comments USDA received on the March
    1996 Notice and to announce the Department's decision to examine WIC
    foods for consistency with the 1995 Dietary Guidelines for Americans
    and supporting scientific knowledge. USDA's Food and Consumer Service,
    in conjunction with the Center for Nutrition Policy and Promotion, will
    be conducting a scientific review of the WIC foods. Until this review
    is completed, the Department will not be making any changes in the
    current Federal sugar cap for WIC cereals.
                                     ______

                      Questions Submitted by Senator Burns
                                bison management
        Question. Mr. Secretary, I have always had great respect for the
    Animal Plant Health Inspection Service and the work that they have done
    to provide a healthy standards for American agriculture. I have never
    had a problem working with the restrictions that they have imposed in
    order to re-enter this country after visiting foreign countries. Today
    though this faith is waning. Can you explain to me the value of the
    guarantees that APHIS has provided the State of Montana?
        Answer. One of APHIS' top priorities is to ensure the integrity of
    the Cooperative State-Federal Brucellosis Eradication Program and to
    protect the brucellosis-free status of the States surrounding
    Yellowstone National Park. These goals are critical to our efforts to
    encourage and support the domestic and international trade of beef
    cattle.
        APHIS, along with the National Park Service (NPS), proposed a plan
    to stop bison from migrating outside of Yellowstone. This proposal
    suggests expanding the bison range into the adjacent Gallatin National
    Forest. The NPS will deploy 24-hour patrols to keep bison migrating
    from Yellowstone to a minimum and contain those animals that stray to a
    section of the Gallatin National Forest.
        Question. I ask this Mr. Secretary, because in the past States have
    either placed or threatened to place restrictions on the shipment of
    Montana beef cattle into their States. Yet APHIS continued to guarantee
    the brucellosis free status of Montana. Can you explain the value of
    your determination to continue the brucellosis free status for Montana?
        Answer. Maintaining Montana brucellosis free enables Montana
    ranchers, as well as other border States, to continue shipping cattle
    into other markets. The threat of the spread of brucellosis can cause
    havoc to the state's livestock economy.
        Question. In more than a dozen years of discussion among all the
    parties involved, and more recently the discussions between your office
    and Secretary Babbitt. Would you provide me with a breakdown on the
    movement that has occurred, if any?
        Answer. APHIS, in cooperation with the Department of Interior's
    (DOI) NPS and the State of Montana, has recently agreed to an interim
    management plan in Yellowstone. The plan includes provisions for the
    capture, testing, slaughter, and removal of diseased bison that migrate
    outside certain areas in or adjacent to the Park. Federal and State
    agencies are also using additional coordinated nonlethal means to
    manage the bison and maintain the viability of the Yellowstone herd.
    Additionally, APHIS is working with DOI and State officials to develop
    long-term solutions that would eliminate brucellosis from the Park's
    herd and manage its population within the confines of available
    rangeland.
        Question. Mr. Secretary, it is my understanding that you have
    finally taken a role in this discussions on this issue. With this in
    mind I would like to know why it took so long for you to come to the
    table on this matter?
        Answer. As you know, this has been a very critical and sensitive
    issue. I have been engaged in the ongoing discussions regarding the
    management of bison at Yellowstone. I would like to take this
    opportunity to reassure you that I am committed to making progress
    towards a long-term solution for bison management that is acceptable to
    all parties involved in this process.
                         appropriate funding mechanisms
        Question. Mr. Secretary can you provide the committee with your
    position on the issue of funding of grants from he federal government?
    Do you in your position believe more in competitive grants or do you
    have faith and a commitment to the formula form of providing funding
    for agriculture research?
        Answer. Federal grant programs provide the most effective mechanism
    for eliciting and supporting meritorious science being conducted by the
    land-grant universities, public and private universities, Federal
    laboratories, and other research institutions and individuals across
    the country. Federal dollars often support highly innovative research
    which requires an investment in time and money to which private
    industry often cannot commit.
        However, Federal formula funding is also necessary to have a
    balanced funding portfolio. Formula funding for the land-grant
    universities continues to provide stable support for core university
    staff, operations, and equipment. Formula funding is also used to
    support on-going research projects which provide the information
    required to respond to critical issues currently faced by the
    agricultural community.
                   federal support for agricultural research
        Question. Mr. Secretary, could you provide me and this committee
    with any and all information you have of organizations outside the
    Federal government that are in a true position to pick up the role of
    USDA in agricultural research? I would like to find out where you
    expect the slack to be picked up and how you can justify the funding
    you have established at this time?
        Answer. The USDA budget for agricultural research in fiscal year
    1998 is $1.8 billion, and represents a continuing strong commitment to
    that activity. Our role is to address research issues that are national
    and regional in scope, and long term and high risk in nature. Within
    the constraints of our budget and in order to ensure that we provide
    the resources necessary to work on those programs and new issues of
    highest priority in the broad national interest, we have proposed
    termination of some projects and activities judged to be less critical
    at this time. USDA has not specifically suggested that the terminated
    research be picked up by other organizations outside the Federal
    government.
        However, other organizations also conduct research relevant to
    agriculture. Land-grant institutions, for example, are well noted for
    their research capabilities. Some industry or other private
    organizations are also involved in agricultural research. However, they
    tend to focus on projects that solve a specific industry problem or
    where there is financial profit. We recognize that both state and
    private institutions, like the Federal government, are experiencing
    financial constraints, which limits their level of research.
        To the extent a particular problem or research activity is truly
    essential to a state, local or private sector group, they need to go
    through the same difficult priority setting process, as USDA has done,
    to decide on how best to allocate their available resources. All
    Federal agencies, universities and private industry need to work
    together in partnership to assure a well-balanced agricultural research
    agenda that collectively serves national, regional, state and local
    agricultural interests.
                    justify redirection of research dollars
        Question. Mr. Secretary, I know you are aware of the many threats,
    including karnal bunt, foreign competition, that face our producers in
    the world market. Can you explain to me how you can justify the
    redirection of research dollars at a time when our yields on crops are
    dropping and when we face the problems of outside pressure on our
    crops.
        Answer. Federal resources are being curtailed government-wide in an
    effort to reduce the deficit and help balance the Federal Budget. The
    Administration and the Congress are examining all programs in order to
    generate savings that will enable a leaner, more responsive Federal
    government that will provide for the most essential services to promote
    the Nation's economy, sustain the environment and improve the lives of
    all Americans.
        The ongoing ARS research programs that have been identified for
    termination have been deemed less critical for ARS to continue in light
    of higher priority research needs and important agricultural problems.
    The savings achieved will be redirected to finance higher priority
    agricultural research initiatives recommended by the Secretary and the
    Administration in accordance with the President's budget.
        Finally, we believe the trend in total factor productivity--a broad
    measure of output per unit of purchased inputs, labor, and capital
    rather than just yields per acre, is more appropriate indicator of the
    return on investments in agricultural research. The trend in factor
    productivity is encouraging. In the period 1948-1993, the productivity
    increased at an annual rate of 1.8 percent.
                              disaster assistance
        Question. Mr. Secretary, I understand that you have the authority
    to establish an emergency committee made up of leaders of the various
    agencies in the States. Mr. Secretary, can you explain why these
    committees don't seem to be functioning in the many States in the west
    that are suffering through very difficult conditions this winter?
        Answer. A USDA State Emergency Board (SEB) is established in each
    State and in the Caribbean Area. The boards constitute the organization
    responsible for carrying out USDA's national security and emergency
    functions. The boards consist of representatives from the following:
    Farm Service Agency, Animal and Plant Health Inspection Service, Food
    and Consumer Service, Forest Service, Food Safety and Inspection
    Service, Natural Resources Conservation Service, National Agricultural
    Statistics Service, and Rural Utilities Service. The SEB's are
    functioning and meet on a regularly scheduled basis and when needed.
    For example, SEB's in Montana, North Dakota, and South Dakota have
    reviewed or will review the Damage Assessment Reports required for
    those States' Secretarial Designation requests.
        Question. I cannot understand how people sitting in Washington can
    look at news reports and think that the only disaster in the mid-west
    this year occurred in North and South Dakota. Mr. Secretary, storms do
    not understand State lines. Can you explain the process for declaring
    feed assistance disaster for the States?
        Answer. Requests for FSA implementation of feed assistance programs
    originate from county committees which are composed of producers and
    ranchers in the local communities. However, the Federal Agriculture
    Improvement and Reform Act of 1996 (the 1996 Act) suspended, through
    the year 2002, several provisions of the Agricultural Act of 1949,
    including all Livestock Feed Programs and the Indian Acute Distress
    Donation Program. With the exception of 210 counties in four States
    that were authorized to provide assistance before the suspension, most
    livestock producers were left without any viable emergency feed
    assistance programs for the 1996 crop year.
        USDA implemented the Disaster Reserve Assistance Program (DRAP) for
    the 1996 crop year only on the basis of an FR Notice published on
    October 29, 1996. Funding for the program was provided by sales of
    disaster reserve stocks. The Disaster Reserve was authorized under the
    1970 Act, Section 813(c). A concurrent resolution of Congress in 1996
    provided authority for the Secretary to use these stocks. DRAP has been
    authorized in 463 counties in 20 States, and has eligibility criteria
    similar to the former LFP; however, DRAP provides a 30 percent cost
    share rather than 50 percent. No authority currently exists beyond the
    1996 crop year for this program. Proposals are being developed to
    utilize the provisions under the Agricultural Act of 1970 to operate
    emergency programs for 1997 and future years; however, funds are
    limited.
        In response to severe winter weather in the Plains, USDA developed
    and delivered the Emergency Feed Grain Donation Program (EFGDP) in
    North and South Dakota, and the Foundation Livestock Relief Program
    (FLRP) was implemented in North and South Dakota, portions of
    Minnesota, and in several contiguous counties in adjacent States.
    Authority for the program was an Interim Rule, effective January 10,
    1997, which amended 7 CFR Section 1439.402(a) to read: ``(a) Assistance
    is for eligible livestock that are commingled, stranded, and
    unidentified as to the livestock owner. . . . Such losses must occur
    during the 1996 crop year because of snow or freezing conditions where
    a emergency declaration has been made by the President and while
    emergency snow conditions exist as determined by DAFP.''
        According to this Interim Rule, the President must have made an
    emergency declaration for a State or county as a condition of
    eligibility for initiating this program. The entire States of South
    Dakota, North Dakota, and certain counties in Minnesota were declared
    disaster areas by President Clinton. The FSA Deputy Administrator for
    Farm Programs (DAFP) determined that all counties in North and South
    Dakota met all eligibility requirements for EFGDP, and that all
    counties in North and South Dakota, counties contiguous to North and
    South Dakota, and counties in Minnesota for which a Presidential
    disaster declaration was made, were eligible for assistance under FLRP.
        As indicated above, although EFGDP benefits were limited to North
    and South Dakota, FLRP benefits were available in North and South
    Dakota, and certain counties in Minnesota, Iowa, Nebraska, Wyoming, and
    Montana.
        Question. In Montana this winter we have seen people feeding in
    October who are not usually scheduled to feed until late spring. We
    have cattle starving because of the conditions of the range. They
    cannot get to the sod and find the forage necessary to continue. Yet it
    took until January for the department to address this situation. Then
    it took another two weeks to get the information into the hands of
    those people who need the help. Could you explain this?
        Answer. As indicated in an answer to another question, the 1996 Act
    suspended all emergency livestock feed programs beginning with the 1996
    crop year through the year 2002. Emergency livestock feed assistance
    was implemented for the 1996 crop year on an ad hoc basis on the basis
    of an FR Notice published on October 29, 1996. Funding for the programs
    was provided by sales of disaster reserve stocks. The Disaster Reserve
    was authorized under the 1970 Act, Section 813(c). A Presidential
    designation in 1996 provided authority for the Secretary to use these
    stocks.
        Although much of the fall grazing acreages in the Northern Plains
    were covered by snow in November, emergency conditions did not ensue
    until severe storms and extended sub-zero temperature conditions
    occurred, beginning in January. At that time, assistance was requested
    from USDA, and Secretary Glickman responded by initiating the EFGDP and
    FLRP programs, effective as early as January 10, 1997.
                              packer concentration
        Question. Mr. Secretary, what are the Department's plans for
    continued investigation into what is happening in regards to packer
    concentration?
        Answer. I established a task force in the Department co-chaired by
    the Assistant Secretary for Marketing and Regulatory Programs and the
    Chief Economist. The Department has already (1) broadened the coverage
    of market reports to include the volume of slaughter cattle contracted
    for sale, (2) expanded reporting of livestock and poultry markets to
    include value-based pricing indicators (ie., premiums and discounts)
    and,(3) sought comments on the petition for rulemaking from the Western
    Organization of Resource Councils (WORC) requesting USDA to restrict
    certain livestock procurement practices. We are also seeking comments
    regarding regulations to address contract poultry grower issues.
                          conservation reserve program
        Question. I would appreciate you explaining to me the process of
    the determination of lands that will be eligible for admittance into
    the Conservation Reserve Program. I would also be very interested in
    the process that was used in the rule making procedure. I am greatly
    concerned that the way the rules were written that you provided no
    opportunity for Congressional review. We have numerous inquiries in our
    offices as to what happened and why it happened in the way it did.
        My question is, how can you justify making almost half of the crop
    land in America eligible for the enrollment in the program, when the
    acreage for inclusion in the program is capped at 36.4 million acres?
        Answer. The focus of CRP involves three major objectives, including
    reducing soil erosion, improving water quality, and enhancing wildlife
    habitat. Our determination to include a larger pool of eligible acreage
    ensures that acreage with the greatest environmental benefits,
    considering all program objectives based on the environmental benefits
    index, will be selected. It was also decided that all land classified
    as Highly Erodible Land should be eligible to be offered for CRP since
    those lands are subject to conservation compliance provisions.
        Also, because no more than 25 percent of the cropland in a county
    can be enrolled in the program at on time, a significant amount of
    otherwise eligible land could not effectively compete for enrollment.
    Once a county has reached the 25 percent limit, enrollment generally
    ceases, even for lands that my be eligible and rank higher based on EBI
    scores than other accepted lands in another county that has not reached
    the 25 percent limit. Thus, of the 230 million to 240 million acres,
    about 55 to 60 percent of the 420 million acres of U.S. cropland in
    1992 (including cultivated and non-cultivated cropland and CRP lands),
    that are eligible based on environmental and cropping history criteria
    only about 100 million acres (less than 25 percent of U.S. cropland)
    could ever really have a chance to be enrolled.
        After the proposed rule was published in September 1996, 3,467
    comments were received which were reviewed by National, State, and
    local FSA employees to categorize by subject. An interagency team
    composed of several USDA agencies, United States Fish and Wildlife
    Service and the Environmental Protection Agency developed issues which
    were reviewed by NRCS and FSA field employees and a final rule was
    published in February 1997. USDA is committed to moving forward with
    the signup and notifying producers as soon as possible.
                      role of the secretary of agriculture
        Question. In my statement, I mentioned the problems my staff faced
    in scheduling a meeting with you. On numerous occasions they called
    your office over a two week period of time. On one occasion they were
    told that you were on travel and that they would get back to us to
    schedule a meeting. Mr. Secretary, we never heard from them. I wonder
    if this is commonplace in the department and if you can assure me that
    this type of action was an oversight or what exactly occurred here.
        Answer. I regret that there was a misunderstanding regarding our
    efforts to schedule a meeting with you and other members of the Montana
    congressional delegation on February 27. Coordinating the schedules of
    one Congressman, two Senators and two Cabinet Secretaries is never an
    easy task, but I am happy that ultimately we were able to arrange a
    meeting to discuss the bison issue. I am sorry that your staff was
    apparently no contacted directly with respect to the scheduling of this
    meeting. However, I am told by our scheduling office that it is easier
    to coordinate delegation-wide meetings when one congressional office
    serves as the principle point of contact for the scheduling of such
    meetings. In most cases, this minimizes confusion and
    misunderstandings. I regret that this was not the case in this
    instance.
        Question. Could you provide me a brief summary of what plans are in
    the coming year to get out in the country and talk about the
    agriculture producers in our country?
        Answer. Throughout my 18 years in the United States Congress and
    during the two years as Secretary of Agriculture, I have traveled to 37
    states visiting both rural and urban communities impacted by USDA
    programs and services. The members of my subcabinet and I are tireless
    advocates for all Americans living in rural communities and
    agricultural producers, especially family farmers. Last year alone 1
    million Americans moved back into rural communities, and rural
    incomes--both on and off the farm--are steadily climbing. I have
    traveled from Indiana where I met with producers to discuss corn and
    row crop issues to the central valley of California where farmers and I
    talked about vegetable harvesting and international trade. I have flown
    around North Carolina to view hurricane damage and flown to Indonesia
    to increase U.S. agricultural markets abroad. Everyday, my subcabinet
    and I work to ensure that the United States is the number one
    agriculture producer in the world.
        At USDA, we are changing the way government does business by
    increasing opportunities for all stakeholders--consumers, producers,
    and industry--to have a voice in policy development. After attending
    countless listening sessions on issues such as concentration, food
    safety, dairy pricing, and civil rights--we have taken decisive action
    to make things better. My plans for the coming year are to take every
    opportunity I get to listen to agricultural producers and rural
    Americans and serve as their advocate at home and abroad.
        Question. What do you see as your role for being the primary
    spokesman for agriculture in America? I would hope that you will be
    more involved than I have witnessed in the past.
        Answer. Most Americans do not realize how much they are touched
    each day by the programs and services of the United States Department
    of Agriculture. As an 18 year Congressman and now as Secretary of
    Agriculture, my job has always been to educate Americans that from the
    food we eat, to the clothes we wear, to the soil we farm and the
    streams we fish, USDA programs affect the quality of life all Americans
    enjoy. USDA programs impact the American landscape from our National
    Forests to the great plains, soil conservation, agriculture research,
    and food and nutrition programs--they are all a part of USDA.
        Although the recent Farm Bill significantly reduced the
    Department's role in production agriculture, there is still much the
    Department is doing to ensure the continued economic prosperity of the
    U.S. agricultural sector. We are working to expand trade opportunities,
    promote a fair and competitive marketplace at home and abroad, and
    improve the safety net for farmers. Also, the research the Department
    conducts helps farmers to be more productive, more environmentally
    conscious, and more profitable, all at the same time. American
    agriculture has seen a lot of change and progress, and the future holds
    even more. As the primary spokesman for agriculture, I want to help
    farmers and ranchers take advantage of the tremendous opportunities
    this new era in agriculture offers.
                          farm service administration
        Question. It is my understanding that the Administration looks to
    reduce the staffing of the field offices in the states. That there is a
    movement afoot to make the employees of the county offices federal
    employees. Could you explain the entire process by which you are
    looking to reduce the Farm Service Administration at the state and
    county level?
        Answer. The fiscal year 1998 President's budget anticipates
    reducing the Farm Service Agency's employment by approximately 2,100
    staff years from fiscal year 1997 estimated levels. This reduction,
    primarily in the field, reflects the reduced workload associated with
    the programmatic impacts of the 1996 Farm Bill and anticipated closing
    of another 500 USDA field service centers by 1999. We are uncertain at
    this time of where the employee reductions and office closures will
    take place because agency and USDA plans have not been finalized. We
    anticipate spending much of fiscal year 1997 analyzing our delivery
    systems for additional opportunities to achieve greater efficiencies in
    the Farm Service Agency and other agencies located in the field. FSA
    and other program delivery agencies face a different future today than
    they did one year ago. The 1996 Farm Bill significantly changed FSA
    workload requirements and further study is needed. To assure that USDA
    provides the best service possible to our customers, any decisions to
    close USDA field offices or reduce an agency presence in a USDA service
    center must be done in coordination with other agencies located at the
    site, including Rural Development and Natural Resources and
    Conservation Service. No additional office closures will take place
    until the situation has been thoroughly studied and USDA plans have
    been shared with Congress and USDA's customers.
        Question. What is the plan to make county directors and staff
    Federal employees?
        Answer. While the Federal Crop Insurance Reform and Department of
    Agriculture Reorganization Act of 1994 provides that Federal and non-
    Federal employees could be used interchangeably in local USDA offices
    in the implementation of programs and activities assigned to the FSA,
    operating a dual employee delivery system at the county level has been
    difficult. Recently, the USDA Civil Rights Action Team (CRAT)
    recommended that the FSA county committee system be modernized by
    converting all county non-Federal employees to Federal status. This
    will require legislation.
        Question. Would you not agree that this will move the focus from
    local control to a more centralized Federal control system?
        Answer. Converting non-Federal county employees to Federal status
    would remove local county committee control from employment decisions
    in FSA county offices. However, this change would not significantly
    lessen or eliminate the county committee program delivery system
    because county committees would retain most of their responsibilities
    for programs and other functions delegated to them by the Secretary of
    Agriculture and the FSA Administrator.
        I support the effort to convert non-Federal county employees to
    Federal status for the following reasons: 1) FSA Federal and non-
    Federal county employees are working side-by-side, and as farm credit
    functions continue to be integrated, are, in many cases, doing the same
    work. 2) having all FSA county employees under one Federal personnel
    system makes it easier for FSA to supervise and deliver programs in the
    field; treat all county employees fairly, consistently, and equitably;
    and extend Career Transition Assistance Program benefits to all county
    employees who are involuntarily separated. 3) as pointed out by the
    CRAT report, converting non-Federal employees to Federal status makes
    all county employees accountable to Federal regulations and minimizes
    the effect of farmer elected county committees on employment decisions.
        Question. Can you describe the process that will be used to reduce
    the state office numbers?
        Answer. No agency or USDA plans for reducing employees or number of
    offices have been finalized. The fiscal year 1998 President's budget
    proposes a reduction of 2,119 staff years, of which 269 are federal
    staff years and 1,850 are non-Federal staff years. These staffing
    reductions reflect the programmatic impact of the 1996 Farm Bill, and
    imply a reduction of about 500 local offices providing service
    delivery. In order for FSA to meet the changing mission of the agency,
    FSA is in the process of preparing strategic plans to address these
    issues and determine program delivery changes which will provide an
    optimum organizational structure to reduce costs and streamline the
    delivery of services. However, no plans have been approved at this
    time. Once plans are finalized, FSA intends to offer buyouts in an
    effort to minimize involuntary separations. However, it is unlikely
    that all reductions can be achieved through buyouts. After we have
    offered a voluntary buyout, then FSA will use RIF's to meet reduction
    targets. Federal RIF procedures (using tenure, veterans' preference,
    performance, and length of service) will be used to determine which
    Federal employees will be RIFed. Internal FSA RIF procedures
    (identifying the employees who are best qualified to perform work) will
    be used to determine which non-Federal employees will be RIFed. If non-
    Federal employees are converted to Federal civil service status, they
    will be subject to Federal RIF procedures after the conversion.
            grain inspection, packers and stockyards administration
        Question. Mr. Secretary, you have been blessed by having a very
    competent person in the leadership position at GIPSA. Can you explain
    to me how it is that you expect these people to address the continuing
    concerns of the agriculture producers in our country, without providing
    them with the funds to do any such investigation and prosecution?
        Answer. An additional $2.8 million is included in the fiscal year
    1998 Budget request for GIPSA to increase their capability to monitor
    and analyze packer market competition, study the implications of
    structural change and behavioral practices in the meat packing
    industry, address poultry compliances issues, and enable the electronic
    submission of industry data. These additional resources will enable an
    increased capability to support legal actions that require complex
    economic and statistical analyses.
                                wic sugar limit
        Question. I wrote to you in June 1996 regarding USDA's Notice of
    Intent to Propose Rulemaking regarding the Special Supplemental
    Nutrition Program for Women, Infants and Children (WIC). USDA proposed
    to review the nutritional regulations limiting the amount of sugar in
    WIC-eligible cereals. In my June letter, I expressed my support of WIC
    and the program's current cap on sugar content, given the importance of
    a healthy and nutritious diet to WIC recipients. I wanted to reiterate
    my support for the current limit on sugar content, and I again request
    any information supporting a review of this issue by USDA.
        Answer. I am pleased to know that you, like many of your colleagues
    in Congress, are a supporter of the WIC Program. We periodically
    consider recent research findings and advice from leading professional
    health and nutrition authorities to determine whether revisions in
    Federal program guidelines or regulations are needed.
        The March 1996 WIC Cereal Sugar Limit Notice stated that USDA was
    aware that the newer clinical evidence indicated that sugar consumption
    is not believed to be an independent risk factor in the development of
    the chronic diseases of coronary heart disease, noninsulin diabetes,
    obesity and hyperactivity. We used the public forum of a Federal
    Register Notice to solicit feedback from the broad sectors of the
    community on whether continuation of a Federal restriction on the
    amount of sugar allowed in adult WIC cereal is still warranted. Among
    the many comments we received were suggestions that neither sugar nor
    any other attribute of WIC foods should be viewed in isolation, but
    rather they should be reviewed in the context of all of the WIC foods
    and their use in achieving WIC goals.
        In follow-up, the Department will publish a notice in the Federal
    Register to summarize the public comments USDA received on the March
    1996 Notice and to announce the Department's decision to examine WIC
    foods for consistency with the 1995 Dietary Guidelines for Americans
    and supporting scientific knowledge. USDA's Food and Consumer Service,
    in conjunction with the Center for Nutrition Policy and Promotion, will
    be conducting a scientific review of the WIC foods. Until this review
    is completed, the Department will not be making any changes in the
    current Federal sugar cap for WIC cereals.
                                     ______

                     Questions Submitted by Senator Bumpers
                               organic standards
        Several years ago, Congress enacted legislation to establish
    federal standard for organic products of which there is a growing
    demand. Organic producers in Arkansas have shared with me their
    continuing frustration with the delays in USDA's promulgation of these
    standards.
        Question. What is the status of this effort and when do you think
    these standards will be in place?
        Answer. I share your frustration and have been assured that these
    are complex standards for a wide range of fruits, vegetables, nuts,
    field crops, livestock, dairy, and poultry. We anticipate that the
    proposed rule for national standards for organic products will be
    published this spring. In addition to standards for production, the
    national organic program will include provisions for labeling of
    organic products; certification of organic farms and processing
    facilities; USDA accreditation of private and State agents who will
    conduct certification; compliance and enforcement measures; user fees;
    and criteria for determining the equivalency of imported organic
    products. When the comment period on the proposed rule has closed, we
    will move as quickly as possible to address concerns that are raised
    and publish a final rule in time for the next crop season.
    Accreditation of private and State agents, and the certification of
    farms and processing facilities, would begin shortly thereafter.
        Question. Can you provide information relating to the economic loss
    to the organic industry due to the failure to implement these
    standards?
        Answer. The organic industry has been growing at a rate of 22
    percent each year for the past six yeas. We estimate that the
    implementation of national organic standards will allow the industry to
    continue to grow at this rate, or higher, for several more years,
    particularly with the introduction of organically produced meats and
    poultry.
                              program terminations
        Question. The FAIR Act of 1996 terminated many programs that had
    long been relied upon by farmers across America. Even before the 96
    Act, congress had taken other action to terminate or vastly modify
    various agricultural programs. The Honey Program comes quickly to mind.
    I know the 96 Act creates a commission to evaluate the direction farm
    policy should take in the 21st Century. But I am wondering what
    evaluations you may have already made about the short and long term
    effects of terminating programs like the Honey Program? Is USDA
    following the effects of the termination of farm programs?
        Answer. USDA continues to establish supply, use, and price
    estimates for a number of crops that remain eligible for production
    flexibility contract payments but were subject to the termination of
    programs such as the Acreage Limitation, Cash Land Diversion, and
    Farmer Owned Reserve Programs.
        In the case of honey, all prior program provisions and payments
    were terminated. No formal evaluation of effects of this program
    termination has been initiated and accounting for honey program supply
    and use at the national level has been discontinued. However, honey
    marketing information continues to be collected. The monthly National
    Honey Market News continues to be published by USDA's Agricultural
    Marketing Service. This publication tracks State-level honey prices and
    weather, disease, and marketing events affecting the industry.
    Additionally, USDA's National Agricultural Statistics Service is
    continuing its survey and reporting of the number of honey producing
    colonies, yield, production, stocks, average price per pound, and value
    of production. These information collection activities do not
    constitute an evaluation of the full effects of the termination of the
    honey program, but they do help us monitor the situation in the honey
    production sector.
        Question. What has been the effect of eliminating the Honey Program
    on the pollination of crops?
        Answer. USDA is not currently examining the effects of the
    elimination of the Honey Program on crop pollination. In May 1994,
    USDA's Economic Research Service published ``The U.S. Beekeeping
    Industry,'' a study directed by Congress. That report included a
    profile of the pollination industry but did not establish any
    particular linkages between pollination services and provisions of the
    Honey Program, so a baseline relationship between the old program and
    the availability of pollination is lacking.
        The marketing loan provision for honey terminated effective with
    the 1994 honey crop, and loans were available only through the 1995
    crop. However, in August 1995 the U.S. entered into an agreement with
    the Government of China limiting Chinese honey exports to the U.S. and
    establishing a price floor for Chinese imports. This agreement is
    generally viewed as a major cause of the increase in domestic honey
    prices from an average of 53.9 cents per pound in 1993 and 52.8 cents
    in 1994 to 68.5 cents in 1995 and 89.4 cents in 1996. Over the same
    period, and in spite of these market-price increases, honey production
    has steadily declined. USDA estimates domestic honey production at
    230.6 million pounds in 1993 and at 198.1 million pounds in 1996. Some
    industry opinion is that price increases since 1993 have only offset
    operating-cost increases that have occurred due to mite and disease
    problems.
        The steady decline in the estimated number of colonies (from 2.876
    million in 1993 to 2.566 million in 1996) suggests an overall decline
    in pollination, and the cause of the decline in colonies appears to be
    mites and diseases and not the reduction/termination of price supports.
    It is widely held in the honey industry that mites and diseases have
    largely eliminated feral bee populations, thereby eliminating
    pollination unless provided by commercially managed colonies. The
    results of these mite and disease problems are lack of pollination or
    deformed fruits and vegetables due to reduced pollination.
        Question. Is research on Honey Bee disease and similar topics
    keeping pace with this problem?
        Answer. Research in honey-bee disease and mite control is not
    keeping pace with the growth of these problems, as evidenced by the
    dramatic decline in the number of colonies (from 3.528 million in 1989
    to 2.566 million in 1996). There is evidence that mites are becoming
    resistant to the one insecticide that has been in use, and effective
    treatments are not yet perfected for the viral, bacterial, and fungal
    diseases that result in colony loss. Further reductions in colony
    numbers are anticipated and reduced commercial pollination services may
    result.
        Question. What other problems do you foresee for the termination or
    substantial modifications of other traditional farm programs?
        Answer. The new Farm Bill has substantially modified many of our
    traditional programs. It is widely assumed that the termination of
    Federal acreage controls on crops previously managed by acreage
    reductions and land diversions will generate more price and income risk
    for producers and possibly more volatile prices for consumers. It has
    been difficult to separate the effects of programs from the effects of
    market factors on price volatility. However, the phase out of programs
    that provided price and income support signals the need for greater
    efforts within remaining programs to protect producers from income
    fluctuations. Thus, the Department is proposing an expansion of the
    revenue insurance programs and is proposing other steps to improve risk
    management programs.
        Another concern is that any decline in income payments as a result
    of a program phaseout may make it more difficult for some commodities
    to compete in international markets that are heavily subsidized. And
    since export markets are crucial to the prosperity of many commodity
    producers, the effect of program changes on our ability to compete in
    these markets is an important concern. On the plus side, the
    modifications which increase producer flexibility to respond to market
    signals should enhance our competitiveness in international markets.
        The Department will be studying the effects of changes made in the
    1996 Farm Bill. Clearly, when programs are terminated or modified,
    substantial adjustments are required by producers and landowners. Our
    experience with program terminations is quite limited. The Honey
    Program was recently terminated as well as the Wool and Mohair Program.
    Both were rather specialized and its not clear yet what lessons can
    eventually be drawn from these cases.
        The wool and mohair support programs authorized under the National
    Wool Act were phased out during the 1994 and 1995 marketing years, and
    the National Wool Act was repealed as of December 31, 1995. Since the
    program ended, USDA has maintained two annual reports--Sheep and Goats
    and Wool and Mohair--which indicate that both industries have continued
    a decline that began long before the program phase-out. USDA also has
    continued holding quarterly interagency meetings to derive supply/use
    estimates and projections for both commodities. However, USDA has not
    conducted a formal study to assess the effects of the termination of
    the program.
        Although support to individual producers has been terminated, the
    Federal Agriculture, Improvement and Reform Act of 1996 authorized up
    to $50 million for a National Sheep Industry Improvement Center. One
    objective is to ``strengthen and enhance production and marketing of
    sheep or goat products in the U.S.'' Rural Development is the lead
    agency for this effort.
                                farm safety net
        Question. I understand you will soon be sending to Congress a
    package of legislative proposals to improve the safety net for farmers
    and ranchers to help ease some of the harsh results of the FAIR Act of
    1996. Included in that package will be a proposal to extend the period
    of time in which commodities may be held under CCC loan.
        I have been hearing from farmers in my state, cotton farmers in
    particular, who are suffering terribly from falling market prices and
    whose CCC loans will be expiring this summer. For example, a cotton
    farmer in southeast Arkansas may have cotton under loan for $0.52 a
    pound. The price on the New York Cotton Board is around $0.73 a pound.
    The farmer may now be able to sell his cotton to a merchant for an
    $0.08 equity giving him a total of $0.60 a pound, far below the New
    York price. If the term of the loan could be extended, many farmers
    would be able to ride out the current marketing cycle. However, I fear
    many farmers in my state will not be able to stay in business long
    enough to wait for a lengthy legislative process to amend the 1996 Act.
        What steps can USDA take immediately to reduce the harm to cotton
    farmers, and to farmers generally, resulting from current market
    conditions?
        Answer. Virtually no policy initiatives have been left to USDA
    under the Federal Agriculture Improvement and Reform Act of 1996 (the
    1996 Act) which could be used to strengthen prices. This is the primary
    reason that we have submitted our legislative proposal which would
    grant authority for 6-month loan extensions under certain market
    conditions. The tenor of the 1996 Act is that farmers will look more to
    the marketplace for their income and essentially requires that farmers
    learn new marketing techniques. At this point, we can only suggest that
    farmers try to hedge their crops on New York. Instead of selling loan
    equities to merchants, farmers do have the option of selling on New
    York, themselves, and receiving more than the merchants are offering.
        Question. Is there anything USDA can do in this respect short of
    legislation?
        Answer. The 1996 Act eliminated the authority for loan extensions,
    and we cannot use other legislation such as the Commodity Credit
    Corporation Charter Act as authority to do so. New authority must be
    enacted by Congress.
                             county office closures
        Question. I appreciate your statement of recent days that county
    offices will not be closed without close examination of continuing
    demands for service delivery. Can you provide an idea of the type of
    criteria and timetables you will use in implementing further downsizing
    and office closures?
        Answer. The fiscal year 1998 President's budget anticipates
    reducing the FSA's employment by approximately 2,100 staff years from
    fiscal year 1997 estimated levels. This reduction, primarily in the
    field, reflects the reduced workload associated with the programmatic
    impacts of the 1996 Farm Bill and the anticipated closing of 500 USDA
    field service centers by the end of 1999 as stated in the 1998 Budget
    proposal. Agency and USDA plans have not yet been finalized and will
    not be until after consultations with Congress on any further office
    closures. We anticipate spending much of fiscal year 1997 analyzing our
    service delivery systems in order to obtain an optimum organizational
    structure while stressing efficient and effective service to our
    customers. This includes contracting for an independent study to
    explore opportunities for further savings in FSA and NRCS.
        Question. If we have no choice but to provide funding levels for
    personnel below the budget request, do you have enough buy-out or
    similar authorities to avoid the disruptive results of simple
    Reductions in Force?
        Answer. The fiscal year 1998 President's Budget request for FSA
    Salaries and Expenses includes $56.2 million in separation costs in
    order to achieve staffing reductions of 2,119 employees in fiscal year
    1998. This amount includes $6.7 million to separate 269 Federal office
    employees and $49.5 million to separate 1,850 non-Federal county office
    employees. These estimates reflect the assumption that reductions-in-
    force will make up 75 percent of all separations since the number of
    employees eligible for buy-out is declining due to the major use of
    buyouts within the FSA over the last several years. If Congress
    appropriates 1998 funds below the budget request, the Agency would be
    forced to conduct an even greater RIF in fiscal year 1998. As stated,
    not all reductions can be achieved through buyouts since the number of
    remaining buyout candidates is insufficient to meet any additional
    staff reduction that reduced funding levels might require.
                     meat and poultry inspection user fees
        The budget again proposes user fees for meat and poultry
    inspection. This time, the proposal goes beyond previous efforts to
    recover the cost of second shift activities and would, instead, cover
    all in plant activities. This would cover roughly 70 percent of all
    FSIS costs and generate approximately $390 million annually.
        User fee proposals have been defeated in the past for a number of
    reasons and, obviously, this is a matter for the authorization
    committee. One of the reasons for these defeats has been a perception
    that having the companies paying for food safety inspection might be
    like the fox guarding the proverbial hen house.
        Question. Is there a strategy whereby the imposition of these fees
    could be perceived as enhancing food safety and, thereby, improving
    consumer confidence?
        Answer. The Administration believes that expanding the authority
    for the collection of user fees is essential to the successful long-
    term implementation of meat, poultry, and egg products inspection
    reforms, including HACCP. The collection of user fees will permit the
    agency to achieve dual goals of ensuring that the demand for on-site
    inspection services are met and the implementation of reforms to
    improve food safety are completed. Ensuring adequate inspection
    coverage and improving inspection processes will give consumers greater
    confidence in the safety of the American food supply. Some have
    indicated that the collection of user fees will compromise our ability
    to fulfill our obligation to ensure the safety of the food supply. This
    is not so. We currently collect fees for overtime holiday, and for
    providing voluntary inspection services to facilities handling
    nontraditional animals, which does not affect the manner in which we
    carry out our inspection responsibility.
                          conservation reserve program
        Question. You recently announced new rules to implement the
    Conservation Reserve Program (CRP) hoping to achieve a total enrollment
    of 36.4 million acres. CRP has been criticized for keeping valuable
    lands out of production and enrolling lands of questionable
    environmental benefit.
        Your final rule, in my opinion, is well suited to meet the
    objectives of CRP that I think are worthwhile and of which I believe
    will silent past criticisms. Still, there are those who might question
    the fact that, technically, millions of acres will be eligible that are
    of marginal environmental value. I understand the use of your
    Environmental Benefits Index should result in the enrollment of only
    the most environmentally sensitive lands.
        Can you explain how you will regard the ``cost'' factor of your
    eligibility criteria to make sure lands of value environmentally will
    be enrolled instead of less advisable lands?
        Answer. The cost factor is one component of the overall
    Environmental Benefit Index (EBI). The EBI is simply the sum of 6
    environmental factors plus cost. The cost factor provides more points
    to offers with lower rental rates. If two bids had the exact same
    scores for environmental benefits, the offer with the lower rental rate
    would receive a higher score and would be ranked above the other offer.
    CRP rental rates are based on soil productivity; thus, the bid with the
    more productive land will rank lower than the less productive acreage.
    The decision on the weights to be used for the cost factor will be
    determined after signup concludes.
        Question. How soon do you think you will have the results of your
    first sign-up under the new rules?
        Answer. Our goal is to notify producers as soon as possible after
    signup concludes. We anticipate the fifteenth CRP signup to be the
    largest in the history of the program. This will present the Department
    many challenges but we are committed to getting the job done in a
    timely manner. All producers will be notified as soon as possible;
    however, due to the volume of offers to be processed, it is likely to
    be late May or early June before producers receive word on the
    acceptance or rejection of their offer.
                             fund for rural america
        Question. The Fair Act of 1996 provides you $100 million annually
    for three years to fund research and rural development activities
    beyond the normal appropriations process. There has been concern that
    unless the Fund was used in a most innovative manner, there would be
    attempts to recapture those savings for shortfalls in other
    discretionary items.
        Do you think the Fund for Rural America will meet the
    ``innovative'' test? Can you explain how your implementation of the
    Fund will do more than simply placing additional funds in select
    appropriations? How will you use the Fund to do what this subcommittee
    can't?
        Answer. As you are aware, I decided to use the Fund to augment the
    single family housing program level which, because of interest rate
    differences decreased from $1 billion to $525 million in fiscal year
    1997. Using the Fund enabled us to increase the program level to $740
    million. We also used the Fund for Water 2000 projects, Rural Business
    Enterprise Grants, and to meet some other critical needs. I am
    convinced the Research component of the Fund will generate innovative
    projects that address both agricultural and rural development problems.
    In addition, I directed that a small part of the Fund be used to
    address some needs related to value-added cooperative development
    efforts. The announcement on the use of this funding will be
    forthcoming.
                           rural development program
        Question. The budget proposal calls for combining several rural
    development programs in order to give additional flexibility to State
    Directors> Previous appropriations bill have given you increasing
    levels of flexibility to mix and match rural development programs, Your
    proposal also calls for $50 million for rural development grants to
    states.
        Can your quantify the result of the flexibility in program delivery
    previously provided by appropriations acts? Even though $25 million of
    the $50 million in grants to states are ``matching'' grants, what
    assurance do you have that the states will spend an additional $25
    million from what they would otherwise spend? Have you examined the
    history of other federal economic development grant programs that were
    delegated to the states? If so, what were the fate of those programs?
    If we provide grants to the states, do you advise allowing the states
    broad use of those funds for any activity?
        Answer. I understand that during 1996 there was 46 instances of
    State Directors transferring budget authority within the water and
    waste disposal loan and grant programs. The vast majority of the
    transfers were from grant to loans, indicating to me that the State
    Directors were exercising good judgement by funding more projects than
    they would have under previous authority. A total of 30 state offices
    transferred budget authority from grants to loans. The monetary effect
    of these transfers was $9 million in grant generated $40 million more
    in loans. Sixteen states transferred budget authority from the loan
    program to grants, thereby reducing available loan funds by $9.3
    million to make $2 million in grant funds available. One State Director
    shifted all of the grant funds to loans.
        I understand the 1996 Farm Bill requires that States not supplant
    normal state expenditures with the funds made available under RCAP. We
    would of course have to monitor that, but there is some assurance the
    funds would be used for additional projects. I agree that the history
    of block grants is checkered. However, the Fair Act requires that the
    States expend the block grant funds for purposes similar to those
    funded by our agencies.
                              municipal annexation
        Question. Section 1926(b) of the Consolidated Farm and Rural
    Development Act imposes prohibitions on the curtailment or limitation
    of services provided through certain USDA programs.
        Please provide your view of what a repeal or substantial
    modification of this section would do to the delivery of services to
    rural areas and additional cost to USDA that might result through
    defaults or by other means. What is the Department's position on any
    changes to this provision?
        Answer. There are several areas of concern when discussing the
    annexation of property served by USDA financed water and waste systems.
    These concerns are:
        1. Many rural systems serve users that are sparsely located and not
    easily served by traditional municipal systems. If part of the system
    is annexed, the remaining system must remain viable, but to do so may
    require increases in user rates that would make the system non-
    affordable to most users. If that occurs the entire system fails.
        2. If all or part of a system is annexed, the USDA borrower must
    receive appropriate value for it because the borrower is still
    obligated to repay the USDA loan. If the system involves grant funds,
    then the value must reflect the value of the grant when originally
    financed. Otherwise the system is obtained at less than true value.
        3. To ensure protection of loan security, USDA must approve any
    lease or sale that pertains to a USDA financed system. In many parts of
    the country the service areas are defined by State or local
    jurisdictions and when the service area is defined prior to development
    of systems, the need to invoke protection under section 1926(b) is
    alleviated. However, other States do not establish legal boundaries. It
    should be noted that section 1926(b) does not prevent the annexation of
    areas into a city. It only prohibits cities from taking USDA financed
    systems and the customer base that is needed to ensure that the debt is
    repaid.
                           falling trade projections
        Last year, you reported that U.S. agricultural exports were
    approaching $60 billion and you anticipated we would exceed that amount
    during the current fiscal year. Earlier this week, you released figures
    showing the estimate for fiscal year 1997 is $55.5 billion and
    projections for fiscal year 1998 are only up to $56.5 billion. These
    figures are well below the $59.8 billion of fiscal year 1996 let alone
    the anticipated $60 billion plus.
        Question. To what can you attribute this decline in export
    activity?
        Answer. The Department first released its $60 billion forecast for
    fiscal year 1996 U.S. agricultural exports in February 1996, after only
    the first quarter of trade data was available. The Department held to
    the $60 billion figure when trade forecasts were reexamined in May and
    August of 1996. When the full fiscal year 1996 trade figures were
    available in November 1996, the figure came in at $59.8 billion--a
    difference of less than one-half of one percent from the forecast which
    the Department had carried for nine months.
        In December 1996, the Department released its second fiscal year
    1997 export forecast placing the value at $55.5 billion. In February
    1997, the fiscal year 1997 export forecast was revised upward $1
    billion to $56.5 billion. This is the Department's current fiscal year
    1997 forecast. There are no official Department trade forecasts for
    fiscal year 1998.
        The decline from $58.9 billion in fiscal year 1996 to an estimated
    $56.5 billion in fiscal year 1997 is mainly due to reduced export
    prospects for U.S. wheat and corn which should more than offset
    expected export gains for U.S. soybeans and products, and high-value
    meat and horticultural products. Both lower prices and lower shipment
    volumes are expected to reduce export value for U.S. wheat and corn.
    With respect to wheat, Argentina and Australia have just harvested
    their largest wheat crops on record, and the European Union has also
    harvested a large crop. Faced with greater competition in global export
    markets, world prices have weakened and U.S. export volume is expected
    lower. With respect to corn, larger crops in some key importing
    countries and increased availability of foreign feed grain supplies,
    including feed-quality wheat, are expected to reduce U.S. corn export
    value and volume.
        Question. What outlook do you have for the years beyond fiscal year
    1998?
        Answer. With respect to long-term trade forecasts, the Department's
    Economic Research Service publishes its ``Agricultural Baseline
    Projections'' twice a year. ERS currently projects U.S. agricultural
    exports to the year 2005, which reflect the U.S. agricultural policies
    set in place by the 1996 Farm Bill as well as other important domestic
    and international factors affecting trade. According to ERS's latest
    projections, published in January 1997, U.S. agricultural exports
    initially decline from the record set in 1996, but then begin a steady
    rise in 1998 to approach $80 billion by 2005.
        From 1998 to 2005, high-value product exports are projected to
    account for about 60 percent of total U.S. agricultural exports led by
    export gains in horticultural and animal products. Bulk commodities
    should continue to account for about 40 percent of the total, which
    implies that export gains for bulk commodities will remain above the
    gains recorded in the late 1980's and early 1990's.
        It is important to understand that such long-term projections are
    based on trend analysis and, therefore, cannot be expected to
    anticipate the inevitable shorter-term, year-to-year variations from
    the estimated trends. The bulk commodity portion of U.S. agricultural
    exports is especially hard to forecast due to the difficulty of
    predicting short-term supply ``shocks''--that is, annual changes in
    U.S. and major foreign producer crop size.
                           public law 480 reductions
        The budget proposal provides a reduction of Public Law 480 Title I
    by $117.2 million in program level. In addition, the budget calls for a
    rescission of $50 million in budget authority in fiscal year 1997. In
    particular, the rice shipments under Title I are projected to drop from
    126,000 metric tons in fiscal year 1997 (without the rescission) to
    17,000 metric tons in fiscal year 1998.
        Question. In view of declining trade figures, why has USDA called
    for further reductions in Title I?
        Answer. The budget proposes reduced funding for Public Law 480
    Title I in fiscal year 1998 because of the constraints on discretionary
    spending we face. In order to meet the President's goal of balancing
    the budget by 2002, we are required to make difficult choices and
    propose lower funding for certain programs.
        Question. Since Title I levels can be transferred to Title II, does
    this action indicate less of a need for Title II?
        Answer. The reduction proposed for the Title I program is not
    directly related to funding requirements for the Title II program.
    However, in developing our Public Law 480 budget proposals, we have
    maintained funding for Title II donations at the current year level
    because of its humanitarian objectives, while proposing a reduced
    program level for Title I.
                               rice trq in the eu
        As part of the GATT Agreement, the U.S. was to achieve duty-free
    access for rice imports equalling 38,000 tons into the EU. To date, no
    U.S. rice has been exported to the EU duty-free. I understand you have
    little if any authority to take action until an agreement within the
    U.S. rice industry has been achieved.
        Question. Can you provide your thoughts regarding ways to resolve
    this issue?
        Answer. As compensation for lost trade resulting from the accession
    of Austria, Finland, and Sweden to the European Union, an agreement
    between the United States and the EU was negotiated under the GATT and
    went into effect on January 1, 1996. As part of this compensation
    package, the EU agreed to open a tariff-rate quota or TRQ of 63,000
    metric tons for semi-milled and wholly milled rice at a zero in-quota
    duty, of which 38,000 metric tons was reserved for the United States.
    The compensation also provided for a TRQ of 20,000 metric tons of
    husked brown rice to enter at an 88 ECU/MT in-quota duty, of which
    8,000 metric tons was reserved for the United States.
        In July 1996, the EU passed a regulation implementing the TRQs for
    rice, but this did not include a system to allocate the U.S. portion of
    the TRQs. The Commission was waiting for the U.S. industry allocation
    system to be finalized before implementing the TRQs for the United
    States. In order to implement a system for allocating the U.S. share of
    the TRQs, several U.S. industry groups have applied to the U.S.
    Department of Commerce for an Export Trade Certificate of Review.
    However, largely because of the lack of agreement within the U.S.
    industry, the EU has not yet opened the TRQs for either 1996 or 1997.
        There seem to be only three possible ways in which this issue could
    be resolved. Ideally, if the U.S. industry could come to agreement on a
    way to allocate the quota, the U.S. industry could benefit from the
    quota rents which are worth about $30 million a year. Alternatively, if
    the U.S. government were given the ability to allocate quotas, the
    benefits would still remain on the U.S. side. If neither of these
    options is feasible, however, it will be necessary to allow the EU to
    allocate the quotas; this would deprive the United States of the quota
    rents, but would at least preserve the market access of the TRQ's.
        Question. What do you see as being at stake for the U.S. rice
    industry long-term?
        Answer. The stakes are substantial. As a result of the three new
    countries acceding to the EU, the United States lost a considerable
    amount of rice trade. U.S. exports of milled rice to those countries
    fell from an average $17.1 million in 1992-94 to an average $3.8
    million in 1995-96; exports of brown rice to the three countries fell
    from $1.1 million in 1992-94 to $23,570 in 1995-96.
        Question. In what way might this dispute spill over into other
    trade issues such as trade barriers such as with Chile or China?
        Answer. The way in which this issue is resolved could have an
    impact on how we negotiate quotas with other countries in the future,
    i.e., whether we try to achieve--either for the U.S. industry or for
    the U.S. government--the quota rents inherent in any TRQ.
                                     ______

                       Question Submitted by Senator Kohl
                           state trading enterprises
        Mr. Secretary, on the issue of international trade, we have had
    several discussions about our mutual concerns about the activities of
    the monopoly state trading enterprises, such as the New Zealand Dairy
    Board and the Canadian Wheat Board, and some of the unfair trade
    advantages that those groups have in the world market. And I appreciate
    your efforts to make this matter a priority in international
    negotiations, such as the recent WTO Ministerial Meeting in Singapore.
        Question. Given the growing importance on this matter, and the
    potential negative effects of STEs on the international trade potential
    of so many commodities of importance to the United States, would you be
    willing to establish a special STE Advisory Group? We have such a low
    threshold of knowledge on this issue, and there is so much at stake, I
    believe a more concentrated effort could be useful.
        Answer. The import and export activities of STEs, along with other
    issues such as tariff reductions, definitions of subsidy policies, and
    further cuts in subsidy levels, continue to be priority issues for the
    Department as we assess compliance with Uruguay Round commitments and
    our goals and objectives for continuation of the reform process in
    agricultural trade. Regarding any WTO-inconsistent policies of STEs, we
    welcome industry input, including through our Agricultural Technical
    Advisory Committee and Agricultural Policy Advisory Committee system.
    Such input would supplement the considerable amount of analysis of STEs
    which has already been done by the Department and the General
    Accounting Office.
        Additionally, as we prepare for the continuation of agricultural
    negotiations in the year 2000, we would welcome industry input on
    negotiating objectives with respect to STEs. We do not believe that a
    special advisory group is required at this time, as appropriate
    mechanisms already exist, but welcome hearing your concerns.
                                     ______

                      Questions Submitted by Senator Byrd
                                   water 2000
        Question. What progress did the U.S. Department of Agriculture
    (USDA) achieve on meeting the goals of Water 2000 in West Virginia in
    fiscal year 1996?
        Answer. In fiscal year 1996 the USDA achieved significant, steady
    progress in the state of West Virginia toward the safe drinking water
    service targeting goals of Water 2000.
        In total, the department invested $23.3 million in Water and
    Wastewater loans and grants ($13.1 million in loans, $10.2 million in
    grants) in water and wastewater projects in West Virginia. This
    investment funded a total of 22 drinking water projects, and three
    wastewater projects.
        Of the 22 water projects, 14 were deeply targeted Water 2000
    investments to the projects of lower income communities with
    significant numbers of unserved or under served residents.
        Finally, of the 54 projects funded by the department in mid-July of
    1996 as part of its Water 2000 nationwide roll-out, four were in West
    Virginia (Page-Kincaid Service District, Downs Public Service District,
    Leadsville, and Red Sulphur Public Service District). Of a total of
    $58.7 million in loans and grants invested in the roll-out, $2.25
    million went to West Virginia.
        These numbers show that despite a 25 percent overall reduction in
    funds for fiscal year 1996, the department made measurable progress on
    Water 2000 in West Virginia, the state with the fifth greatest need in
    the nation for targeted safe drinking water investments.
        Question. What progress does the agency expect to make in fiscal
    year 1997?
        Answer. For fiscal year 1997, a 35 percent increase in the loan and
    grant program level means that the department will fund substantially
    more targeted drinking water projects in West Virginia than in fiscal
    year 1996.
        Our staff in West Virginia are working closely with the State
    Infrastructure Fund to leverage their loan and grant dollars. Such co-
    funded proposals compete very well for national USDA discretionary
    funds.
        Question. What progress does the agency expect to make toward the
    goals of Water 2000 with respect to the President's budget?
        Answer. Within the President's request for loans and grants, the
    USDA will continue to make significant, steady progress toward the
    goals of Water 2000. Nationwide in fiscal year 1995 and fiscal year
    1996, combined, the USDA invested $351,960,836 in deeply targeted loans
    and $195,306,345 in deeply targeted grants, for a total of
    $547,267,181, in 535 Water 2000 projects. This investment, however,
    still leaves a gap of over $2.8 billion to reach the at least $3.4
    billion needed (according to the USDA's 1995 Water 2000 Needs
    Assessment) to correct the nation's most serious rural safe drinking
    water problems.
        Question. Are there any barriers that the agency can identify that
    are preventing West Virginia agencies from receiving USDA
    telecommunications grants and loans?
        Answer. There are no barriers in West Virginia that we are aware We
    have received very few applications from West Virginia over the past
    four years of the program.
                                 fsa downsizing
        Question. How will the expected Farm Service Agency downsizing
    impact West Virginia?
        Answer. I cannot provide any details on that because no specific
    agency or USDA plans for reducing employees or numbers of offices, by
    State, have yet been finalized. Any decisions to close USDA field
    offices must be done in coordination with other agencies, including
    Rural Development and Natural Resources Conservation Service, and
    approved by me, after full consultation with Congress.
                             flood control planning
        Question. In 1996, the President made five national disaster
    declarations for West Virginia as a result of severe flooding. The
    affected communities critically need leadership in developing flood
    control plans. Please provide recommendations on how the USDA might
    assist West Virginia.
        Answer. In response to Congressional appropriations language, the
    Natural Resources Conservation Service (NRCS) is providing $300,000
    from the PL-534 program under Watershed Protection and Flood Prevention
    to develop community-based comprehensive resource management plans for
    communities devastated by the 1996 flood events. The funds are being
    used to secure Agricultural/Engineering consulting firms to develop a
    North Fork South Branch Potomac River Watershed Plan. The consultant
    will work under the direction of the NRCS Community Based Assistance
    planner and will provide direct assistance to the North Fork Watershed
    Committee.
        Also, NRCS is working with other Federal agencies in West Virginia
    and other states where there has been a declared national disaster to
    implement guidance issued on February 18, 1997, by the Office of
    Management and Budget and the Council on Environmental Quality. This
    guidance establishes a goal that Federal agencies ``...achieve a rapid
    and effective response to damaged flood and floodplain management
    systems that will minimize risk to life and property, while ensuring a
    cost-effective approach to flood damage mitigation and floodplain
    management and the protection of important environmental and natural
    resource values that are inherent to the floodplain and adjacent
    lands.''
        This guidance includes the following procedure:
        1. Setup or use existing repair coordination team to review all
    needs and proposals
        2. Include representative from applicable state and federal
    agencies
        3. Make recommendations as to the appropriate program and measure
    to use in addressing the damages
        4. Encourage local community involvement
        5. Develop a flood response plan.
        The local NRCS staff and the other agriculture agencies work
    together after each storm event or other natural disaster to identify
    the damaged areas and develop damage survey reports (DSRs). DSRs
    include the work needed and the estimated cost. Total costs are then
    included in a request for supplemental appropriations for the Emergency
    Watershed Protection Program (EWP).
                                  aquaculture
        Question. While the National Center for Cool and Cold Water
    Aquaculture is under construction, what actions will the USDA take to
    expand cool and cold water aquaculture opportunities in the state?
        Answer. The National Center for Cool and Cold Water Aquaculture
    (NCCCWA) could be operational as early as the year 2000. While the
    Center is under construction, USDA will take the following actions to
    expand cool and coldwater aquaculture opportunities in West Virginia:
        1. The Agricultural Research Service (ARS) will continue to work
    closely with the Freshwater Institute in Shepherdstown in implementing
    a comprehensive research program in ``Development of Aquacultural
    Systems for Appalachia'', administered by ARS. The goal of this program
    is to promote the expansion and diversification of the cold water
    aquaculture industry through the development of high volume, under-
    utilized water resources common to Appalachia. With guidance from ARS,
    the Freshwater Institute is presently developing a new 5-year proposal
    to design and install a scaled-up intensive production facility for
    trout and other salmonids, employing state-of-the-art technology for
    water reuse, that will be evaluated for commercial use.
        2. ARS will continue to conduct an aquaculture research program at
    its Appalachian Fruit Research Laboratory in Kearneysville. The focus
    of this program is to determine the feasibility of using fish wastes
    from intensive aquaculture production systems as a nutrient source for
    fruits produced hydroponically in greenhouses. This is a promising
    approach to managing aquaculture wastes, maintaining water quality, and
    diversifying agriculture in West Virginia and Appalachia. ARS is
    conducting this program in cooperation with the Freshwater Institute
    and the Leetown, WV Science Center of the U.S. Department of the
    Interior.
        3. ARS has reached an agreement with the Leetown Science Center
    (LSC) to contract for the services of a highly qualified LSC fisheries
    scientist, with considerable aquaculture experience, to serve as an on-
    site liaison for the design phase of the NCCCWA. This individual will
    assist ARS in ensuring that the facility design complements the
    facilities and resources of the LSC and optimizes the opportunities for
    conducting research and delivering results that best serve the needs of
    the U.S. in general and West Virginia in particular.
        4. ARS will work closely with the University of West Virginia and
    appropriate state agencies to identify and develop opportunities for
    collaboration in aquaculture research and delivery of research results.
        5. ARS is developing a technical resource group, consisting of
    aquaculture scientists, representatives of the cool and coldwater
    aquaculture industry, and key individuals in West Virginia. This group
    will work closely with ARS to help define a comprehensive research
    program for the NCCCWA that will best serve the interests of the U.S.
    aquaculture industry and the state of West Virginia and that will
    effectively complement related programs within and outside West
    Virginia.
                                     ______

                      Questions Submitted by Senator Leahy
                            national cheese exchange
        I think everyone would agree that dairy farmers, regardless of the
    region, deserve a fair, accurate, and representative price for milk. I
    am deeply concerned that the cheese exchange fails to meet those
    important criteria. Strong evidence shows that the cheese exchange may
    have been manipulated by large corporate traders to the detriment of
    farmers across the country. As you know, Senator Jeffords and I
    recently sent you a letter explaining our view of the cheese exchange
    and its role in determining the Basic Formula Price. I think an
    alternative pricing mechanism which deserves strong consideration is a
    national electronic survey, operated by the Department.
        Question. I would like to know whether you think a national
    electronic survey of dairy prices could provide a more accurate
    estimate than the current system of using the cheese exchange?
        Answer. In response to concerns about the accuracy of cheese prices
    reported by the National Cheese Exchange, I have directed the National
    Agricultural Statistics Service to develop a weekly cheddar cheese
    price survey. With the support of the industry, this weekly survey will
    provide a timely reliable national cheese price. Plans include the
    combination of reporting through electronic mail, facsimile, and
    telephone to expedite data collection.
        On January 29, 1997, the Department announced it was taking steps
    to address concerns raised about how milk prices are calculated and is
    seeking comments on whether there exists a superior alternative to NCE
    prices for administering Federal milk marketing orders. If improved
    price setting arrangements are identified, the Department will not wait
    for the Milk Marketing Order reform deadline of April 1999 to implement
    them.
        Question. Do you believe such a survey would require additional
    funding?
        Answer. Although conducting the weekly price survey of cheddar
    cheese prices is a new activity for the National Agricultural
    Statistics Service, they will perform this activity within available
    funds.
                          conservation reserve program
        Question. I appreciate the efforts the Department has made in
    carrying out our intent to refocus the Conservation Reserve Program to
    enroll the most environmentally-sensitive lands as contracts begin to
    expire later this year. As part of this effort, I understand you are
    going to enroll cropped wetlands and adjacent upland buffers, as well
    as upland buffers around non-cropped wetlands in the CRP. Departmental
    guidance indicates that these adjacent upland buffers may be up to six
    times the size of the wetlands around which they are established. Has
    the Department developed technical criteria for establishing these
    buffers to ensure that only the lands needed to buffer the wetland from
    adjacent land use are enrolled and to establish manageable contracts?
        Answer. Guidance has been issued by the Natural Resources
    Conservation Service to its field units to ensure that buffer areas are
    limited to that which is needed (copy attached). Additionally, NRCS is
    undertaking a coordinated oversight effort to determine the extent to
    which the buffer area decisions and other technical CRP decisions being
    made in the field are consistent with national guidance and to
    determine where it may be necessary to issue additional instructions.
        Question. What efforts are you making to ensure that accepting
    wetlands and associated buffers into the CRP will not result in direct
    competition with enrollment in the Wetlands Reserve Program,
    potentially driving up the cost of both programs?
        Answer. The Department does not believe there is a competition
    problem. The purpose of expanding CRP land eligibility to include
    cropped wetlands and their adjacent lands is to restore and protect
    wetland functions and values to achieve substantial wildlife habitat,
    water quality, erosion control, and flood control benefits without
    competing with existing programs like WRP. The maximum enrollment level
    under each program and the duration and extent of conservation
    protection are notably different which could result in each program
    having a separate landowner constituency. If there is a cost increase,
    it may be in the form of higher WRP per acre easement payment costs as
    the WRP program begins to enroll a higher percentage of PC's in lieu of
    cropped wetlands. Generally, the PC's would be expected to have a
    somewhat higher land value than would the cropped wetlands.
                            wetlands reserve program
        Question. We restructured the Wetlands Reserve Program in the 1996
    Farm Bill such that the Department would enroll, to the extent
    practicable, one-third of the acres in permanent easements, one-third
    of the acres in temporary easements, one-third in voluntary cooperative
    agreements. Have you experienced interest among landowners in all three
    enrollment types to meet the 1/3-1/3-1/3 enrollment goals?
        Answer. Under the 1997 continuous sign-up, we have received
    applications for all three of the program components. Landowners have
    thus far offered approximately 144,000 acres for permanent easements,
    96,000 acres for 30-year easements, and 13,000 acres for restoration
    cost-share agreements. We anticipate that landowner offers will
    continue throughout the year in the same relative proportion that has
    occurred during the first five months of the year. By the end of
    September, total offers will likely be at least double that which has
    already been received. This extensive backlog list of ranked offers
    will serve as the basis for the initial allocation under the 1998
    program.
        Question. Is splitting the enrollment equally among these three
    options practicable? If not, do you have an alternative ratio that
    would be more reasonable to achieve?
        Answer. The 1/3-1/3-1/3 split is not the best manner in which the
    program could be implemented. Based on the landowner response to date
    it is apparent that permanent easements are the most popular and are
    being severely underfunded. The 30-year easements, while less popular
    than the permanent easements, still have enough landowner interest to
    make it practicable for the Department to reach the goal established in
    the 1996 Act. The restoration cost-share agreements appear to be far
    less popular than will be needed for the Department to be able to reach
    the goal established in the 1996 Act. This may become even more
    problematic once the CRP cropped wetlands enrollment begins to take
    full effect. For the Department to be able to enroll the most cost
    efficient and most ecologically sound wetland restoration projects in
    response to landowner offers, a ratio of 45 percent permanent, 40
    percent 30-year, and 15 percent restoration cost share agreement would
    be more practicable. We do continue to support having all three options
    as components of the WRP.
                             mitigation exemptions
        Question. An underlying theme of the Wetland Conservation
    provisions in the 1996 Farm Bill was increasing mitigation flexibility
    options to the producer, while maintaining existing wetland functions
    and values on the landscape. How is USDA implementing these provisions
    to ensure wetlands functions and values are in fact being maintained?
        Answer. In order to successfully implement the wetland mitigation
    exemption provision of the 1996 Farm Bill, it is necessary to conduct
    functional assessments of the wetlands to determine the impact of the
    conversion activities in order to replace the functions that are lost.
    Interagency (NRCS, USACE, FWS, EPA) workshops are scheduled this spring
    to provide guidance to the states on developing an Interim Wetland
    Functional Assessment Method based on the philosophy of the
    Hydrogeomorphic Approach to the Functional Assessment of Wetlands (HGM
    approach). The objective of the workshops is to train partners in the
    development of a functional assessment method that has the potential to
    be used by all agencies involved in wetland programs. Thus, providing a
    science-based process for making mitigation decisions which is
    developed and supported by these agencies.
        When a wetland mitigation exemption is granted by NRCS, the
    landowner is required to place an easement on the mitigation site. NRCS
    documents the information regarding the functions and values lost on
    the converted site and the functions and values replaced on the
    mitigation site, based upon the output from a functional assessment
    evaluation. It is the responsibility of NRCS to ensure that the
    proposed mitigation plan is viable. NRCS will conduct follow-up
    inspections of the mitigation sites until all practices are
    successfully established, including successful establishment of
    vegetation and restoration of hydrological features as planned.
                          conservation reserve program
        Question. As you know, I and many other Northeastern Senators
    played an important role in making sure CRP was reauthorized. That
    represents a huge federal financial contribution. Obviously, one reason
    we could do so was our belief that CRP could help address water quality
    and other environmental problems in our regions. In the last generation
    of CRP, the region from Virginia north enrolled only 300,000 acres. In
    Vermont, only 193 acres were enrolled. Most experts believe that a
    critical reason was the rate structure. CRP pays prevailing
    agricultural rental rates. And, in much of the Northeast, even the
    speculative possibility of development has a strong influence on fair
    market value. Second, in much of our region, the rental market is
    influenced by residential landowners who rent farmland out at cheap
    rates, essentially to make sure the land is cared for. And it seems to
    me that CRP is not paying fair market value. The proof is that we have
    extremely limited enrollments in my region.
        The market is showing us the rates as they are now set are not at
    fair market value, or farmers would be enrolling their land. So my
    question is--what is the Department going to do about this?
        Answer. Rental rates have been developed to reflect the dryland
    agricultural market value cash rents, or cash equivalent of a share
    rent, for each cropped soil in each county through two general steps.
    In the first step, NRCS and FSA national offices developed a soil
    productivity index for each unique soil type based on existing soil
    characteristics data from soil surveys. In the second step, these draft
    soil rental rates were distributed to each State and County FSA and
    NRCS office, who worked with other agencies to review and analyze, and
    if necessary, adjust the rates to ensure that they reflected prevailing
    market rents.
        The State and county FSA committee in Vermont, along with other
    local representatives with knowledge of agricultural rental rates,
    developed dryland cash rental rates, adjusted for soil productivity,
    for each soil. The State and county FSA committees, with NRCS
    concurrence, determined that the rates needed no further adjustments.
    The CRP rental rate accurately reflects the local prevailing
    agricultural rental rates in their State.
        Along with the use of an environmental benefits index, adoption of
    the new soil-specific market-based maximum acceptable rental rates has
    had a positive effect on CRP enrollment in the northeastern U.S.
    (including Virginia). As a proportion of total CRP enrollment, the
    northeast's share nearly doubled from about 0.7 percent of the 33.9
    million acres that were enrolled before 1990; to about 1.3 percent of
    the 3.1 million acres that were enrolled after 1990.
        Question. The Department clearly has authority to be creative on
    this issue, the Food Security Act (paragraph 1234(c)(1), states: ``In
    determining the amount of annual rental payments to be paid to owners
    and operators for . . . (CRP), the Secretary may consider, among other
    things, the amount necessary to encourage owners or operators . . . to
    participate in the program . . .''
        In other words, you may consider what rates will actually encourage
    enrollments. Further, section 1231(f)(4) states, that in conservation
    priority watersheds: the Secretary shall attempt to maximize water
    quality and habitat benefits . . . by promoting significant level of
    enrollment . . . by whatever means the Secretary determines appropriate
    and consistent with no additional measures are necessary to promote a
    ``significant level of enrollment.'' But in the Northeastern priority
    areas, such as Lake Champlain, additional incentives would seem to be
    necessary to promote ``significant level of enrollment.''
        What type of incentives could the Department use to address this
    concern and have you done it in other areas of the country?
        Answer. CCC currently provides incentives to encourage enrollment
    of certain high priority environmental practices such as filter strips
    and riparian buffer areas. The incentives provide an annual increase of
    10 percent to 20 percent over the site specific soil rental rate for
    the CRP offer. The incentives are used to encourage the implementation
    of these high priority practices. Any producer in any region of the
    country is eligible to receive an incentive payment if they install
    certain continuous signup practices such as riparian buffer areas.
        Question. My region has a number of water bodies of high public
    concern that are threatened by pollution. Obvious examples include Lake
    Champlain, Long Island Sound, and the Chesapeake Bay. In many of these
    areas, farmers, environmentalists and State officials have come
    together to develop a comprehensive plan to improve water quality, but
    they sorely need financial support. I have heard about new use of the
    CRP provision that allows you to approve State-submitted Conservation
    Reserve Enhancement Programs which would allow States to submit
    comprehensive plans to tailor CRP to local needs with an additional
    contribution of State funds. This seems to demonstrate an important way
    to show the public that CRP can make a real difference for dealing with
    pollution problems and that incentive-based approaches can solve a
    specific problem. I know that several states are awaiting the
    Department's reaction to plans submitted by Maryland and Illinois.
        What is the Department's attitude toward them? Do you have a
    schedule for approving these plans?
        Answer. The Department supports the development of partnerships
    with States to address critical resource needs of State and National
    importance using applicable and appropriate provisions of CRP. State
    Government, working with CCC, is requested to develop a comprehensive
    plan that outlines: (1) the resource issues to be addressed; (2), the
    expected societal benefits to be achieved by the program; (3), the
    State and local contributions; and (4) the role of CRP to address
    resource issues. Currently, negotiations are under way between USDA and
    State agencies in both Maryland and Minnesota to develop and finalize
    Conservation Reserve Enhancement Programs.
        Question. Have you set a date when other States would be invited to
    submit proposals?
        Answer. States may submit requests for a State Enhancement Program
    at any time. The final rule published in the Federal Register included
    language regarding the availability of the Conservation Reserve
    Enhancement Program, and training has been provided to all FSA and NRCS
    State personnel.
        A number of Senators have raised concerns over the Department's
    decision to expand the amount of eligible land for enrollment in CRP as
    the bulk of existing CRP contracts expire. I have long been a champion
    of the Program and believe that under the new rule the Agriculture
    Department will have the opportunity to move this Program forward to
    maximize environmental benefits and to help American farmers conserve
    the resources of their land. How the Department applies the
    Environmental Benefits Index (EBI) to select land for enrollment will
    be critical to ensuring that CRP funds are used most appropriately. I
    am concerned about several factors in the EBI and how they will be used
    in the 15th sign-up.
        First, I am concerned about the cost factor in the EBI. Land with
    very high environmental benefits but relatively high cost should not be
    disadvantaged by the index. At the same time, it is very important that
    within a state or region, the cost factor in EBI be used to maximize
    competition to ensure the most cost-effective program possible.
        Question. Will the cost factor be used primarily to encourage
    competition within regions? Or will it be used to give priority to
    enrollments in low-cost land areas rather than to the most competitive
    bids within a given area?
        Answer. The Environmental Benefit Index (EBI) is the sum of 6
    environmental factors plus cost. The EBI is designed to rank lands for
    enrollment into CRP that will maximize environmental benefits relative
    to cost. In order to effectively achieve that goal, each CRP offer is
    evaluated relative to every other offer in the country. An offer with a
    lower point score on the 6 environmental indices but a lower rental
    rate may not be more competitive than an offer that has a higher score
    on the 6 environmental factors and a high cost per acre. EBI is
    evaluated based on the total score of environmental factors and cost.
        Second, I am concerned that during the 15th sign-up and a possible
    fall sign-up the Department will be flooded with applications from
    expiring contract holders. In this situation, it is possible to enroll
    a great deal of land that has a lower EBI in the next two sign-ups than
    land that may be available for enrollment in future years.
        Question. Will the USDA implement a ``floor'' for an EBI rating
    when it is selecting the land for enrollment in future sign-ups?
        Answer. After signup, CCC will thoroughly review all offers to
    ensure that land accepted into CRP provides significant environmental
    benefits relative to cost. CCC will use actual CRP bid data to evaluate
    the relative environmental benefits for each offer. Bids that do not
    provide significant environmental benefits relative to cost will not be
    enrolled in the program. USDA will announce the minimum EBI value at
    the same time it notifies producers of bid acceptance.
        Third, it appears that any cropland near any water body or within
    any impaired watershed will receive the maximum number of points. The
    concern I have heard expressed is if these points are too easy to
    achieve, the effect could be enrollment of many whole fields even
    though partial field practice enrollment would be adequate to meet
    whatever water quality concerns do exist.
        Question. How will the Department determine how much land should be
    enrolled to meet a specific water quality objective?
        Answer. The EBI is composed of six environmental factors (soil
    erosion, water quality, wildlife habitat, long-term retention beyond
    the contract period, air quality, and conservation priority area).
    Rather than focus on an individual factor, the EBI was constructed to
    maximize the environmental benefits of all factors related to cost.
    Also, any area offered for CRP will likely contribute multiple
    environmental benefits making it difficult to target individual
    factors.
        The determination of how much land to enroll during the 15th signup
    is limited by the authorized program level of 36.4 million acres. It is
    impossible to determine, though, the amount of land that will be
    accepted until after the end of signup when all offers are evaluated.
        Question. Within the water quality scoring system, will maximum
    points be given to rare and native habitat and critical areas?
        Answer. High priority water quality areas can be designated to
    receive an additional 30 points under the water quality factor of the
    EBI if the use of CRP will assist in achieving the desired water
    quality and habitat protection objectives in a cost-effective manner.
    The critical area may contain areas of rare and native habitat which
    may be designated by the State technical committee and approved by the
    State FSA Committee.
        Question. Fourth, will the EBI be applied nationally or regionally?
        Answer. The EBI will be applied nationally. Every offer will be
    compared against every other offer. Each offer will be ranked and
    evaluated and only those offers that provide significant environmental
    benefits relative to cost, will be eligible to enroll in CRP. In order
    to achieve the goal of maximizing environmental benefits relative to
    cost, each offer must be compared to every other offer.
        Question. For instance, if a parcel of land in one region of the
    country ranks high in comparison to parcels in its region, but less
    favorably in comparison to parcels in other regions, how will the
    Department evaluate its EBI rating?
        Answer. The Department will utilize the actual CRP bid data and
    other data sources to evaluate the impacts of the EBI. Utilizing the
    bid data, the Department will evaluate the impacts that EBI could have
    on land selection for enrollment into the program and the environmental
    and program impacts. This data will be available when determining the
    weight for the cost component of the EBI.
        Question. Fifth, in the three categories being considered in the
    EBI (water quality, wildlife habitat and soil erosion) will there be a
    minimum threshold in each category for land to be enrolled? For
    example, if an application ranks very low in soil erosion and water
    quality but very high in wildlife habitat, could it be enrolled in the
    CRP only for its wildlife benefits?
        Answer. There will be no decision on a minimum EBI threshold until
    after the CRP offer data is evaluated. The overall score of all factors
    is used to develop the EBI score. It is this score that is used to rank
    an offer. An offer that ranks low on one factor (water quality) but
    high on the other environmental factors could be enrolled into the
    program. Applicants have opportunities to increase their score by
    planting better wildlife cover or reducing their bid amount.
        To be eligible for enrollment, crop land must have a cropping
    history, be physically and legally capable of being cropped in a normal
    manner and meet one of the following conditions:
      --Have an Erosion Index (EI) of 8 or higher or be considered highly
            erodible land according to the conservation compliance
            provisions; (Redefined fields must have an EI of 8 or higher)
      --Be considered a cropped wetland;
      --Be devoted to any of a number of highly beneficial environmental
            practices, such as filter strips, riparian buffers, grass
            waterways, shelter belts, wellhead protection area, and other
            similar practices;
      --Be subject to scour erosion;
      --Be located in a national or state CRP conservation priority area;
            or
      --Be cropland associated with or surrounding non-cropped wetlands.
        Question. Finally, assuming the Department's goal is to sign-up
    36.4 million acres, will the Department reserve a set amount of acres
    as a ``future land bank'' for acreage to be enrolled under continuous
    sign-up in order to provide the necessary flexibility to conserve land
    with high environmental benefits in the future?
        Answer. The Department will reserve acreage for continuous signup
    and for State Enhancement Programs.
                            conservation farm option
        Question. The new farm bill creates a Conservation Farm Option
    which provides for ten-year contracts with farmers utilizing a
    combination of land retirement, incentive and cost-share payments to
    foster long-term, innovative conservation improvements. This program
    holds great promise for encouraging total resource management planning,
    alternative farming systems and practices, innovative combinations of
    land management improvements and partial field land retirements. It is
    my understanding that the program in its first year of implementation
    will go out as a request for proposals without the need for formal
    rulemaking. What is the current status of the request for proposals?
        Answer. The Conservation Farm Option (CFO) request for proposals
    for fiscal year 1997 is undergoing final review prior to issuance in
    the Federal Register.
        Question. When will it be issued and when will the proposals be
    due?
        Answer. The CFO request for proposals is expected to be published
    in the Federal Register by March 31, 1997 subject to approval by OMB.
    Proposals will be due on or about May 15, 1997.
        Question. Will there be appropriate program information and
    technical assistance for groups and individual farmers who may wish to
    apply for funds?
        Answer. Yes. Appropriate CFO program information will be published
    in the Federal register and technical assistance will be available at
    the field level for groups and individual farmers who wish to apply.
                         green mountain national forest
        Question. In the Fiscal Year 1997 Omnibus Appropriations Act,
    Congress authorized a land exchange between the Green Mountain National
    Forest (GMNF) and Sugarbush Resort Holdings, Inc. and allowed the
    proceeds of that exchange to be retained by GMNF for purchase of other
    lands to be added to the Forest in the future. The land exchange would
    have considerable benefits for the GMNF and the public. The GMNF would
    be able to acquire lands that are more consistent with the goals of the
    management of the GMNF and would provide far greater environmental
    benefits than the parcel GMNF would offer to Sugarbush. In addition,
    Sugarbush would acquire a 57-acre parking lot from the Forest Service
    and be able to provide better skier access and facilities from
    Sugarbush Village. The GMNF staff have done an exemplary job in
    negotiating and preparing this exchange. At this point in time, all the
    details of the exchange have been resolved except one--Departmental
    approval of the exchange. Although the appropriations language was
    drafted and interpreted to allow the exchange, one technical question
    remained involving the establishment of an escrow account. It is my
    understanding that this question is being resolved to the satisfaction
    of the USDA Office of the General Counsel. I appreciate the cooperation
    and hard work on behalf of both agencies to resolve this issue.
    Unfortunately, due to the short construction period in Vermont approval
    of the exchange is needed in the immediate future. I am confident that
    your staff will be able to move this exchange forward with great
    efficiency. When can I expect the Forest Service to indicate to the
    GMNF that the land exchange is approved?
        Answer. The Green Mountain National Forest is moving forward with
    the exchange as directed in the legislation. The Forest Supervisor is
    prepared to issue a decision on the exchange soon and we anticipate the
    first portion of the exchange will be processed by May 1 of this year.
                    electronic benefit transfer--food stamps
        Question. I have favored eliminating the use of paper food stamp
    coupons and switching over to an electronic benefit transfer system for
    some time. It has been estimated that program losses caused by
    diversion of benefits and fraud could be reduced by as much as 80
    percent under a national EBT system. USDA spends millions each year
    just on printing and distributing coupons that are used once. Would you
    support the mandatory elimination of paper food stamp coupons? How is
    the Department supporting the adoption of the EBT system in the fiscal
    year 1998 Budget?
        Answer. The welfare reform legislation enacted last August does, in
    effect, mandate the elimination of coupons insofar as it requires full
    implementation of EBT by the year 2002. Other provisions of that
    legislation serve to promote timely implementation of EBT, including
    the exemption of EBT systems from Regulation E requirements.
        Currently, EBT is operational in 18 States--Statewide in 8 of these
    States---and in various stages of planning and implementation in the
    remaining States.
        The 1998 Budget supports EBT implementation via sharing the cost
    50:50 with the States, under the standard food stamp administrative
    cost share formula. In addition, $4.6 million is earmarked for EBT
    implementation, less than in prior years reflecting a reduced need for
    implementation funding at this stage.
        EBT will eventually supplant the cost of the paper food stamp
    system--the printing, distribution, and redemption activities--these
    costs will all disappear. In their place, the program will incur
    greatly reduced costs for card issuance and electronic redemption.
    Another advantage, as you point out, is that EBT will help detect and
    deter trafficking and some ineligible items purchases. EBT provides an
    audit trail making it possible to identify both stores and recipients
    that are abusing the program, and to do so at a fraction of the cost of
    traditional, labor intensive investigatory activity--which were in many
    cases, prohibitively expensive. In fact, EBT has already helped
    identify existing fraud--and EBT was at first being blamed for causing
    it, rather than getting credit for detecting it. Nonetheless, EBT will
    significantly improve program integrity. Until further advances are
    made, however, trafficking and ineligible items abuses are still
    possible with EBT, they are just harder to do without detection.
                         rural development initiatives
        Question. The 1996 Farm Bill included authorization for a one
    hundred million dollar Fund for Rural America. I strongly supported the
    establishment of the Fund as a much needed resource for the Department
    to support rural development initiatives and research that fall between
    the cracks of existing programs. Too often strict regulatory
    requirements of narrowly targeted Departmental programs disqualify
    innovative projects that could more effectively address the needs of
    rural communities.
        I was therefore disappointed by the Department's decision to depend
    almost all of the rural development allocation on backlogs within
    existing rural development programs. I agree completely with the need
    to augment fiscal year 1997 funding for rural housing programs t offset
    the interest rate assumptions in the bill which would have dramatically
    reduced the loan program level. I am also a strong supporter of the
    Department's distance learning and water and sewer programs. However,
    within the approximately $53.8 million direct to rural development
    initiatives, I had hoped to see some commitment to flexible and
    innovative approaches to problems facing rural America.
        Do you support using the flexibility provided by the Fund for Rural
    America to fund initiatives which do no fit within the framework of
    existing Department programs, but which might more effectively address
    the problems facing rural communities?
        Answer. I certainly support more flexible approaches to the
    problems of rural America. This is why the Administration strongly
    supported the Rural Community Advancement Program (RCAP) which contains
    that flexibility. Unfortunately, implementation of RCAP was blocked by
    the 1997 Appropriations Act.
        The statutes providing for the Fund for Rural America requires the
    moneys specifically for rural development be used through existing
    programs. We are therefore limited to a certain extent by existing
    statutory and regulatory requirements. Additionally, it was the opinion
    of many Members of Congress that the funds be used to address the
    backlog of applications so prevalent in many of our programs and the
    Appropriations Act Conference Report encouraged the Department to use
    the funds to address the shortfall in program funding caused by the
    difference in interest rates. Therefore, I directed the funds be
    utilized to meet the most pressing needs. As you are aware, I also
    directed that a portion of the funds, $2.2 million, be used for value-
    added cooperative development efforts and I expect some innovative
    proposals to come forth from this process. We will be announcing the
    availability of these funds in the near future and inviting
    applications. I also believe we will see some innovative proposals from
    the research component of the Fund for Rural America.
        Question. I was also disappointed by the lack of communication
    between the Department and Congress regarding the disposition of the
    Fund. As an author of the bill which established the Fund I had hoped
    to discuss ideas about the Congressional intent behind the program.
    Unfortunately that opportunity was not available until the division of
    the Fund was finalized.
        How do you intend to improve communications between members of this
    Committee and the Department to allow input from interested members and
    to ensure that detail about how the Fund for Rural America will be used
    are available to members well before their publication in the Federal
    Register?
        Answer. A significant number of the Members of Congress did contact
    my office to express their thoughts on how the Fund for Rural America
    should be utilized. Those ideas, as well as the thoughts of a number of
    others from outside the Department, were considered in the
    deliberations on how best to use the funds.
                             rural fire task force
        Question. I would like to thank you for the unflagging support you
    have shown for the AmericaCorps program. The initiatives that the
    Department has funded in Vermont have improved nutrition services to
    children and the elderly, improved trails and recreation in the Green
    Mountain national Forest and reduced fire insurance costs for the
    hundreds of homeowners touched by the rural Fire Task Force.
        While the AmericaCorps direct grant program has ended, the
    initiatives the Department helped to establish have not. I have written
    to you asking for your assistance in helping those organizations which
    wish to continue make the transition from direct Federal assistance.
    The Rural Fire Task Force in particular has shown tremendous return in
    reductions of fire insurance costs for a minimal investment of Federal
    dollars.
        Are there existing Department of Agriculture programs the Rural
    Fire Task Force could apply to, or funding available within the
    Department to ensure that this valuable initiative will continue
    despite the loss of the AmeriCorps direct grant program?
        Answer. There are three components to the forest service
    cooperative fire programs including rural fire prevention and control
    (through the Interior Appropriations Committee), the rural development
    community fire protection grant funds are passed through to the Forest
    Service which in turn funds applications from the State Foresters, and
    the Federal excess property programs through the Defense Department. In
    addition, there is the rural development community facilities loan
    program which finances a significant number of fire protection
    projects. I would suggest the Rural Fire Task Force contact the State
    Forester and the Rural Development State Director in Vermont and
    inquire as to the availability of funds for fiscal year 1997.
                    empowerment zone/enterprise communities
        Question. In 1994 when the first round of rural and urban
    Empowerment Zone and Enterprise Communities (EZ/ECs) were chosen, I was
    surprised to discover that no Vermont communities were eligible for
    consideration as rural Enterprise Communities. This despite the fact
    that Vermont is the most rural State in the country based on the 1990
    Census. While Vermont does not have the high poverty levels and
    unemployment rates the current EZ/EC criteria require, it faces other
    hurdles such as higher cost of living, high fuel and heating costs and
    high costs for construction of housing and utilities. When take in
    combination with the common rural problems of a small tax base and
    small, widely separated communities it is clear that Vermont and other
    northern states have a need for rural EZ/ECs as the southern states
    that this designation has largely been restricted to.
        The Administration requested funding in its fiscal year 1997 and
    fiscal year 1998 proposed budgets for another round of Enterprise
    Communities. I believe that any new round of rural Enterprise
    Communities should take into consideration a broader spectrum of
    economic indicators to ensure that struggling rural communities in all
    parts of the country are eligible to compete.
        Question. What are the specific criteria for consideration as a
    rural Enterprise Community? How are those criteria scored?
        Answer. The criteria in the legislation proposing a second round of
    designations is again based on the degree of poverty. Each census tract
    in the area seeking designation must have a poverty rate of not less
    than 20 percent with at least 90 percent of the census tracts having
    poverty rates of not less than 25 percent. The only exception provided
    for is that the Secretary of Agriculture may designate not more than
    one EZ and not more than 5 EC's that satisfy emigration criteria
    developed by the Secretary.
        I certainly agree that there are rural areas experiencing economic
    problems that are not associated with poverty or unemployment and that
    the Federal government needs the flexibility necessary to address those
    problems. However, the reasoning behind the EZ/EC legislation is that
    traditional approaches to solving these problems have not worked well
    in poverty stricken communities and a comprehensive, well-focused
    effort is needed to build the economic infrastructure necessary to
    reverse the situation. This approach is being proven successful by the
    initial round of rural designations.
        Question. Are the criteria and scoring for the selection of EZ/EC's
    set by law or by Departmental regulation?
        Answer. The criteria for designation as an EZ/EC are established in
    statute. The criteria for rating and scoring the applications will be
    established in regulation.
        Question. What steps would be required to modify selection criteria
    for rural EZ/EC's?
        Answer. Members of Congress will have ample opportunity to review
    and modify the legislation as it considered by Congress. Subsequent
    regulations will also be available for public comment.
        Question. Would you support expanding the criteria for rural EZ/ECs
    to address the problems facing rural communities in northern states?
        Answer. I would be happy to discuss possible solutions to the
    problems facing rural communities in the northern states with you.
                                     ______

                    Questions Submitted by Senator Faircloth
                                tobacco research
        Question. What has been the result of this language on ARS and
    CSREES research efforts for the production, processing or marketing of
    tobacco or tobacco products?
        Answer. ARS terminated its research program on the production,
    processing, or marketing of tobacco or tobacco products, and no CSREES
    funds have been approved for these purposes. Tobacco research is still
    conducted at the State Agricultural Experiment Stations supported by
    state or industry funds.
        Question. Are there any USDA funds expended for the production,
    processing or marketing of tobacco products?
        Answer. There are no ARS funds expended for research on the
    production, processing, or marketing of tobacco products. CSREES no
    longer approves Federally-supported research projects directly dealing
    with tobacco production and processing. There are however, some funded
    projects using tobacco as a model system for basic genetic and
    physiological studies. Research dealing with the health effects of
    tobacco use is still permitted.
        Question. Has the Department analyzed what the impact of this
    language has been on tobacco farmers and tobacco-producing States? I
    wish to see any documentation that the Department can provide on this
    matter.
        Answer. Neither ARS or CSREES has collected information to analyze
    the impact of research restriction on tobacco farmers and tobacco-
    producing states.
        Question. Is it your understanding that this language prohibits any
    ARS or CSREES employee at the state level from doing research on
    anything to do with tobacco?
        Answer. ARS and CSREES employees are not specifically prohibited
    from doing research on anything to do with tobacco. In some instances,
    research must be performed on plants that are amenable to specific
    kinds of manipulations in experiments. Tobacco plants often serve this
    purpose, and they are widely used for basic research in plant molecular
    biology. Tobacco plants can be regarded as the ``white rat'' of the
    plant sciences. Although the objectives of these experiments are not
    specifically related to production, processing, or marketing of
    tobacco, all crops benefit from the advances of knowledge and direct
    applications that might develop from sound basic science.
        Question. Is it your understanding that this language would
    prohibit any ARS or CSREES employee at the state level from doing
    research on alternative uses of tobacco?
        Answer. Research on certain alternative uses of tobacco might be
    permissible if the research objectives are to improve production
    systems for other crops, rather than for the production and processing
    of the tobacco crop itself. For example, ARS has in the past conducted
    research to identify unique insecticidal compounds from tobacco and
    closely related plants, and to learn how to use those natural compounds
    for pest control as part of integrated pest management for cotton and
    other crops.
        Question. Does this language affect any other tobacco program that
    falls under the Tobacco Division of USDA?
        Answer. There are no other tobacco-related programs in ARS or
    CSREES.
                                     ______

                    Questions Submitted by Senator Coverdell
                                  karnal bunt
        Question. How much money do you anticipate will be spent by the
    Animal and Plant Health Inspection Service (APHIS) this year and next
    to enforce any quarantines imposed to prevent the spread of Karnal Bunt
    (Kb)?
        Answer. In fiscal year 1997, we anticipate spending approximately
    $5.6 million on regulatory activities to enforce Karnal Bunt (Kb)
    quarantines. Our costs are decreasing as we develop efficiencies in our
    quarantine enforcement methods. The budget requests an increase of $4.5
    million for pest detection activities in fiscal year 1998 largely for
    Karnal Bunt regulatory activities, the National Survey, and to examine
    alternative control and eradication measures for Karnal bunt and
    potential future infestations.
        Question. Do you believe implementing a quarantine in the Southeast
    is necessary, in light of the fact you have not found any bunted
    kernels?
        Answer. We will not take regulatory action in the Southeast unless
    proof exists that Karnal Bunt is present. We are examining wheat lots
    for bunted kernels and conducting pathogenicity tests with spores
    recovered from the Southeast to determine whether there is the presence
    of the disease.
        Question. In the United States Department of Agriculture's 1998
    Budget Summary, there is a request by the Animal and Plant Health
    Inspection Service (APHIS) of $9 million for pest detection activities,
    a $5 million increase from fiscal year 1997. The stated reason for this
    large increase is to enable APHIS to provide assurance to all trade
    partners that Karnal Bunt is not present in major wheat-producing areas
    of the United States. How can you provide such an assurance if Karnal
    Bunt has been detected from coast to coast?
        Answer. Since March 1996, we have committed $65 million for program
    operations and compensation to producers. With survey data, we can
    clearly demonstrate where the disease is and is not. And, it has not
    been detected coast to coast. Because of this, we have largely
    maintained market access for U.S. wheat from non-infected areas. To
    date, negotiations have been successful with several significant
    markets, including Germany and Italy.
        Question. Which States will this increased money be spent?
        Answer. We will spend this increased money in the 42 wheat-
    producing States for conducting the National Survey and in the Karnal
    Bunt regulated areas which are currently limited to the Southwest.
        Question. It is my understanding that Karnal Bunt is a disease
    which can not be eradicated. Do you believe that Karnal Bunt can be
    eradicated?
        Answer. As a regulatory agency, APHIS considers eradication a
    reasonable first objective in dealing with a new quarantine pest. When
    Karnal Bunt was first detected in March 1996, this position was
    strongly supported by various industry groups, State departments of
    agriculture, and officials involved in international trade. Presently,
    the main goals of the program are to (1) protect U.S. export markets,
    (2) protect U.S. wheat producers in Karnal Bunt-free areas, (3) provide
    the best possible option for producers in regulated areas, and (4)
    maintain the best possible information on where Karnal Bunt is located.
        Question. If yes, please explain how? If no, how much will it cost
    to continuously implement a quarantine on a disease that can not be
    eradicated?
        Answer. The management strategy we are currently using against
    Karnal Bunt concentrates on minimizing the probability that it will
    expand beyond areas where it currently exists and detecting and
    identifying it in other areas to which it might have inadvertently been
    moved. We expect that this strategy will be sufficient to allow wheat
    exports to continue moving.
        With a program like Karnal Bunt, where the negative consequences
    that affect exports is so great, we feel that regular investment in
    enforcement activities are justifiable since these activities would
    play a crucial role in protecting export markets. During fiscal year
    1997, we plan to spend approximately $5.6 million on enforcement
    activities and to conduct the National Survey. Our costs are decreasing
    as we develop efficiencies in our quarantine enforcement methods.
        Question. Do you believe Karnal Bunt is a major disease threat?
        Answer. While there is no human or animal health problem associated
    with this plant disease, it is considered a pest of quarantine
    significance by more than 30 nations with which the U.S. does business.
    In the next few months, APHIS will be addressing this issue at an
    international forum in an attempt to create a better understanding of
    this disease within the international agricultural community.
        Question. If APHIS found Karnal Bunt spores or Karnal Bunt in the
    Midwest, would that change your opinion?
        Answer. Well, if Karnal Bunt spores were found in the Midwest, we
    would have a much more serious problem with the export market. As a
    result, we would have to change our program strategy since we would no
    longer meet our goals of protecting U.S. export markets or of
    protecting U.S. wheat producers in Karnal Bunt-free areas.
        Currently, exports are not significantly affected. Only three
    percent of U.S. wheat is located in Arizona. We are able to certify
    wheat for export by demonstrating that over 90 percent of U.S. wheat
    originates in areas where Karnal Bunt is not known to be present and we
    have seen relatively normal movements of wheat exports since the
    beginning of our program.
        Question. Since a quarantine was imposed in the Southwest, what
    have the economic losses been for farmers?
        Answer. For the 1996 crops, we estimated the losses for
    compensation to be $39 million.
        Question. It is my understanding that you plan on compensating
    farmers affected by any quarantine imposed to prevent the spread of
    Karnal Bunt. How much do you anticipate this will cost?
        Answer. For the 1997 crops, we estimate the losses to be
    significantly reduced because of the actions which were already taken
    in the regulated areas and the knowledge gained from the National
    Survey. At this time, we estimate the losses at no more than $10
    million.
        Question. Who will be eligible?
        Answer. If regulations are necessary for the 1997 crop,
    compensation will be provided to producers and handlers of regulated
    wheat, and owners of grain storage facilities which require
    decontamination.
        Question. Is this included in your budget request for fiscal year
    1998?
        Answer. At this time, we have no way of projecting whether
    additional Karnal Bunt areas will be identified for the 1998 crop. The
    increase of $4.5 million included in the fiscal year 1998 Budget for
    pest detection is primarily for Karnal Bunt regulatory activities and
    to conduct the National Survey.
        Question. Are there plans by you or the Administration to work with
    other nations to have the status of Karnal Bunt changed from a major to
    minor disease threat?
        Answer. We have initiated plans for an international conference
    this summer to consider whether the status of Karnal Bunt should be
    changed. By that time, APHIS will have the results from pathogenicity
    tests performed on spore samples from the southeastern United States.
    We will be asking Mexico and Canada to sponsor the conference, possibly
    through the auspices of the North American Plant Pathology Organization
    (KNOOP). Hopefully, this conference will provide all countries the
    opportunity to review the available data and create rational and
    objective standards for the international movement of grains affected
    by various smut diseases. The suggested conference title is, ``The
    International Conference on Regulatory Issues Related to Smut in Small
    Grains in the United States''.
        Question. If Karnal Bunt is found in the Midwest, would your answer
    change?
        Answer. No, it would not.
        Question. What increased costs do you anticipate for farmers if
    there is a quarantine imposed in the Southeast?
        Answer. If regulations are necessary, we have estimated the
    additional needs for compensation to be $6.4 million.
        Question. How will this affect peanuts, vidalia onions, cotton, and
    other major crops in the Southeast?
        Answer. Field-packed nuts and vegetables that meet normal industry
    standards for cleanliness are not considered to be contaminated. If we
    find a bunted kernel in a field that is double-cropped, we would place
    restrictions only on soil movement. The term ``soil'' generally refers
    to large clumps or clods; dust or road film is not considered to be
    soil. Cotton harvesting would not be affected.
        Question. What will be the economic losses for farmers in the
    Southeast?
        Answer. If regulations are necessary, our estimate of the losses to
    be compensated is about $6.4 million.
        Question. Does the U.S. Department of Agriculture regulate suspect
    spores?
        Answer. No regulatory action will be taken until clear evidence
    exists that the disease is present.
        Question. What is the reliability of the spore identification
    techniques and can your current DNA test differentiate between Karnal
    Bunt spores and spores from fungi present on weedy and cultivated
    grasses found in the Southeast?
        Answer. APHIS' test procedures provide a reasonable assurance that
    spore counts of one or more in a 50-gram sample, from a railcar or
    elevator, will be detected. Spore counts which average less than one
    per 50 grams may not be detected. APHIS policy accepts the negligible
    risk of spread of the disease posed by such spore counts.
        Current DNA testing does not distinguish between Kb spores and
    ryegrass spores. The pathogenicity tests underway are designed to
    determine if the ryegrass pathogen infects wheat. And, we are
    developing other tests to distinguish the two pathogens based on
    physical and chemical properties.

                              Subcommittee Recess

        Senator Cochran. The next hearing of this subcommittee will
    be on Tuesday, March 4, at 10 a.m. in this room, 124, of the
    Dirksen Senate Office Building. We will hear at that time from
    the Department's witnesses on the budget request regarding food
    safety, marketing, and regulatory programs. Until then, the
    subcommittee stands in recess.
        [Whereupon, at 12:35 p.m., Thursday, February 27, the
    subcommittee was recessed, to reconvene at 10:08 a.m., Tuesday,
    March 4.]

    AGRICULTURE, RURAL DEVELOPMENT, AND RELATED AGENCIES APPROPRIATIONS FOR
                                FISCAL YEAR 1998

                                  ----------

                             TUESDAY, MARCH 4, 1997

                                           U.S. Senate,
               Subcommittee of the Committee on Appropriations,
                                                        Washington, DC.
        The subcommittee met at 10:08 a.m., in room SD-124, Dirksen
    Senate Office Building, Hon. Thad Cochran (chairman) presiding.
        Present: Senators Cochran, Burns, and Bumpers.

                           DEPARTMENT OF AGRICULTURE

    STATEMENT OF MICHAEL DUNN, ASSISTANT SECRETARY,
                MARKETING AND REGULATORY PROGRAMS
    ACCOMPANIED BY DENNIS KAPLAN, DEPUTY DIRECTOR, OFFICE OF BUDGET AND
                PROGRAM ANALYSIS

                   Animal and Plant Health Inspection Service

    STATEMENT OF TERRY MEDLEY, ADMINISTRATOR

                         Agricultural Marketing Service

    STATEMENT OF LON HATAMIYA, ADMINISTRATOR

            Grain Inspection, Packers and Stockyards Administration

    STATEMENT OF JAMES R. BAKER, ADMINISTRATOR

                       Food Safety and Inspection Service

    STATEMENT OF THOMAS J. BILLY, ADMINISTRATOR
    ACCOMPANIED BY DR. CRAIG REED

                                Opening Remarks

        Senator Cochran. The subcommittee will please come to
    order.
        This morning we are very happy to welcome our panel of
    witnesses to discuss the proposed budget for the Department of
    Agriculture as it relates to the Food Safety and Inspection
    Service; the Animal and Plant Health Inspection Service; the
    Agricultural Marketing Service; and the Grain Inspection,
    Packers and Stockyards Administration.
        We are happy to have with us Assistant Secretary for
    Marketing and Regulatory Programs Michael Dunn. We welcome you
    and your colleagues, the Administrators of these programs which
    I mentioned. We also welcome Mr. Kaplan from the Budget Office
    of the Department of Agriculture.
        Mr. Secretary, we have copies of your statements and we
    will make them all a part of the record. But before proceeding
    any further, I'm going to see if my colleagues have any opening
    comments or statements they would like to make.
        Senator Burns.

                           STATEMENT OF SENATOR BURNS

        Senator Burns. Thank you, Mr. Chairman. I have just a
    couple of comments, but I think it would be better if my
    statement just be entered in the record.
        I still have some concerns about Mr. Billy and some of the
    concerns we have on the border of meat inspections coming in
    from Canada. I would hope that we could maybe lay aside some
    fears that we have in the State of Montana.
        Anytime we start talking about food inspection and food
    safety, we know that part of the problem in the Northwest with
    the Jack-in-the-Box situation was not created by American
    producers.
        I am concerned about how we are moving more to a fee
    situation with our inspection service. Food safety is
    everybody's problem, and we know who will pay the fees for
    inspection. It will be the producer. That will be one of the
    expenses that has to be incurred by a processing plant whenever
    they start buying and paying for the raw product. They will
    take it off of the purchase price. I said this the last time.
    Anybody that does not believe that we in agriculture do not
    live at the end of the railroad where we buy retail and sell
    wholesale and we pay the freight both ways and all the fees
    that are incurred has never experienced being raised on 160
    acres of two rocks and one dirt like I have been.
        So, we understand those.
        Mr. Baker, I see you today and I want to congratulate you
    on what you have done in your Department. I think you have
    brought a lot of credibility. And P&S, maybe it ain't working
    as smooth as we would like to see it in some places, but I
    think you have done a great job there and I want to commend you
    for that.
        Other than that, I would just put my statement in the
    record, Mr. Chairman, and thank you for holding this hearing.

                              Prepared Statements

        Senator Cochran. Thank you, Senator Burns.
        Senator Bumpers. Mr. Chairman, I have a statement I'll put
    in the record.
        Senator Cochran. Without objection, the statements will be
    made a part of the record.
        [The statements follow:]
                      Prepared Statement of Senator Burns
        Thank you, Mr. Chairman.
        I would like to welcome the Assistant Secretary and the Agency
    Administrators to the committee hearing today. In an attempt to get the
    input we all seek I will try to keep my statement as short as possible.
    This should provide us with the time we need to hear testimony from
    these people and learn more about the budget proposal put forth by the
    Department of Agriculture and the Administration.
        I would like to address my issues as they appear to us in the list
    of witnesses appearing before the committee today. With this I will
    start with the Administrator of the Food Safety and Inspection Service.
        Mr. Billy, I must say coming from a state with little or no poultry
    production, and from a state that shares a border with our neighbors to
    the north, that I cannot see the workings of a partnership between
    Congress and the Food Safety and Inspection Service. I can also see
    that, with the most recent lawsuit filed by the state of Ohio against
    the Federal government that this partnership does not seem to be
    working as well as you are describing here today. I also have to say
    that the cooperation does not seem to be as clear to the producers and
    consumers in the field. I will commend you and your agency for going
    out into the field to get an understanding of what those packing houses
    of a smaller size are facing, but I do not believe that you have
    alleviated all the fears that these people have about staying in
    business.
        As with the general Department budget, I am concerned about the
    number of employees that you are taking out of the field. It appears to
    me that we continue to reduce those jobs in the field that mean most to
    our smaller communities and provide the real work in this government.
        I also have fears about the changes that are being proposed in
    regulatory form. I agree with you that the basic goal of FSIS should be
    the improvement of the safety of our food sources. But the clear, sharp
    and precise fact we see, is that if somebody gets ill from food borne
    pathogens, then it is always related to our own American products. Not
    the meat and vegetables we see coming in from other countries. Our
    producers in Montana, Mississippi, Missouri, Washington, Arkansas and
    Wisconsin take the hit in the public eye.
        Mr. Billy, I hope that in your position you can and will continue
    to work to form the partnerships that you have mentioned in your
    testimony today. With this partnership comes much work and even
    heartbreaks at times, but it is what the people in America seek from
    government, and it is my hope that you can work out the many
    particulars which are required in this close working relationship.
        Mr. Chairman I would also like to welcome Assistant Secretary Mike
    Dunn and the Administrators of the Animal Plant Health Inspection
    Service, Agricultural Marketing Service and the Grain Inspection
    Packers and Stockyards Administration to this hearing. These are all
    good people I am willing to put my faith in as they work for the future
    of American agriculture.
        It wasn't even a week ago that I met with the Assistant Secretary
    and the APHIS Administrator along with Secretary Glickman to discuss a
    very important issue in Montana, Bison. I was pleased to see how far
    the Department of Agriculture has come in the past two years, but still
    am disappointed in the current state of the Yellowstone bison herd. I
    appreciate the way you came to the table with some suggestions which I
    hope the Secretary of the Interior will open his mind too in the coming
    months.
        There are a few issues of concern I have with the budget proposal
    coming out of Marketing and Regulatory Programs. First among these in
    my state is the issue of the reduced funding in the Animal Damage
    Control budget. I understand that according to your testimony Mr.
    Secretary that you feel that this is in response to the wishes of
    Congress. Well I can guarantee you that this is not among the wishes of
    this member of Congress. Approximately two years ago, Secretary Babbitt
    found it necessary to introduce a predator into Yellowstone National
    Park, the Canadian wolf. With this action he placed a predator on the
    ground that preys upon the livestock in Montana. This is bad enough,
    for the controls are rigid in defending one's property. But add to this
    the increased numbers of coyotes in western states and you have a
    serious problem.
        The problem we face is that due to the wolf ADC, is unable to do
    the work necessary to provide protection for the livestock producers in
    Montana. The real problem will be down the road however, because
    without ADC workers and control, the people will begin to take the law
    and the necessary steps for protection into their own hands. The
    results of this of course will be the criminal prosecution for a number
    of people only trying to protect what is theirs.
        When we talk about the needs on the ground today, one of the main
    areas of interest that all of us in the west share, is the need for
    effective work in the area of packers and stockyards. As we have seen
    in the past two years, this has been a high point of interest with all
    members of Congress in the west. We have discussed and we have
    bargained and we have read the reports, but the basic premise which is
    on the ground is that the packers are taking advantage of the producer.
    Now this is not something that is new, it goes on in all commodities
    and with all manners of livestock, but the fact is the people have a
    lack of confidence in the government to do something. I have the utmost
    faith and confidence in the Administrator of the agency, but he really
    needs the help of the Department and this Congress to do an effective
    job.
        I do not have the answer in my hip pocket to the problems we face
    in this area, but I do know we do need to work with Mr. Baker to see
    that he can and does get the most bang for the dollar. I look forward
    to sitting down with him in the near future to discuss many of the
    concerns we share with the current system, and what Congress can do to
    assist him.
        Finally, I have real problems with the inclusion of the large
    numbers and the amounts sought to be generated by the user fees in this
    budget. I do not think that this is the really fair approach to the
    funding needs of this Department. I believe the Administration and the
    Department is falling into the same mind set as the majority of our
    country is, that they see the Ag budget and figure it all goes to the
    farmers and ranchers. Well we see numerous dollars, over half of the Ag
    budget I believe, going to programs of a social nature. Food Stamps,
    and WIC are among these. I do not want to see the poor and the needy in
    our land suffer any more than anyone at this table, but let's be honest
    when we are dealing with the taxpayer's funds.
        The imposition of the user fees is just another tax on the people
    in rural America, and they are not in a much better position to afford
    than many of the people that live in our cities. These people toil day
    in and day out for the tax dollars they put into the treasury of this
    land, and now we are asking them to pay more for services that they
    really feel that they have paid for with their original tax payment.
        I know in Montana we don't have the great need for mass transit
    that we find here on the east coast and in our nation's capital. But we
    do have the need for the services provided by APHIS, AMS and GIPSA.
    These are what we like to think we pay our tax dollars for. Now this
    Administration and the Department have made a move, which I believe we
    have fought in the past, to pass additional costs onto our producers.
    As I mentioned to Secretary Glickman last Thursday before this
    committee, these costs are not going to be borne by the consumer, they
    are reflected directly in the price which is paid to the producer for
    the food and fiber they provide this country. At this time I do not
    know where I will make up the difference, but I will work hard to
    protect my agricultural producers in Montana and throughout this
    country against this tax plan by the Administration.
        Mr. Chairman, I really wanted to keep this short and sweet and to
    the point, but agriculture is still the number one industry in Montana
    and I need to make my feelings known on a variety of topics which this
    hearing allows me to address. I am sure I will need to address many of
    these again down the road, but I need to make my intentions known. I
    thank you, Mr. Chairman for the time, and I look forward to hearing
    from the panel today.
                                     ______

                     Prepared Statement of Senator Bumpers
        I wish to join Senator Cochran in welcoming our guests from the
    U.S. Department of Agriculture who appear before us this morning.
    Agencies of the Department of Agriculture have jurisdiction over a vast
    array of services and obligations. However, within the purview of all
    those agencies there may be no others that hold the high level of
    responsibility for protecting the continued health and safety of
    agriculture and the ultimate consumer of all that agriculture may
    produce than those collected here today.
        We all recall from history, nearly 100 years ago, how President
    Theodore Roosevelt having just completed reading Sinclair Lewis' The
    Jungle, tossed his breakfast out the window when placed before him.
    Reminded of and revolted by the imagery of Lewis' masterpiece, wound
    too much in fact for comfort, President Roosevelt reportedly stormed
    from the room to begin work toward passage of legislation that led to
    the creation of the Food Safety and Inspection Service. Whether it is
    to the writing skills of Lewis or the ill-served breakfast of a
    President, we all owe a great deal of gratitude.
        As much as we think we know about how to protect our crops and
    livestock from pests and disease, truth is we live in a very dynamic
    world where new threats to agricultural stability appear to be in a
    constant state of introduction to our shores. Problems we never thought
    we might see, such as Karnal Bunt, and hopefully never will see, such
    as Bovine Spongiform Encephalopathy (Mad Cow Disease), remind us we
    must be ever vigil in the protection of our productive capabilities and
    consumer confidence in those products. In some cases, introduction of
    serious pests, such as the Imported Fire Ant or the Zebra Mussel, are
    inadvertent. Still, that does not reduce our responsibilities in
    removing these threats from the public domain.
        Aside from pathogens, insects, diseases, and other adversaries of
    nature, we must also guard against the unwise use of chemicals as
    methods of control. Pesticides have helped American Agriculture produce
    bountiful and hardy foods and certainly rank among those items we
    regard as the arsenal of the agricultural revolution. These products
    remain important for continued production and we are learning more
    about proper means of application. We must continue to learn more about
    how to ensure our food is safe from all forms of harm.
        American agriculture is as dynamic as the forces of life itself.
    New forms and presentation of products, such as organics, cater to the
    ever changing demands of the public. Growth and changes in the
    livestock sector remind us to ensure that the benefits of growth accrue
    to all. A safe and healthy agriculture, and a safe and healthy world of
    consumers can feel secure that there are those at USDA charged with the
    duty to see that these dynamic forces remain positive.
        The budget before us presents certain challenges. We are here to
    discuss the range of priorities, areas in which attention should
    decline or increase, and the manner in which some of these services
    should be paid. In some cases, we might even need to find agreement on
    who the actual beneficiary may be. But regardless of the points of
    detail, I believe we can all agree that the work before us is serious
    and touches on levels of safety no one here is willing to reduce even
    slightly.

                           Statement of Michael Dunn

        Senator Cochran. Mr. Secretary, why don't you proceed and
    make whatever comments or statements that you think would be
    helpful for the committee.
        Mr. Dunn. Thank you, Mr. Chairman. I thank you and members
    of the committee. I am pleased to appear before you today to
    discuss the activities of marketing and regulatory programs at
    the U.S. Department of Agriculture for fiscal year 1998.
        I have a written statement and would like that to be made
    part of the record.
        Senator Cochran. Without objection, it is so ordered.
        Mr. Dunn. With me today are Terry Medley, Administrator for
    the Animal and Plant Health Inspection Service; Lon Hatamiya,
    Administrator for the Agricultural Marketing Service; and James
    Baker, Administrator for the Grain Inspection, Packers and
    Stockyards Administration. They have written statements for the
    record and will answer questions regarding the specific
    proposals.
        The Marketing and Regulatory Program activities are funded
    by both the taxpayers and beneficiaries of program services.
    The programs are proposed to carry out $789 million of
    activities. Over $396 million of that will be funded through
    fees from beneficiaries of these services. Currently over 58
    percent of the Department's user fee programs are administered
    by marketing and regulatory programs. These programs have been
    marketed, tested, and are high performers under the Government
    Performance and Results Act.
        The fiscal year 1998 budget on the discretionary side, we
    request a current law appropriation of $431 million for APHIS,
    $51 million for the Agricultural Marketing Service, and $25.7
    million for the Grain Inspection, Packers and Stockyards
    Administration.
        Legislation will be submitted to cover $28 million more in
    user fees. The budget proposes new fees to recover the cost of
    administering programs in all three of the agencies.
        APHIS provides leadership in anticipating and responding to
    issues involving animal and plant health, conflicts with
    wildlife, environmental stewardship, and animal well-being.
        The APHIS 1998 budget request proposes under current law
    $424 million for salaries and expenses compared to fiscal year
    1997 appropriations of $435 million.
        The budget request contains an increase of $1.3 million for
    the Agricultural Quarantine Inspection Program to handle the
    increased workload along the Mexican and Canadian borders and
    from Hawaii and Puerto Rico.
        Approximately $9 million are requested for increased pest
    detection activities and will be largely devoted toward the
    Karnal bunt program.
        The budget proposes a decrease of $3.3 million for animal
    damage control.
        APHIS will conduct architectural and engineering work with
    carryover money funded by the screwworm program for a sterile
    screwworm rearing facility to be built in Panama. Legislation
    will be proposed to cover the costs of providing activities for
    animal welfare, veterinary biologics, pink bollworm,
    biotechnology, and the swine health protection program. We
    believe that the identifiable beneficiaries of these Federal
    programs, rather than the general taxpayer, should pay for the
    services they receive.
        An appropriation of $3.2 million is proposed to complement
    the Agricultural Research Service's request for modernization
    of the Plum Island Animal Disease Center and $4.0 million for
    basic facility repairs, alterations and preventive maintenance.
        Agricultural Marketing Service's fundamental mission is to
    facilitate the strategic marketing of agricultural products in
    domestic and international markets while ensuring fair trade
    practices and promoting a competitive and efficient marketplace
    to benefit consumers of U.S. food and fiber products.
        In response to the changing needs of its customers, the AMS
    has improved program delivery and broadened the focus of
    programs to incorporate a global approach to marketing
    services. The Market News reports are nearly 700 reports on a
    daily basis available on the Internet.
        In response to recommendations made by the Advisory
    Committee on Agricultural Concentration, AMS broadened the
    scope of market news to include more information about cattle
    traded under contract or formula, value-based pricing, and
    regional market forces. These actions have given our farmers
    and ranchers more tools to compete in today's marketplace which
    relies on timely and accurate market information.
        AMS's budget request under current law for fiscal year 1998
    is $49.8 million for the Marketing Service Program and $1.2
    million for the Federal-State Marketing Improvement Program. We
    are requesting an increase of $320,000 to begin marketing news
    collection in South and Central America and the Pacific rim.
    Market surveys conducted by AMS for these areas are needed as
    international competitions increase in the post-GATT and NAFTA
    economy.
        We are also requesting an increase of $500,000 to expand
    domestic market news reporting in accordance with
    recommendations made by the Secretary's Advisory Committee on
    Agricultural Concentration.
        We are working diligently to publish a rule on the national
    organic standards and to implement a national program. In order
    to meet the increased responsibility for accrediting organic
    certifiers and administering the program, the AMS budget
    includes an increase of $505,000. Consistent with the National
    Organic Standards Act, we will seek to recover the cost of the
    program through user fees that will be deposited into the
    Treasury.
        The budget also proposes to return program funding for the
    Pesticide Data Program to AMS from the Environmental Protection
    Agency. With the implementation of the Food Quality Protection
    Act, the pesticide residue data will play a critical role in
    conducting risk assessments of re-registration of pesticides.
        Finally I want to discuss GIPSA. Its mission is to
    facilitate the marketing of livestock, poultry, meat, cereals,
    oilseeds, and related agricultural products, and to promote
    fair and competitive trading practices for the overall benefit
    of consumers in American agriculture.
        Federal grain personnel work with over 2,000 State and
    private inspectors to provide highly qualified inspection and
    weighing services on a user-fee basis. In 1996 this unique mix
    of Federal, State, and private inspection agencies provided 2.3
    million inspections on an estimated 250 million metric tons of
    grains and oilseeds, issued 118,000 official weight
    certificates, and weighed over 114 million metric tons of
    grain, and met with trade teams representing 41 countries
    around the world.
        GIPSA's Packers and Stockyards is located in 11 offices
    throughout the United States to monitor compliance with the
    Packers and Stockyards Act with approximately $95 billion of
    livestock, meat, and poultry products.
        During fiscal year 1996, GIPSA targeted resources at
    providing financial protection, promoting fair business action,
    and enabling a competitive marketing environment for livestock,
    meat, and poultry.
        GIPSA's 1998 budget request under current law is $68.8
    million, of which $25.7 million represents appropriated funds.
    The remaining $43.1 million represents user fee authority for
    grain inspectors and weighing services.
        The fiscal year 1998 budget proposes legislation to
    authorize, subject to appropriations, the collection of $3.6
    million in additional user fees to cover the costs of grain
    standardization activities. The grain industry is the primary
    beneficiary of the grain standards and should pay for these
    services.
        For P&S programs, the budget proposes $14.8 million which
    includes increases of $225,000 to allow GIPSA to establish
    electronic filing procedures for annual reports, $1.6 million
    for activities in the packer competition and industry structure
    areas, and $750,000 for poultry compliance activities.
        Increasing concentration, structural change, declining
    market performance, and the increased use of complex formula
    and value-based marketing systems by packers continue to raise
    questions of regulatory and policy significance. Additional
    resources will allow GIPSA to expand its monitoring and
    investigations regarding the anticompetitive implications of
    structural change and behavioral practices in the meat packing
    industry and will afford us an increased capability to support
    legal actions that require complex economic and statistical
    analyses.
        Finally, the fiscal year 1998 budget proposes legislation
    to authorize the collection of license fees to administer the
    activities under the P&S Act. All meatpackers, live poultry
    dealers, stockyard owners, market agencies, and dealers, as
    defined in the P&S Act, would be subject to license fees.
        Also included is a legislative proposal regarding a
    statutory dealer trust to require livestock inventories and
    accounts receivable due from sales of livestock to be held in
    trust for unpaid cash sellers when a dealer fails to pay for
    livestock.
        I appreciate the opportunity to present the budget for
    marketing and regulatory programs. We believe the proposed
    funding amounts and sources of funding will provide the level
    of service wanted by our customers: the agricultural producing
    and marketing industry, consumers, and the general public. We
    are happy to answer any questions.

                              Prepared Statements

        Senator Cochran. Thank you very much, Mr. Secretary. We
    have your complete statement, and it will be made part of the
    record along with the statements of Mr. Medley, Mr. Hatamiya,
    and Mr. Baker.
        [The statements follow:]
                       Prepared Statement of Michael Dunn
        Mr. Chairman and members of the Committee, I am pleased to appear
    before you to discuss the activities of the Marketing and Regulatory
    Programs of the U.S. Department of Agriculture and to present our
    fiscal year 1998 budget proposals.
        With me today are Terry Medley, Administrator of the Animal and
    Plant Health Inspection Service, Lon Hatamiya, Administrator of the
    Agricultural Marketing Service, and James Baker, Administrator of the
    Grain Inspection, Packers and Stockyards Administration. They have
    statements for the record and will answer questions regarding specific
    budget proposals.
                       marketing and regulatory programs
        The mission of the Marketing and Regulatory Programs is to
    facilitate the domestic and international marketing of U.S.
    agricultural products and to ensure the health and care of animals and
    plants while improving market competitiveness and the economy for the
    overall benefit of both consumers and American agriculture. We
    contribute to all four fundamental themes underpinning the Department's
    budget proposals for 1998. We have activities to: expand agricultural
    economic and trade opportunities; ensure a healthy, safe, affordable
    food supply; manage our natural resources in a sensible way; and,
    reinvent government and save taxpayers money.
        The Marketing and Regulatory Program activities are funded by both
    the taxpayers and beneficiaries of program services. The programs are
    proposed to carry-out $789 million of activity. Over $396 million will
    be funded through user fees from beneficiaries of these services.
    Currently, over 58 percent of the Department's user fee programs are
    administered by the Marketing and Regulatory Programs. These programs
    have been market tested and should be high performers under the
    Government Performance and Results Act.
    Fiscal Year 1998 Budget
        On the discretionary side, we are requesting a current law
    appropriation of $431.7 million for the Animal and Plant Health
    Inspection Service; $51.0 million for the Agricultural Marketing
    Service; and $25.7 million for the Grain Inspection, Packers and
    Stockyards Administration. Legislation will be submitted to recover $28
    million more in user fees. The budget proposes new license fees to
    recover the cost of administering the Packers and Stockyards Act (P&S
    Act), additional fees for selected APHIS activities, and for developing
    grain standards. In addition, on the mandatory side, nearly $11 million
    in user fees would be collected to finance the Federal oversight of
    marketing agreements and orders. I will use the remainder of my time to
    highlight the Department's budget requests for the Marketing and
    Regulatory Programs.
                   animal and plant health inspection service
        APHIS provides leadership in anticipating and responding to issues
    involving animal and plant health, conflicts with wildlife,
    environmental stewardship, and animal well-being. With its customers
    and stakeholders, APHIS promotes the health of animal and plant
    resources by facilitating their movement in the global marketplace.
    These efforts help ensure abundant agricultural products and services
    for U.S. consumers, and expand export markets for our farmers.
        The responsibilities of APHIS have grown as agricultural markets
    have embraced the challenges and opportunities of global trade.
    Protection of U.S. agriculture was previously accomplished by excluding
    imports from countries which might have foreign pests and diseases. The
    development of new ``rules'' of trade through GATT, NAFTA, and other
    agreements now must address sanitary and phytosanitary barriers based
    upon risk assessment procedures, regionalization and equivalence.
    Ensuring access to foreign markets has become more complicated and is a
    critical component of protecting U.S. agriculture. For example, the
    dynamic biology and epidemiology of animal and plant pests and diseases
    such as Karnal bunt, vesicular stomatitis, and fruit flies, all
    represent risks to U.S. agriculture's productivity and access to
    foreign markets. But, these risks can be ameliorated with adequate
    prevention, monitoring systems and response actions. APHIS is ready to
    meet the opportunity and challenge to develop new partnerships with
    States, industry, and the public.
    APHIS Priorities
        Protecting American producers from harmful pests and diseases.--
    APHIS has inspectors at international ports of entry--including land
    border ports, airports, and seaports--around the clock. Last fiscal
    year, they conducted over 77 million inspections and intercepted
    approximately 1.9 million illegal agricultural products. Seizures of
    contraband prevented the introduction of nearly 56,000 plant pests that
    could have been dangerous to U.S. agriculture and more than 290,000
    lots of unauthorized meat and animal byproducts that could have had the
    potential to spread health threats. If there were outbreaks of foot-
    and-mouth disease, exotic Newcastle disease, or hog cholera, they could
    have had an overwhelmingly negative impact on the $186 billion in
    annual cash receipts from agricultural products.
        One of the most visible and successful port of entry inspection
    efforts is the Beagle Brigade program. Inspectors use specially trained
    beagles at 20 international airports to detect prohibited fruits,
    plants, and meat. The beagles identified 73,751 instances of illegal
    contraband in 1996 and can detect agricultural contraband about 90
    percent of the time.
        Facilitating trade.--With survey data, we are able to demonstrate
    where diseases exist and where it does not exist. Because of these
    data, we have maintained nearly 99 percent of the $6 billion wheat
    export market. Most countries have continued to accept our export
    certificates and we have met with others to negotiate their acceptance
    of wheat from regulated areas that test negative for Karnal bunt. We
    have negotiated successfully with several significant markets,
    including Germany and Italy.
        One of the many new markets we have helped open has been pork to
    Russia. Since 1993, producers have shipped more than $30 million worth
    of pork, making Russia a valuable market for U.S. farmers. We have also
    opened new export markets in both China and Japan for U.S. apples.
    Industry officials have estimated these markets will mean hundreds of
    millions of dollars of income for U.S. farmers.
        Behind the scenes, we help farmers maintain access to international
    markets by providing foreign governments with up-to-date scientific
    information on the status of U.S. plant and animal health. For
    instance, we have worked to keep the Korean market for cowhide at more
    than $700 million--making it the largest agricultural export to Korea.
    In addition, we negotiated the sanitary requirements with Russian
    officials that allowed the resumption of U.S. poultry exports to
    Russia. Through these successful efforts, we maintained access to
    Russia's $500 to $700 million market for U.S. poultry.
        We also certify U.S. agricultural products for export to ensure
    that our trading partner's plant and animal health requirements are
    being met. In fiscal year 1996, about 279,000 Federal certificates were
    issued for plant products alone and another 527,000 ruminants and
    horses were certified for shipment to foreign destinations. We issue
    these certificates on demand--including evenings, weekends, and
    holidays--on a user-fee basis. These fees help us reduce the Federal
    Government's costs to taxpayers by charging the cost of providing these
    services to the direct beneficiary.
        APHIS has proposed a rule setting up the regionalization framework.
    Under regionalization, countries would recognize pest and disease
    status on an area or regional--rather than national--basis. A region's
    risk-class levels--ranging from ``negligible risk'' to ``very high or
    unknown risk''--would depend on the region's geographic location;
    environmental conditions; prevalence of diseases; type of commodity;
    country's animal health infrastructure with regard to its disease
    monitoring, surveillance systems, and its level of enforcement to
    contain diseases and pests. Canada has already made the commitment to
    regionalization by accepting parts of the United States as free of
    bluetongue disease. The European Community is considering doing the
    same. We hope to move forward with regionalization and join these
    countries on this new frontier of agricultural trade.
        Monitoring animal and plant health.--Our National Animal Health
    Monitoring System--or NAHMS program--surveys the Nation's livestock and
    poultry herds to systematically establish a baseline measure of U.S.
    livestock and poultry health. By sampling animals at slaughter, we are
    advancing our surveillance goals to detect, isolate, and eradicate
    diseases like brucellosis and tuberculosis. As you know, we have been
    taking actions to prevent the introduction of Bovine Spongiform
    Encephalopathy (BSE) since the late 1980's.
        For plant pests, APHIS and cooperators in the Cooperative
    Agricultural Pest Survey (CAPS) conduct detection surveys for incipient
    infestations of exotic pests. These data provide Federal and State
    officials, and the private sector, with information used to manage
    cooperative pest control programs. APHIS used the CAPS network to
    implement the National Survey for Karnal bunt and the emergency
    response after the detection of the pathogen that causes the disease in
    Arizona in March 1996. The data gathered through these pest surveys
    enabled the Agency to continue certifying wheat for export subsequent
    to the 1996 detection.
        The Internet enables us to quickly and efficiently reach our
    customers. For example, a sheep producer in North Dakota can use the
    information superhighway to access our interactive database and get
    information regarding the voluntary scrapie certification program. A
    poultry producer in Georgia can visit the APHIS home-page to review
    regulations, search for emergency bulletins, and find current export
    health requirements. And, a cattle rancher in New Mexico or a dairy
    herd owner in Ohio can locate information about national trends
    collected by our National Animal Health Monitoring System.
        Our scientists at the National Veterinary Services Laboratories in
    Ames, Iowa, strive to identify and improve the diagnostic kits and
    procedures used to test livestock and poultry. One such advance
    included a more accurate method of distinguishing the hog cholera virus
    from a similar virus that causes bovine viral diarrhea. Another
    involved molecular techniques to distinguish pathogenic from
    nonpathogenic strains of avian influenza (AI). Scientists used this
    latter test two years ago in California to confirm a potentially deadly
    strain of AI in shipment of birds. That shipment was denied entry and
    we prevented millions of dollars of potential losses.
        Last August, exotic Newcastle disease was detected in the United
    States at a pet bird facility in Missouri. An early response team
    worked with State officials and traced the incident to smuggled birds.
    Through quarantines and testing they eliminated the risk to our
    commercial poultry industry.
        Reducing the impact of existing pests and diseases on U.S.
    agriculture.--The Animal Damage Control (ADC) program minimizes the
    effects of wildlife on livestock and crops and protects human health
    and safety from wildlife damage. Recent surveys indicate that predators
    have killed 96,200 calves and 21,200 adult cattle valued at $39.5
    million annually. Coyotes and dogs continued to be the largest
    predators of cattle. Bird and other wildlife strikes are a serious
    economic and safety problem for aircraft in the United States. The
    National Wildlife Research Center, working with the Federal Aviation
    Administration (FAA), found that 2,220 strikes to civilian aircraft
    mostly by gulls and waterfowl occurred in 1994. Losses from strikes to
    U.S. military aircraft are estimated to average $112 million per year;
    a similar loss occurs for civilian aircraft. ADC provided assistance to
    340 airports regarding appropriate control programs to minimize
    wildlife hazards in 1996.
        We have reached a major milestone in the Cooperative State-Federal
    Brucellosis Rapid Completion Plan by bringing the total number of
    quarantined herds in the United States down to a record low of 32 as of
    December 31, 1996. This tremendous achievement points towards
    eliminating this disease by the end of fiscal year 1998. Significant
    progress is being made also toward the final eradication of bovine
    tuberculosis. Currently, 44 states are accredited free, and six States
    are in a modified accredited status. One of our proudest achievements
    in the eradication program has been the significant decrease in the
    number of Mexican-origin cattle identified with tuberculous at
    slaughter. APHIS has the infrastructure, statutory authorities, and
    operational and technical expertise for managing a wide range of pest
    and disease activities which include grasshopper, noxious weeds, boll
    weevil, biocontrol, and pink bollworm.
        Being the Federal leader of animal care and horse protection.--Many
    citizens have recently expressed concern about the care and handling of
    wildlife in captivity; particularly those used for exhibition in zoos
    and circuses. We have developed regulatory proposals regarding the
    treatment and training requirements for elephants and other dangerous
    exotic animals. In looking for ways to improve our enforcement efforts,
    we seek cooperation with our partners to carry out our regulatory
    responsibilities effectively. For example, APHIS recently signed a
    Memorandum of Understanding with the State of Missouri to share
    information on Animal Welfare Act (AWA) inspections. We are also
    continuing to pursue augmentation of our AWA enforcement authority. For
    instance, we are looking at ways of increasing our authority to refuse
    licenses to individuals not in compliance with the AWA--or anyone
    convicted of violating any Federal, State, or local animal welfare law.
    In our efforts to improve enforcement of the Horse Protection Act
    (HPA), APHIS officials depend on individuals certified through the
    Designated Qualified Persons (DQP) program to assist in monitoring
    horse shows for compliance.
        Developing new or improved methods based on science.--The National
    Wildlife Research Center has made significant progress toward
    developing immunocontraceptive vaccines for non-lethal wildlife damage
    management. In the biotechnology field, after extensive review to
    assure minimal risk, APHIS deregulated seven new plant varieties. They
    are: herbicide tolerant cotton; male sterile and herbicide tolerant
    corn; tomato altered for fruit ripening; Colorado potato beetle
    resistant potato; virus resistant squash; herbicide tolerant soybean;
    and virus resistant papaya. These new technologies are important
    advances for agriculture.
        The international harmonization of regulations for genetically
    modified products involve several activities. First, we work with other
    countries, including all European countries, to build confidence in the
    review processes and work to extend existing regulatory approaches for
    traditional plant products to new, genetically modified products.
    Second, we work with other countries to coordinate our different
    national regulatory approaches through bilateral and multilateral
    forums, such as the Organization for Economic Cooperation and
    Development. Third, we attempt to base our review system on rational,
    science-based regulations. The recent trade agreements support this
    regulatory approach.
    APHIS' 1998 Budget Request
        The current law request proposes $424 million for salaries and
    expenses, compared to the fiscal year 1997 appropriation of $435
    million. The budget request contains an increase of $1.3 million for
    the Agricultural Quarantine Inspection Program (AQI) appropriated
    program that inspects travelers along the Mexican and Canadian borders
    and from Hawaii and Puerto Rico to the mainland. The 1998 budget
    requests approximately $9 million for pest detection activities;
    largely devoted to the Karnal bunt (KB) program. The budget proposes a
    decrease of $3.3 million for Animal Damage Control operation by seeking
    at least 50 percent of total program support from each State. This
    proposal is responsive to Congressional encouragement that APHIS
    maximize cost-sharing of ADC control activities. The budget also
    proposes a decrease of $9.8 million in the boll weevil program since it
    is no longer necessary to provide Federal funding in areas where the
    boll weevil no longer exists. APHIS will still assist in establishing
    new program areas, oversee and provide technical support to boll weevil
    detection and control activities in the eradicated and non-infested
    areas. In addition, APHIS intends to conduct architectural and
    engineering work for a sterile screwworm rearing facility, to be built
    in Panama with carryover funding for screwworm. Legislation will be
    proposed to recover the costs of providing certain costs for animal
    welfare, veterinary biologics, pink bollworm, biotechnology and the
    Swine Health protection Act. We believe that the identifiable
    beneficiaries of these Federal programs, rather than the general
    taxpayer, should pay for the services they receive.
        An appropriation of $7.2 million is proposed for maintenance and
    modernization of APHIS facilities in 1998 to complement the
    Agricultural Research Service's request to continue modernization of
    the Plum Island Animal Disease Center and for general repairs and
    maintenance on existing buildings.
                         agricultural marketing service
        The fundamental mission of AMS is to facilitate the strategic
    marketing of agricultural products in domestic and international
    markets, while ensuring fair-trading practices, and promoting a
    competitive and efficient marketplace to the benefit of consumers of
    U.S. food and fiber products. The AMS programs enable the private
    sector marketing system to provide food and other agricultural products
    more efficiently, with greater dependability, lower economic cost, and
    higher equitable treatment among the participants. AMS' activities
    include the dissemination of market information, development of grade
    standards--many of which are used in the voluntary grading programs
    funded by user fees--protection of producers from unfair marketing
    practices, random testing of commodities for pesticide residues,
    oversight of industry funded programs to promote agricultural products,
    research and technical assistance aimed at improving efficiency of food
    marketing and distribution. AMS also administers marketing agreements
    and orders at the national level and purchases commodities that support
    domestic feeding programs.
    Program Accomplishments and Plans
        In response to the changing needs of its customers, AMS has
    improved program delivery and broadened the focus of its programs to
    incorporate a global approach to marketing services. Using additional
    funds provided for fiscal year 1997 for Market News activities, AMS
    absorbed reporting functions in states, such as California, that were
    unable to provide the level of coverage necessary to maintain the
    integrity of national market reporting. Market news coverage for
    critical California markets was maintained by establishing a new office
    in Fresno, California, and reporting California livestock, grain, and
    hay markets utilizing AMS staff located in other states.
        The U.S. Department of Agriculture's market news reports are now
    available on the Internet's World Wide Web. The new Market News
    Communications System will carry nearly 700 reports on a daily basis.
    The World Wide Web is just one more step we have taken to increase
    accessibility to and the timeliness of market news information.
        In response to recommendations made by the Advisory Committee on
    Agricultural Concentration, AMS broadened the scope of market news to
    include more information about cattle traded under contract or formula,
    value-based pricing, and regional market forces. These actions have
    given our farmers and ranchers more tools to compete in today's
    marketplace, which relies on timely and accurate market information. We
    are happy to be on the forefront of supplying American agriculture all
    the information they need in order to strategically produce and
    successfully market products in a globally competitive marketplace.
        As the global marketplace has grown in importance, we have taken
    initial steps to meet the international information needs of American
    agriculture. Within limited available funds AMS has developed
    international market intelligence to support expanded foreign markets.
    Through cooperative exchanges of information between the United States
    and countries in Europe, Canada, Mexico, and Asia, AMS provides
    critical market information, such as current prices and volume traded,
    to U.S. producers that want to take advantage of these markets. Market
    news reports containing this information have enabled agricultural
    exporters to take advantage of expanding global marketing
    opportunities. In addition, AMS is providing technical assistance aimed
    at increasing U.S. export opportunities through market development
    activities focusing on market information, quality assessment, and
    product distribution systems. These activities are primarily conducted
    through USDA's Emerging Markets Program by representing U.S. commercial
    interests in various international standard setting organizations.
        Under the Pesticide Recordkeeping Program, AMS is working to
    achieve national coverage by 1998. Currently, AMS provides funding for
    educational materials, training programs, and inspection of certified
    private applicators' records through cooperative agreements with 22
    states. In states that are unable to enter into cooperative agreements
    with AMS, Federal employees administer the program. In addition, the
    State Cooperative Extension Services and other organizations deliver
    educational information.
        AMS works closely with State programs to enhance marketing of
    agricultural products. For example, AMS has developed a Partners in
    Quality, or PIQ program with the States to design a unique system of
    procedures, documentation, and audits for packing houses. The Federal-
    State Improvement program improves the efficiency of the agricultural
    marketing chain through cooperative grant agreements with State
    Departments of Agriculture and other State agencies. And, the Pesticide
    Data program is a cooperative Federal/State effort to obtain
    statistically defensible data on pesticide residues in food.
    AMS' 1998 Budget Request
        For 1998, we are requesting a budget of $49.8 million for the
    Marketing Service Program and $1.2 million for the Federal-State
    Marketing Improvement Program. We are requesting an increase of
    $320,000 to expand international market news reporting to South and
    Central America, and Pacific Rim countries. Market surveys conducted by
    AMS have indicated a great demand for this information by the food and
    fiber industry as they meet increased competition in the post-GATT and
    NAFTA economy.
        We are also requesting an increase of $500,000 to expand domestic
    market news reporting in accordance with the recommendations of the
    Secretary's Advisory Committee on Agricultural Concentration. As I
    mentioned earlier, initial steps have been taken within available funds
    to address some of the concerns raised by the Committee. However, more
    needs to be done including 1) increased reporting on the terms of
    cattle traded under contract sales; 2) expanded reporting on value-
    based pricing indicators; 3) establishment of more timely and detailed
    reports of import and export data on livestock and meat; and, 4)
    reporting the distribution of slaughter cattle by grade and yield on a
    regional basis. We must adapt to the changing needs of the industry in
    order to ensure a healthy competitive environment for all players.
        We are working diligently to publish a draft rule on the National
    Organic Standards by late spring and to implement a National program.
    The program will facilitate the marketing of agricultural products as
    organically produced both domestically and internationally. AMS plans
    to begin accrediting state agricultural departments and private persons
    who will inspect participating producers and handlers to certify
    compliance with the organic program after the final rule is published
    in late 1997. AMS estimates that when the program is implemented
    approximately 35 private agencies will certify over 6,800 organic
    producers and handlers. In order to meet the increased responsibility
    for accrediting organic certifiers and administering the program, the
    AMS budget includes an increase of $505,000. Consistent with the
    National Organic Standards Act, we will seek to recover the cost of the
    program through user fees that will be deposited into the Treasury.
        The budget also proposes to return program funding for the
    Pesticide Data Program to AMS from the Environmental Protection Agency
    (EPA). The Administration believes that funding for the Pesticide Data
    Program within AMS is preferable to funding the program within EPA. PDP
    uses state-of-the-art equipment that can detect residues in parts per
    billion. We find detectable residues in less than 46 to 62 percent of
    the test samples. Residues, which are less than 10 percent of the
    tolerance levels set by EPA, occur in 90 percent of the samples. Only
    1.3 percent of the samples contain violative residues; 88 percent of
    which represent pesticides having no tolerance on that particular
    commodity--often due to long-term uncontrollable carryover effects from
    DDT. These data help the Department dispel the notion that pesticide
    residues are pervasive and at dangerous levels. It also helps improve
    the confidence which domestic and foreign consumers have in the food
    safety of our products. The Economic Research Service has used this
    data and published reports to help the Department target its
    agricultural research and extension resources. These programs implement
    integrated pest management practices and eliminate mistakes by farmers
    in applying pesticides, in controlling drift from adjacent fields or in
    following best management field rotation practices.
        AMS has the technical staff and program infrastructure in place to
    meet the multiple demands for pesticide residue data. Since the program
    was created, AMS has forged highly successful cooperative working
    relationships with participating states to obtain statistically
    defensible data. AMS staff have worked with many others to refine the
    scientific methodology for collecting and conducting the tests so the
    data is useful not only to EPA, but also the Food and Drug
    Administration, USDA's Foreign Agricultural Service, Economic Research
    Service, Agricultural Research Service, other academia, the
    agricultural industry, and consumers. With the implementation of the
    Food Quality Protection Act, the pesticide residue data will play a
    more critical role for conducting risk assessments for the
    reregistration of pesticides. The program continuity provided by
    funding the program in AMS will ensure the integrity of the data and
    that all the needs of agriculture and the security and safety of the
    food supply to the public are met.
            grain inspection, packers and stockyards administration
        The Grain Inspection, Packers and Stockyards Administration's
    (GIPSA) mission is to facilitate the marketing of livestock, poultry,
    meat, cereals, oilseeds, and related agricultural products, and to
    promote fair and competitive trading practices for the overall benefit
    of consumers and American agriculture. GIPSA personnel are situated in
    field locations across the country to serve our customers in the grain,
    livestock and poultry industries.
    Organization and Performance
        Federal grain personnel work with over 2,000 State and private
    inspectors to provide high-quality inspection and weighing services on
    a user-fee basis. Federal inspectors service 42 export elevators
    located in Georgia, Illinois, Indiana, Louisiana, Maryland, New York,
    Ohio, Oregon, and Texas. A small Federal staff also provides service at
    six export elevators in Eastern Canada for U.S. grain transshipped
    through Canadian ports. Eight delegated States provide services at an
    additional 20 export elevators located in Alabama, California,
    Minnesota, Mississippi, South Carolina, Virginia, Washington, and
    Wisconsin. Sixty-five (65) designated agencies service the domestic
    market under GIPSA supervision. In 1996, this unique mix of Federal,
    State, and private inspection agencies provided 2.3 million inspections
    on an estimated 250 million metric tons of grains and oilseeds; issued
    over 118,000 official weight certificates; weighed over 114 million
    metric tons of grain; and met with trade teams representing 41
    countries around the world to teach them about GIPSA and the U.S. grain
    marketing system.
        GIPSA's grain program collected over $34 million to conduct over
    2.3 million official inspections, 600,000 protein and oil tests,
    115,000 mycotoxin tests, and for a variety of other official inspection
    and weighing services on U.S. exports of wheat, corn, coarse grains,
    rice and soybeans. These products were valued at approximately $27
    billion. Our activities cost only a little over one-tenth of 1 percent
    of the total value of the exports.
        In fiscal year 1996, GIPSA's grain program pursued a number of
    initiatives to reengineer and automate our business and administrative
    functions in an attempt to contain costs, lessen risks, and increase
    the productivity associated with grain handling. We worked closely with
    the U.S. grain handling industry on Electronic Data Interchange (EDI),
    an electronic commerce project designed to automate business
    transactions involving U.S. grain. A reengineered quality assurance and
    quality control program for the official grain inspection system will
    improve the quality and accuracy of inspection results nationwide. The
    new, proactive program integrates automated technology, empowers front-
    line employees to take action, and increases the use of statistical
    quality control processes to further improve the performance of the
    official grain inspection system.
        GIPSA continued to be the sole laboratory for grain inspection
    equipment in the National Type Evaluation Program. This program is a
    cooperative effort with the National Institute of Standards and
    Technology and the National Conference on Weights and Measures for
    standardizing the commercial grain inspection equipment. GIPSA
    continued numerous grain moisture meter calibration changes to improve
    the accuracy and consistency of commercial grain moisture measurements.
        GIPSA also helped educate our worldwide customers about the quality
    and value of U.S. grain exports. GIPSA representatives met with 77
    teams from 41 countries to provide information, technical guidance, and
    educational seminars.
        GIPSA's Packers and Stockyards Program is located in 11 offices
    strategically sited throughout the United States to monitor compliance
    with the P&S Act. The Commerce Department estimates the annual
    wholesale value of livestock, meat, and poultry products to be
    approximately $95 billion. At the close of fiscal year 1996, there were
    1,348 stockyards; 6,988 market agencies/dealers; and 2,169 packer
    buyers registered with GIPSA to engage in the livestock marketing
    business. There also were approximately 6,000 slaughtering and
    processing packers; an estimated 6,500 meat distributors, brokers, and
    dealers; and an estimated 225 poultry firms subject to the P&S Act.
        During fiscal year 1996, GIPSA targeted resources at providing
    financial protection, promoting fair business practices, and enabling a
    competitive marketing environment for livestock, meat, and poultry. The
    Agency conducted over 2,000 investigations which disclosed over 800
    violations of the P&S Act. Formal actions were requested in 84 cases
    and 62 administrative or justice complaints were issued to bring firms
    into compliance with the P&S Act. Administrative decisions and orders
    were issued in 49 cases during fiscal year 1996. Most violations were
    corrected voluntarily. Several cases resulted in livestock and poultry
    producers receiving additional funds for the sale of their product.
    Financial investigations during fiscal year 1996 resulted in $3.5
    million being restored to custodial accounts established and maintained
    for the benefit of livestock sellers. Packer and poultry trust
    activities also returned over $400,000 to livestock sellers and over
    $100,000 to poultry growers during the fiscal year. During fiscal year
    1996, 205 insolvent dealers and market agencies corrected or reduced
    their insolvencies by $11.2 million. GIPSA closely monitored
    anticompetitive practices to determine whether there were apportioned
    territories, price agreements or arrangements not to compete, and
    payoffs or kickbacks to buyers. A high priority is placed on
    investigating all complaints and developing information regarding the
    failure of livestock dealers, market agencies, or packers to compete
    for the purchase of livestock.
        In 1996, a major investigation of fed cattle procurement practices
    in Kansas was completed. The investigation examined over 15,000
    purchase transactions involving two million head of cattle and found
    that supply and demand factors were the primary causes of price
    declines in the spring of 1995. GIPSA began several other actions to
    increase enforcement activities in the area of anticompetitive-type
    practices involving the Nation's major meat packers. A major cattle
    procurement investigation in Texas will examine over 37,000 purchase
    transactions involving over six million head of cattle sold during 1995
    and 1996. A major slaughter hog procurement investigation will examine
    approximately 50,000 purchase transactions involving over 2.5 million
    head of slaughter hogs. Using data from the Kansas and Texas fed cattle
    investigations, GIPSA will conduct economic analyses during fiscal year
    1997 on the effect of forward contracting, packer feeding, and
    marketing agreement/formula pricing arrangements.
        In fiscal year 1997, GIPSA will use a review by USDA's Office of
    the Inspector General (OIG) to increase its effectiveness and make full
    use of its authority to investigate and rectify anticompetitive
    practices and arrangements. GIPSA's structure and operating practices
    and procedures may need to be modified to enhance its responsiveness to
    the needs of a changing industry.
        GIPSA has solicited public comment on the need for regulations to
    address contract poultry grower financial arrangements. Many poultry
    growers have complained about the behavior of some contractors who have
    been comparing the production costs between growers in determining
    payment. Growers also have complained about the inaccuracy of feed
    weights, untimely feed delivery, inconvenient pickup procedures and
    unacceptable procedures for weighing live birds picked up for
    slaughter.
    Strategic Planning
        The draft GIPSA Strategic Plan was developed to guide the agency
    into the next century and to help ensure that our programs and services
    remain relevant to our customers and American agriculture. It was
    developed in a cooperative effort with all GIPSA employees and our
    customers. The four major goals that will guide our planning processes
    and initiatives for the upcoming years are to ensure that: programs are
    cost-effective and responsive to markets served; the credibility of
    programs is unquestionable; GIPSA employees are highly-skilled
    professionals providing quality customer service; and, customers'
    expectations are harmonized with GIPSA's authority and capabilities.
        As part of the strategic planning process, GIPSA identified several
    measures that will allow us to quantitatively evaluate our performance.
    In the grain program, GIPSA will begin measuring the performance of the
    new quality assurance and control system for accuracy and consistency;
    the average cost of oversight per metric ton of grain inspected; the
    number of new tests developed; the number of improved methods/
    calibrations implemented; and the average cost of export grain
    inspection per metric ton. For the P&S programs, GIPSA will implement a
    new electronic tracking system for complaints and investigations. This
    system will enable us to establish performance goals based on the new
    tracking and monitoring system, and to provide for more effective
    allocation of resources.
    GIPSA's 1998 Budget Request
        To fund the important initiatives and to enable GIPSA to remain a
    valuable part of American agriculture, under current law, GIPSA's total
    budget request for fiscal year 1998 is $68.8 million, of which $25.7
    million represents appropriations funding. The remaining $43.1 million
    represents user fee authority for grain inspection and weighing
    services.
        For fiscal year 1998, the President's budget proposes a total
    program level for grain inspection of $54.0 million, with $10.9 million
    appropriated for compliance, standardization, and methods development
    activities. The fiscal year 1998 budget also proposes legislation to
    authorize, subject to appropriations, the collection of $3.6 million in
    additional user fees to cover the costs of grain standardization
    activities. The grain industry, which is the primary beneficiary of the
    grain standards, should pay for the services they receive rather than
    the general taxpayer.
        For P&S Programs, the budget proposes $14.8 million, which includes
    increases of $225,000 to allow GIPSA to establish electronic filing
    procedures for annual reports, which is consistent with the
    requirements of the Paperwork Reduction Act of 1995; $1.6 million for
    activities in the packer competition and industry structure areas; and
    $750,000 for poultry compliance activities.
        Increasing concentration, structural change, declining market
    performance, and the increasing use of complex formula and value-based
    marketing systems by packers continue to raise questions of regulatory
    and policy significance. Additional resources will allow GIPSA to
    expand its monitoring and investigations regarding the anti-competitive
    implications of structural changes and behavioral practices in the meat
    packing industry, and will afford us an increased capability to support
    legal actions that require complex economic and statistical analyses.
    Continuous, systematic collection and analysis of data along with
    aggressive investigative activities are required to address these
    issues effectively. The needs for these additional resources were
    supported by recommendations from the Secretary's Advisory Committee on
    Agricultural Concentration.
        Finally, the fiscal year 1998 budget proposes legislation to
    authorize the collection of license fees to administer all activities
    under the P&S Act. All meat packers, live poultry dealers, stockyard
    owners, market agencies, and dealers, as defined in the P&S Act, would
    be subject to the license fees. Also included is a legislative proposal
    regarding a statutory dealer trust to require livestock inventories and
    accounts receivable due from the sale of livestock to be held in trust
    for unpaid cash sellers when a dealer fails to pay for livestock.
                                   conclusion
        I appreciate this opportunity to present the budget for the
    Marketing and Regulatory Programs. We believe the proposed funding
    amounts and sources of funding will provide the level of service wanted
    by our customers--the agricultural producing and marketing industry,
    consumers, and the general public. We are happy to answer any
    questions.
                                     ______

                     Prepared Statement of Terry L. Medley
        Mr. Chairman and members of the Committee, I am very pleased to
    report on the use of resources you have entrusted to us. Using these
    resources, we help to ensure a wholesome, affordable food supply while
    stimulating global economies, safeguarding agricultural resources, and
    protecting ecological systems. I will report on our efforts and
    outcomes in more detail.
                                  our mission
        APHIS leads the way in anticipating and responding to issues
    involving animal and plant health, conflicts with wildlife,
    environmental stewardship, and animal well-being. Together with our
    customers and stakeholders, we promote the health of animal and plant
    resources to facilitate their movement in the global marketplace, which
    helps to ensure abundant agricultural products and services for U.S.
    consumers and necessary export markets for our farmers.
                         external and internal factors
        In developing its overall strategy for accomplishing its mission,
    APHIS considers a wide range of internal and external factors. The
    following factors serve as challenges and opportunities for APHIS
    programs:
        1. The growing importance of global trade to U.S. agriculture and
    the development of new ``rules'' of trade through GATT, NAFTA, and
    other agreements.--APHIS responsibilities have grown as agricultural
    markets have become global in nature. We once thought protecting U.S.
    agriculture meant excluding foreign pests and diseases. New rules
    concerning sanitary and phytosanitary regulations mean that we must
    base exclusion decisions upon risk assessment procedures and concern
    for equivalence. Equivalence of sanitary and phythosanitary regulations
    among nations is the key to ensuring access to foreign markets and a
    critical component of protecting U.S. agriculture.
        2. The dynamic biology and epidemiology of animal and plant pests
    and diseases.--Threats to plants, domestic animals, and wildlife are
    dynamic. Pests, such as fruit flies, and diseases, such as stomatitis
    and karnal bunt, represent risks to U.S. agricultural productivity and
    access to foreign markets. APHIS is continuously challenged to update
    prevention strategies, monitoring systems, and response actions needed
    to ensure effective prevention, control and response.
        3. The need to expand upon and develop new partnerships with
    States, industry, and the public.--The role of the Federal government
    in agriculture continues to change, driven in large part by budgetary
    constraints and the need for partnerships to carry out new and complex
    programs. In a cooperative effort, we share responsibility for animal
    and plant health with the States and industry while public involvement,
    both directly and through the media, is expanding. APHIS has both the
    opportunity and the challenge to plan its mission and carry out its
    implementation strategies through new forms of collaboration and
    cooperation.
                                 our priorities
        1. Our first priority is to protect American producers and maintain
    export markets by preventing the introduction and establishment of
    pests and diseases harmful to U.S. agriculture.--APHIS conducts many
    activities to protect the health of U.S. plant and animal resources:
    including preclearance inspections, permit decisions, port of entry
    inspections, quarantine treatments, monitoring and detection surveys,
    and eradication of exotic plant and animal pests and diseases. While
    these activities are fundamental to protecting U.S. plant and animal
    resources, they succeed only when they are part of a comprehensive
    safeguarding system that reduces pest risk.
    Inspecting people and cargo
        Our inspectors work at international ports of entry--including land
    border ports, airports, and seaports--around the clock. Last fiscal
    year, we conducted over 77 million inspections and intercepted nearly
    1.9 million illegal agricultural products. These products harbored over
    56,000 plant pests that could have infested U.S. farms and led to
    billions of dollars in losses and control costs.
        Our officials also intercepted more than 290,000 lots of
    unauthorized meat and animal byproducts that have the potential to
    spread health threats such as foot-and-mouth disease, exotic Newcastle
    disease, and hog cholera to American livestock and poultry. These
    diseases could dramatically reduce the $186 billion Americans receive
    annually in cash receipts from agricultural products.
        One of the most visible and successful parts of our pest and
    disease exclusion efforts is the Beagle Brigade program. This program
    pairs beagles and inspectors at 19 international airports throughout
    the country to detect prohibited fruits, plants, and meat. Our beagles
    can detect agricultural contraband about 90 percent of the time. The
    beagles identified illegal contraband 73,751 times in 1996.
        Our Agency takes action against those agricultural diseases and
    pests that find their way into our country undetected. One example is
    the pathogen that causes Karnal bunt. Since the pathogen's discovery in
    Arizona in early March of 1996, we have worked with States and industry
    to focus on four main objectives. The first is to protect U.S. wheat
    producers who do not have Karnal bunt; the second is to provide the
    best possible options for those who are affected by Karnal bunt; the
    third is to protect the movement of wheat into domestic and
    international markets. And finally, the fourth is to ensure that we
    maintain the flow of pertinent disease information to guide our
    efforts.
        We recognized early on that, we would need to determine the actual
    presence of the disease and limit the paths that enable its spread. We
    initiated the national Karnal bunt survey and conducted targeted
    delimiting surveys and traceback efforts to track the movement of
    suspected grain and seed. We have made every effort to be attentive to
    the needs of producers--striking a balance between the need to protect
    those affected, while also keeping U.S. wheat moving in domestic and
    foreign commerce. Accordingly, as we gathered preharvest survey
    results, we began to adjust the initial boundaries of regulated areas.
    We removed areas from quarantine in July. In October, we again refined
    the regulations, establishing criteria for levels of risk and relieving
    some restrictions.
        As we have said from the very beginning, we intend to keep our
    efforts to combat this disease flexible and risk-based. We will
    continue national survey activities as we determine the appropriate
    long term response to Karnal bunt.
        2. A second priority is to facilitate trade.--Competitiveness in
    international trade is of vital national interest to the United States.
    We seek to maximize trade opportunities and access to new markets by
    developing new export protocols which assure that exported animals and
    plants and related products meet the requirements of recipient nations,
    and by integrating contemporary science into negotiations with trading
    partners. The establishment of the World Trade Organization has
    significantly changed the rules of trade and dramatically increased the
    importance of international standards. By ensuring compliance with
    international standards and the entry requirements of importing
    countries, APHIS facilitates the export of U.S. agricultural products,
    livestock, and poultry. Because APHIS resolves sanitary and
    phytosanitary issues between states, it is uniquely positioned to align
    interstate regulations with international standards.
    Keeping products flowing to foreign countries
        APHIS keeps exports flowing by maintaining existing markets and
    opening new ones. Let me describe a few examples.
        With Karnal bunt disease survey data, we can clearly demonstrate
    the limited distribution of the disease and we can show other countries
    that Karnal bunt does not impact the quality of U.S. wheat. Because of
    this, we maintained 99 percent of the $6 billion wheat export market.
    Most countries have continued to accept our export certificates and we
    have met with others to negotiate their acceptance of wheat from
    regulated areas that tests negative. We have negotiated successfully
    with several significant markets, including Germany and Italy.
        We have opened new export markets in both China and Japan for U.S.
    apples. These are markets that were not even considered a few years
    ago. Now, because of our efforts, industry officials have estimated
    that apple shipments to Japan alone will mean hundreds of millions of
    dollars of income for U.S. farmers. Several livestock protocols have
    just been negotiated with China, opening this market to exports of U.S.
    ruminants, swine, ratites and germ plasm. The negotiations have been
    long and steady, taking over ten years to get into this current market
    of over $10 million for U.S. livestock. China, with its rapidly
    expanding economy, is considered one of the largest potential markets
    for U.S. animal-related exports.
        We also worked to keep the market for cowhide exports to Korea open
    and thriving. In recent years, the export of such hides has provided
    American agricultural producers with more than $700 million in
    revenues--making it the largest Korean market for any U.S. agricultural
    product.
    Maintaining information on pests and diseases
        A key to maintaining access to already established international
    markets and obtaining access to new markets is providing foreign
    governments with up-to-date scientific information on U.S. plant and
    animal health status. Quality animal health status information allowed
    us to reach an agreement on sanitary requirements that permitted the
    resumption of U.S. poultry exports to Russia. The accord establishes a
    framework for reviewing U.S. poultry processing plants and cold storage
    facilities that export poultry to Russia and provides for development
    of mutually acceptable criteria for review of U.S. facilities in the
    future. Documentation on six poultry diseases of concern will now
    accompany birds from farms to processing plants as a result of a
    cooperative State-Federal-industry program. Through these successful
    negotiations, we maintained access to Russia's $500 to $700 million
    market for U.S. poultry.
        This information is essential if we are to certify U.S.
    agricultural products for export. In fiscal year 1996, we issued over
    279,000 Federal certificates for plant products alone and certified
    another 527,000 ruminants and horses for shipment to foreign
    destinations.
    Allowing trade from regional areas
        We are preparing to seize the economic opportunities that are
    developing in world trade. ``Regionalization'' is a key provision in
    our international trade agreements. It is a concept that the Department
    of Agriculture has advocated for many years as beneficial to world
    agriculture.
        Under regionalization, countries recognize pest and disease status
    on an area or regional--rather than national--basis, allowing trade in
    agricultural products to occur from regional areas. Regionalization
    will afford U.S. producers exciting new export opportunities, as pest
    and disease free areas of our country are relieved from restrictions.
    In addition, adherence to this principle should reduce the impact of
    trade disruptions if a disease or pest outbreak occurs in a limited
    region of the United States.
        APHIS has proposed a rule setting up the framework for how we would
    establish regionalization principles. APHIS' proposed criteria for
    animal disease regionalization would establish requirements for foreign
    regions based on scientific risk class levels. A region's risk-class
    level--ranging from ``negligible risk'' to ``very high or unknown
    risk''--would vary depending on many factors. Among them are the
    region's geographic location and environment, the prevalence of
    diseases of concern, and the type of commodity. Other factors to
    consider are the foreign country's animal health infrastructure,
    disease monitoring and surveillance systems, and the level of
    enforcement to contain diseases and pests. Of course, in the realm of
    international trade, we must be prepared to answer these same
    questions. We are confident that U.S. agriculture will fare well.
        We believe American agricultural producers will benefit from
    regionalization in the future. Canada has already made the commitment
    to regionalization by accepting parts of the United States as free of
    bluetongue disease. The European Community is considering doing the
    same. We hope to move forward with regionalization and join these
    countries on this new frontier of agricultural trade.
        3. A third priority is animal and plant health monitoring.--APHIS
    must maintain a domestic infrastructure to assure a strong animal and
    plant health monitoring and surveillance program. As part of this
    effort, the Agency maintains a cadre of trained, committed
    professionals to respond immediately to potential animal and plant
    health emergencies.
    Knowing the health status of our plants and animals
        We have in place both formal and informal monitoring and
    surveillance programs. Our National Animal Health Monitoring System--or
    NAHMS program--surveys the Nation's livestock and poultry herds. The
    program's goal is to systematically establish a baseline measure of
    U.S. livestock and poultry health. Our other formal programs include
    disease-specific testing and depopulation, foreign disease
    investigations, and the testing of livestock at slaughter. By using
    samples from animals at slaughter, for example, we are advancing our
    surveillance goals to detect, isolate, and eradicate diseases like
    brucellosis and tuberculosis.
        Bovine Spongiform Encephalopathy (BSE) has never been detected in
    the United States, and the USDA has worked aggressively and proactively
    to keep it that way. In a recent hearing before the House Committee on
    Government Reform and Oversight, we explained issues surrounding BSE
    and actions taken to prevent its introduction. We understand that the
    public is concerned about BSE, particularly in light of the recent
    announcement in Great Britain that a newly identified variation of
    Creutzfeldt-Jakob disease in humans may be linked to the BSE epidemic
    in cattle. APHIS is continuing to work cooperatively with FSIS, FDA,
    the Department of Health and Human Service's Centers for Disease
    Control and Prevention, and other Federal agencies--as well as
    industry, animal health organizations, and independent scientific
    experts--to evaluate and reassess our policies regarding BSE. We have
    established five working groups focusing on specific aspects of the
    disease. We are committed to maintaining a coordinated, science-based,
    and effective approach that will keep the United States free of BSE.
        APHIS conducts detection surveys for incipient infestations of
    exotic pests that could potentially cause economic damage if spread in
    the United States. APHIS and cooperators in the Cooperative
    Agricultural Pest Survey (CAPS) conduct surveys and manage the data
    obtained. The data provide Federal and State officials, and the private
    sector, with information on exotic pest detections, agricultural export
    requirements, and the management of cooperative pest control programs.
    APHIS used the CAPS network to implement the National Survey for Karnal
    Bunt in an emergency response to the detection of the pathogen that
    caused the disease in Arizona in March 1996. The data gathered through
    these surveys enabled the Agency to continue certifying wheat for
    export even after the 1996 detection.
        APHIS' places information about diseases and pests directly into
    the hands of producers, practitioners, and government officials using
    the latest information technology. We are also taking full advantage of
    the Internet and using it to quickly and efficiently reach our
    customers. For example, a sheep producer in North Dakota can link up to
    our interactive database and get information regarding the voluntary
    scrapie certification program. A poultry producer in Georgia can visit
    the APHIS home page to review regulations, search for emergency
    bulletins, and find current export health requirements. A cattle
    rancher in New Mexico or a dairy herd owner in Ohio can locate
    information about national trends collected by our National Animal
    Health Monitoring System.
        We cannot rely solely upon individual programs to protect U.S.
    livestock. Our efforts to prevent the entry of prohibited animal
    products at our borders alone cannot protect us. Monitoring and
    surveillance programs cannot stand by themselves. For this reason, we
    must continue to explore new projects and new tools.
        Our scientists at the National Veterinary Services Laboratories in
    Ames, Iowa, strive to identify and improve the diagnostic kits and
    procedures used to test livestock and poultry. Their work with
    researchers and their attention to the most current veterinary
    literature have led to several diagnostic advances. These advances
    include a more accurate method of distinguishing hog cholera virus from
    a similar virus that causes bovine viral diarrhea and molecular
    techniques to distinguish pathogenetic from nonpathogenic strains of
    avian influenza (AI). Scientists used this test 2 years ago in
    California to confirm a potentially deadly strain of AI in a shipment
    of birds. The shipment was denied entry and we prevented millions of
    dollars of potential losses.
        In addition, APHIS will open its Center for Plant Health Science
    and Technology in Raleigh, North Carolina in 1997. The Center will
    provide the best possible scientific and technological support for the
    protection of U.S. plant resources and the facilitation of agricultural
    trade.
    Emergency response
        We are not waiting for inspiration to come at the moment of crisis.
    We have taken steps with State governments and industry to protect U.S.
    livestock and poultry. Underlying these efforts are three emergency
    management principles: prevention, preparedness, and response.
        Although APHIS inspectors have remained vigilant in their watch at
    our ports of entry and have proven an effective first line of defense,
    we cannot rely simply on prevention. To be prepared, we must constantly
    educate our people on foreign disease identification and make sure they
    are armed with the best information available. To do this, we send
    people across the globe to study first hand the diseases not endemic to
    the United States. For example, we now have APHIS personnel in Armenia
    to study Foot-and-mouth disease, and others in Poland to review the hog
    cholera situation in Central and Eastern Europe. In addition, APHIS
    assisted the Government of Surinam in detection and trapping activities
    for the Carambola fruit fly.
        The third principle of our emergency management strategy is
    response. We have two highly prepared and trained teams which act as
    independent disease eradication forces, specializing in early
    responses. These teams are dispatched immediately at the first
    indication of a foreign animal disease or plant pest. They analyze the
    situation and examine what steps may be necessary. With over $186
    billion in U.S. cash receipts from agricultural products at risk, we
    must be poised to act quickly when breaches in our preventative
    security occur.
        Last August, we detected exotic Newcastle disease at a pet bird
    facility in Missouri. An early response team was on the scene
    immediately. They worked with State officials to trace the incident to
    smuggled birds. Through quarantines and testing, they eliminated the
    risk to our commercial poultry industry. Swift identification of the
    disease and prompt response--two of the things we have been preparing
    ourselves to do--made all the difference.
        4. A fourth priority is to manage those pests and diseases which
    have been detected and identified as having a significant impact on
    U.S. agriculture.--In cooperation with the States, APHIS works to
    improve the general health of our Nation's multi-billion dollar
    agriculture industry through management techniques designed to
    eradicate harmful pest and diseases, or, if eradication is not
    feasible, minimize their economic impact.
    Protecting people, property, and the environment
        The Animal Damage Control (ADC) program helps protect agricultural
    and natural resources, property, and public health and safety. ADC also
    provides the world's only research center devoted entirely to the
    development of methods for wildlife damage management, and currently
    allocates about $7 million a year towards nonlethal methods development
    activities.
        Since 1989, ADC has worked closely with the National Agricultural
    Statistics Service to determine the range and extent of wildlife damage
    to various agricultural resources. Wildlife damage has been estimated
    at approximately $3 billion a year, of which about $610 million
    annually is damage to agricultural resources alone.
        Bird and other wildlife strikes are a serious economic and safety
    problem for civilian aircraft in the United States. For the first time,
    ADC's National Wildlife Research Center, working with the Federal
    Aviation Administration, completed an analysis of all wildlife strikes
    reported for an entire year. The 1994 analysis revealed 2,220 reported
    wildlife strikes to civilian aircraft. Biologists estimate that less
    than 20 percent of the total strikes were actually reported. The
    estimated nationwide economic losses from wildlife strikes to civilian
    aircraft in 1994 exceeded $100 million. Losses from wildlife strikes to
    U.S. military aircraft are estimated at $112 million per year.
        ADC has responded by providing assistance to 340 airports across
    the United States, by recommending or providing appropriate control
    programs to minimize wildlife hazards in fiscal year 1996. In September
    1996, ADC conducted an airport training and certification program for
    wildlife biologists. Thirty ADC wildlife biologists received
    specialized training in identifying and managing wildlife hazards to
    air-traffic safety.
        In fiscal year 1994, ADC completed and published the program's
    final environmental impact statement. Since that time, the program has
    completed over 40 environmental analyses on site-specific projects
    throughout the country, and ADC employees have received National
    Environmental Policy Act training conducted by the National Association
    of Environmental Professionals and a private contractor.
    Managing animal and plant pests and diseases
        As a testament to our cooperative efforts with producers and the
    States, many of our disease eradication programs are nearing successful
    completion. We have reached a major milestone in the Cooperative State-
    Federal Brucellosis Rapid Completion Plan by bringing the total number
    of quarantined herds in the United States down to a record low of 32 as
    of December 31, 1996. This is a tremendous achievement, and we are
    working our way toward elimination of this disease. We need continued
    industry cooperation to reach the goal of full eradication by the end
    of 1998.
        We are making significant progress in eradicating bovine
    tuberculosis. Currently, 44 states are accredited free, and six States
    are in a modified accredited status. One of our proudest achievements
    has been the significant decrease in the number of Mexican-origin
    cattle identified as having tuberculosis at slaughter. Since 1993,
    there has been a 72 percent decrease in the number of tuberculosis
    cases in imported Mexican feedlot animals. This is evidence that the
    Mexican tuberculosis program is progressing and that our ban on
    Holstein imports, which have a higher percentage of infection than
    other Mexican cattle, is effective.
        APHIS is uniquely capable of managing plant pests because of its
    infrastructure, statutory authorities, and operational and technical
    expertise. We have a role in managing plant pests such as grasshopper,
    noxious weeds, boll weevil, biocontrol, and pink bollworm. We develop
    and implement new management programs only after broad input and
    demonstrated potential for success and support. Success requires
    cooperation with industry, State cooperators, and other Federal
    Agencies. The ultimate goal of such programs is to transfer the
    technology to the States and industry.
        5. A fifth priority is to provide Federal leadership in the areas
    of animal care and horse protection.--Many citizens are concerned about
    the care and handling of wildlife in captivity--particularly those used
    in exhibition in zoos and circuses. We are striving to address their
    concerns and to make certain that all animals covered under the Animal
    Welfare Act receive proper care and treatment. We are counting on
    continued cooperation with our partners to carry out our regulatory
    responsibilities effectively. More and more, we are reaching out to
    form new partnerships with State and local governments, animal welfare
    advocates, and members of the industry to assist us in educating the
    public about animal health and welfare issues. For example, APHIS
    officials recently entered into a memorandum of understanding with
    officials from the State of Missouri to enable us to share information
    from our AWA inspections with them. This arrangement allows us to
    provide Missouri State officials with copies of our inspection reports
    of licensed premises. In return they provide us with any information
    they have about individuals conducting regulated activities without a
    license.
        We are also continuing to pursue augmentation of our AWA
    enforcement authority. For instance, we want to increase our authority
    to refuse to issue or renew licenses to individuals not in compliance
    with the AWA--or anyone convicted of violating any Federal, State, or
    local animal welfare law.
        One of our particular concerns is the care and handling of
    elephants. Certainly, we are very much aware of the increasing public
    attention and concern about the treatment these animals receive in zoos
    and circuses, as well as the methods used to train them. In response,
    we have developed regulatory proposals relating specifically to the
    treatment and training requirements for elephants and other dangerous
    exotic animals.
        To improve enforcement of the Horse Protection Act (HPA), APHIS
    officials depend on individuals certified through the Designated
    Qualified Persons (DQP) program to assist in monitoring horse shows for
    compliance. Our strategic direction for improved enforcement of the HPA
    calls for a greater emphasis on the important role DQP's play in
    preventing the mistreatment of horses. Many concerned individuals have
    contacted APHIS officials about this important issue, and we will
    consider their views as we develop and further refine our objectives
    and proposals.
        6. A sixth priority is to develop new or improved scientific
    methods for our work.--These scientific and technical activities help
    carry forward the efforts of protecting American agriculture with the
    most effective exclusion, monitoring, and management methods.
        The National Wildlife Research Center researchers have made
    significant progress toward developing immunocontraceptive vaccines for
    non-lethal wildlife damage management. We are developing new animal
    drug applications for submission to FDA to permit field testing of zona
    pellucida vaccine and gonadotropin releasing hormone vaccine for the
    control of deer and other damage causing wildlife.
    Biotechnology Advances
        In fiscal year 1996, APHIS issued determinations of non-regulated
    status for seven new plant varieties: herbicide tolerant cotton; male
    sterile and herbicide tolerant corn; tomato with altered fruit
    ripening; Colorado potato beetle resistant potato; virus resistant
    squash; herbicide tolerant soybean; and virus resistant papaya. Also,
    the Agency continued to provide daily Internet updates on field testing
    and commercialization of new agricultural crop varieties.
        We have established three broad goals for the international
    harmonization of regulations for genetically modified products. First,
    we will seek to ensure the integration of compatible national
    approaches. This means we will work with other countries, including all
    European countries, to identify the common aspects of our regulatory
    systems. By doing so, we can build confidence in each other's review
    processes and work to extend existing regulatory approaches for
    traditional plant products to new, genetically modified products.
    Second, we will work with other countries to ensure that our different
    national regulatory approaches are coordinated. Toward this end, we
    will work in bilateral and multilateral forums, such as the
    Organization for Economic Cooperation and Development, to exchange
    information on how reviews of genetically modified plants are being
    conduced and on products being researched. Third, we will work to
    ensure that scientific principles are used in evaluating genetically
    modified products. We strive to base our review system on rational,
    science-based regulations. Under recent trade agreements, this
    regulatory approach has been further supported at the international
    level.
                        fiscal year 1998 budget request
        The current law request proposes $424 million for salaries and
    expenses, compared to the fiscal year 1997 current estimate of $435
    million. On the mandatory side we anticipate having available an
    additional $41 million for the AQI user fee program based on the FAIR
    Act authority, bringing that program to a program level of $141
    million. We request $7.2 million for maintenance and modernization of
    APHIS facilities in 1998. Of this amount, $3.2 million would be
    provided, in addition to a $5 million proposal included in the
    Agricultural Research Service's budget, to support continued
    modernization of the Plum Island Animal Disease Center, Plum Island,
    New York. We would fund general repairs and maintenance on existing
    buildings with the remaining $4 million.
        We request approximately $9 million, as compared to $4 million in
    1997, for pest detection activities. This increase is largely needed
    for the Karnal Bunt (KB) program to enable APHIS to assure all trade
    partners that KB is not present in major wheat-producing areas of the
    United States. The budget request also contains an increase of $1.3
    million for the AQI appropriated program, which is responsible for
    inspecting people and cargo crossing the Mexican and Canadian borders;
    those traveling from Hawaii and Puerto Rico to the mainland; as well as
    private and military aircraft and small tonnage vessels from Hawaii and
    Puerto Rico. Because of increased traffic of untreated Asian and
    European agricultural products into the United States through Canada,
    we must increase inspections to reduce the risk of introducing exotic
    agricultural pests via this route. We will conduct additional
    predeparture inspections in Hawaii and preclearance inspections in
    Canada and Mexico. The budget proposes a decrease of $3.3 million for
    Animal Damage Control Operations. This reduction will produce savings
    in Federal ADC spending by encouraging States and private entities that
    do not currently spend a matching amount to contribute at least 50
    percent to the cost of operating the direct activities from the ADC
    program in their State. The budget proposes to maintain the current
    level of support for States that cost share in excess of 50 percent.
    The budget also proposes a decrease of $9.8 million in the boll weevil
    program since it is no longer necessary to provide Federal funding in
    areas where the boll weevil does not exist. APHIS will still offset
    initial start-up cost in new program areas, as well as oversee and
    provide technical support to boll weevil detection and control
    activities in the eradicated and non-infested areas.
        Let me highlight a few of our proposals in more detail. The first
    proposal relates to Animal Damage Control Operations. While the
    Administration supports an effective ADC program, we feel that, in many
    instances, cooperators need to accept a greater responsibility in
    paying for the services that they receive. In addition, there is
    currently a significant disparity between the portion of the total
    program that each State pays--ranging from zero percent to 94 percent.
    Many States pay a significant portion of their program costs, and
    should be congratulated. Other States need to do better. The
    Appropriations Committees, in fiscal year 1997 report language
    concurred with this by encouraging ``cost sharing of control activities
    to the maximum extent possible''. Therefore, the Administration has
    proposed paying no more than 50 percent of each State's total program.
    This is not a question of supporting the ADC program, but rather one of
    fairness and equity between the Federal government and cooperators, and
    among cooperators.
        Second is the proposed screwworm facility in Panama. We realize the
    problems associated with continuing the operation of the current fly
    rearing facility located in Mexico. Therefore, the budget includes
    sufficient funding, through the use of prior balances, for the
    architectural and engineering work and environmental studies associated
    with the construction of a new fly rearing facility in Darien. We
    anticipate that the facility will be ready for operation during fiscal
    year 2000, which is when we expect that it will be needed.
        Third, within the increase requested for pest detection, we propose
    to use approximately $500 thousand to work with other agencies to look
    at potential future infestations, and determine the appropriate control
    measures. The costs associated with dealing with Karnal bunt have
    taught us that we may need to consider alternative responses that may
    be less costly to both the government and the industry. This will be an
    ongoing effort.
        Finally, we have proposed savings from the enactment of five new
    user fees. I realize that in many cases, user fees are not popular.
    However, I urge the Committee to consider these fees in the context of
    who the main beneficiaries are.
                                   conclusion
        APHIS has achieved great success in protecting American
    agriculture, of which we are most proud. Animal and plant pests and
    diseases, however, are very tenacious and can reinfect or reinfest if
    we let down the safeguard. Every day there are thousands of
    opportunities for exotic pests and diseases to violate our borders and
    pest and disease free areas. We can and must continue our record of
    success as we move toward the third millennium. With the cooperation of
    Federal and State governments and industry, we will continue to find
    new ways to do so. Together, we can continue to improve and protect the
    health of the Nation's animal and plant resources and the economic
    opportunities that effort represents.
        We appreciate the Committee's strong support of our programs in the
    past, and look forward to meeting the challenge of protecting and
    strengthening American agriculture in the future. We will be happy to
    answer any questions.
                                     ______

                     Prepared Statement of Lon S. Hatamiya
        Mr. Chairman and Members of the Committee, I am pleased to have
    this opportunity to represent the Agricultural Marketing Service and to
    present our fiscal year 1998 budget proposals.
                                    mission
        First, I would like to remind you of our agency's mission,
    strategic goals, activities, and funding sources, and mention a few
    current issues in the agricultural marketplace.
        The mission of the Agricultural Marketing Service is to facilitate
    the strategic marketing of agricultural products in domestic and
    international markets, while ensuring fair trading practices and
    promoting a competitive and efficient marketplace, to the benefit of
    consumers of U.S. food and fiber products. In other words, our programs
    are designed to help create more efficient markets which benefit
    agricultural producers, processors, and consumers.
                                strategic goals
        AMS' strategic goals are: 1) to provide high quality service and
    products, in a cost-effective and efficient manner, to meet changing
    customer needs; 2) to develop new marketing services to increase
    customer satisfaction and expand our customer base; and 3) to tailor
    and focus agency services to better facilitate strategic marketing of
    U.S. agricultural products in international markets.
                                   activities
        Our Market News, Standardization and Grading activities facilitate
    the domestic and international marketing of agricultural commodities.
    The AMS Market News program provides timely, accurate, and unbiased
    market information on numerous agricultural commodities. Market
    information assists agricultural producers and traders to make critical
    buying, selling, and pricing decisions. Commodity standards provide a
    common language of quality for buyers and sellers in the U.S. and
    abroad. AMS grading and certification services provide an impartial
    evaluation of product quality so that purchasers can buy commodities
    without having to personally inspect them.
        The Shell Egg Surveillance program assures consumers of the safety
    of shell eggs by monitoring the proper disposition of certain
    undergrade and restricted eggs through regular inspections of shell egg
    handling operations.
        Our Market Protection and Promotion activities include Organic
    Certification, Pesticide Recordkeeping, Federal Seed, and Research and
    Promotion. The Organic Certification program is developing national
    standards and definitions to govern the production and handling of
    ``organic'' agricultural products so that consumers can be assured of
    the validity of the label. The program will also accredit agents who
    will certify organic products to facilitate trading between the states
    and abroad. The Pesticide Recordkeeping Program educates private
    certified applicators of Federally restricted-use pesticides about
    recordkeeping requirements, and monitors compliance with those
    requirements. The Federal Seed Act program protects growers by
    regulating agricultural and vegetable seed moving in interstate
    commerce, prohibiting false labeling and advertising, and prohibiting
    the shipment of prohibited noxious-weed seed into a State. When a
    violation is verified by testing and investigation, program personnel
    administratively resolve the complaint or initiate legal action.
    Research and promotion programs are used by agricultural producers to
    broaden and enhance national and international markets for various
    commodities. Each of these industry-funded programs reimburses AMS for
    the cost of overseeing its program.
        AMS' Wholesale Market Development program works to expand and
    improve domestic markets for agricultural products by providing
    technical advice and assistance to states and municipalities that are
    interested in creating or upgrading wholesale markets, auction and
    collection markets, retail and farmers' markets, and urban markets.
    Program personnel also conduct cooperative feasibility studies to
    evaluate and suggest more efficient ways to handle and market
    agricultural products.
        The nation's transportation system is crucial for agricultural
    products to reach their markets. AMS provides technical assistance to
    shippers and carriers and participates in transportation regulatory
    actions. We also provide economic analysis and recommend improvements
    to domestic and international agricultural transportation.
        The Federal-State Marketing Improvement program makes matching
    funds available to state marketing agencies to improve the efficiency
    of the agricultural marketing chain. Such projects might identify and
    test alternative farm commodities, identify international markets, or
    test the use of new technology in agricultural marketing.
        The Perishable Agricultural Commodities Act, or PACA, protects
    producers, shippers and distributors from loss due to unfair and
    fraudulent practices in the marketing of perishable agricultural
    commodities. Our PACA program enforces the Act by investigating
    violations.
        AMS uses Section 32 funds to stabilize market conditions and
    improves the returns to producers through marketing agreements and
    orders and commodity purchases. Marketing agreements and orders are
    regulations that are requested and funded by the regulated producers
    and handlers, and locally administered by marketing order committees
    and market administrators. AMS oversees and administratively supports
    the activities of the industry. AMS purchases selected meats, fish,
    poultry, fruits and vegetables to remove excess supplies from the
    markets and provide a dependable supply of agricultural commodities for
    the National School Lunch and other domestic feeding programs.
                                funding sources
        Despite our wide range of activities, AMS places a universal
    emphasis on providing service as cost-effectively as possible. This is
    because over 75 percent of AMS funding is revenue we generate by
    providing services voluntarily requested by our customers. Because our
    programs depend on our customers' requests for service, we must ensure
    that these services evolve to meet the needs of our customers, and that
    the fees we charge are acceptable to industry. We operate all of our
    programs--user-funded and appropriated--on this cost-conscious
    principle. All of our Marketing Services programs--including market
    news, pesticide recordkeeping, Federal Seed, organic standards,
    transportation, and wholesale market development--as well as our
    Federal/State Market Improvement Program, are operating on less than
    $40 million in appropriated funds this year. Administrative costs for
    commodity purchase services and marketing order oversight are funded
    from Section 32 customs receipt funds. Our user funded programs total
    $171 million.
                                 current issues
        Before I present our budget proposals, I would like to discuss the
    AMS programs that received increased funding this fiscal year.
    Domestic Market Reporting
        This fiscal year, Congress appropriated additional funding to
    support domestic market reporting. Because several key agricultural
    production states reduced or completely eliminated their market news
    programs, AMS has increased its Market News activities to maintain the
    integrity of national market reporting. Producers, marketers, and
    others in related industries rely on AMS Market News data on
    agricultural commodity supply, movement, contracts, inventories and
    prices to make selling, buying, and pricing decisions. We must have
    sufficient information on major production and market states, such as
    California, to present an accurate picture of the national market. The
    AMS Market News Program has absorbed those nationally significant
    reporting functions formerly provided by states through a series of
    consolidations and a shifting of resources, and by adding staff where
    necessary. These changes, which include establishing a new office in
    Fresno, California, and reporting California livestock, grain, and hay
    markets from AMS offices in Washington, Oregon, Arizona, and Colorado,
    will enable us to continue to provide timely, accurate, and unbiased
    market information.
    Pesticide Recordkeeping
        We also received funding this year to expand pesticide
    recordkeeping monitoring activities nationwide. The Pesticide
    Recordkeeping Program was established by Congress in 1990 to ensure
    that certified private applicators of restricted use pesticides
    maintain records comparable to records maintained by commercial
    applicators in each state. This program provides data that can be used
    by state and Federal agencies to design sound pesticide practices and
    by the medical community for treatment of individuals exposed to
    pesticides.
        AMS is working to provide national coverage by providing
    educational materials, programs, and inspections of private
    applicators' records. In the majority of states, these activities are
    accomplished through cooperative agreements with the state designated
    agencies. Where states are unable to enter into a cooperative agreement
    with AMS, Federal employees will conduct inspections of certified
    private applicators' records and provide educational information. AMS
    will also continue to provide funding for state programs that train
    certified applicators, and the development of educational materials by
    state and Federal programs. The State Cooperative Extension Services
    and other organizations deliver educational information to people
    affected by the regulations. We expect the program to reach national
    coverage by the end of 1998.
                        fiscal year 1998 budget requests
        Now, I wish to present our budget requests. We are proposing a net
    increase in Marketing Services funds totaling $11.3 million; $320
    thousand for international market reporting, $500 thousand to expand
    market reporting to help counter the effects of market concentration,
    $505 thousand to implement the Organic Certification Program
    nationwide, and $9.8 million to restore funding for the Pesticide Data
    Program to AMS. We are also proposing user fees for oversight of
    marketing agreements and orders.
    International Market News
        To effectively compete in export markets, U.S. agriculture must
    have easy access to a consistent, public source of timely information
    on international prices. For fiscal year 1997, the forecast for U.S.
    agricultural exports is approximately $56 billion, with a volume of
    almost 147 million metric tons. This year, livestock products, poultry
    meat and horticultural exports are expected to reach record levels.
    Meat exports are expected to reach almost $5 billion, poultry and
    poultry products $3 billion, and horticultural exports are forecast at
    almost $11 billion. Of total agricultural exports, about 43 percent are
    expected to come from sales in Asia, 16 percent in Western Europe, and
    almost 17 percent in Latin America. Agricultural imports are forecast
    at $34 billion in fiscal year 1997. The fiscal 1997 agricultural trade
    surplus is projected at almost $22 billion.
        AMS is currently collecting limited international market
    information, but more in-depth information from a wider array of
    markets is needed. For example, the meat industry is requesting more
    information from Korea and other Pacific Rim countries to remain
    competitive in the rapidly expanding world meat market. AMS reporters
    will need to establish contact with private companies and government
    sources to collect and exchange market information. Cost increases to
    provide foreign market information would include reporters, travel, and
    electronic communications. Improving our knowledge of overseas markets
    should have a significant positive impact on the ability of our
    products to complete successfully in the international marketplace.
    Enhanced Market Reporting
        We must also adapt to market changes occurring in the U.S. The
    Department is increasingly concerned about the effects of industry
    concentration and the resulting potential for non-competitive behavior.
    Concentration can have a significant negative impact on small farmers
    and producers. The Secretary's Advisory Committee on Agricultural
    Concentration recommended that the price discovery and reporting
    processes be enhanced to ensure fair competition. The advisory
    committee recommended that AMS Market News: 1) increase its reporting
    on the terms of cattle traded under contract sales, 2) expand its
    reporting of value-based pricing indicators, 3) institute more timely
    and more detailed reports of import and export data on livestock and
    meat, and 4) report the distribution of slaughter cattle by grade and
    yield on a regional basis. Initial steps have been taken to address
    these information needs; however, resource availability is limiting our
    ability to be fully responsive. These initiatives will require
    additional AMS reporters, more travel, and improved technology to cover
    auction sales and to collect additional information from producers and
    packers.
    Organic Certification
        The organic food industry is estimated to have a value of nearly $3
    billion and is growing more than 20 percent a year. With this growth
    has come increasing confusion in the marketplace about what is and what
    is not organic. The Organic Foods Production Act of 1990 required the
    Secretary to establish and implement national minimum organic standards
    and a program to certify organic production. The Act was requested by
    the organic community after they observed problems such as fraudulent
    use of the term ``organic'', customer confusion, variations among
    certifiers on standards and requirements, and excessive documentation
    required by foreign importers before they would accept products
    certified in the U.S. By using recommendations from the National
    Organic Standards Board and public input from certifiers, consumers,
    producers and handlers, AMS has developed a public-private partnership
    that encourages innovation within the boundaries of organic principles
    and legislative intent.
        National standards and definitions of agricultural products that
    are organically produced will facilitate the movement of products
    between States and assure consumers of the validity and integrity of
    the organic label. Beyond the domestic market, standardized organic
    production will facilitate international marketing of U.S. organic
    products. We will work to harmonize AMS standards with those of
    existing and developing international organic programs.
        The National Organic Standards Board--which consists of growers,
    processors, consumers, environmentalists, a retailer and a scientist--
    has prepared recommendations on more than 120 substances for the
    National List of allowed synthetics and prohibited natural substances
    for use in organic production and processing. We expect to publish the
    rules and implementation plan for production and processing standards
    and for accreditation of certification agents this year. After that, we
    will begin accrediting representatives of state agricultural
    departments and private persons who will inspect producers and handlers
    to certify compliance with the organic program. We need additional
    resources to expedite development of the program, ensure labeling
    integrity, and facilitate global trade of our country's organic
    products. Once the program is fully established, certifying agents will
    be assessed fees for USDA accreditation, which is provided for under
    current legislative authority. Any fees collected will be deposited
    into the Treasury.
    Pesticide Data Program
        The Food Quality Protection Act, passed in August 1996, confirmed
    the need for collection of pesticide residue data. The Act states that
    ``The Secretary of Agriculture shall ensure that the residue data
    collection activities conducted by the Department of Agriculture in
    cooperation with EPA and the Department of Health and Human Services,
    provide for the improved collection of pesticide residues, including
    guidelines for the use of comparable analytical and standardized
    reporting methods, and the increased sampling of foods most likely
    consumed by children.'' The fiscal year 1997 Appropriations Act cut
    funding for the Pesticide Data Program from AMS and placed it in EPA's
    budget for fiscal year 1997. EPA has been working with the cooperating
    states and AMS to ensure that data collection is continued. For fiscal
    year 1998, we are requesting that the Pesticide Data Program funding be
    returned to AMS.
        Since the program's inception five years ago, we have established
    statistically reliable procedures, an automated information system for
    pesticide residue data, and good working relationships with industry
    and participating state and Federal agencies. AMS' procedures are
    statistically designed to make unbiased estimates of residues collected
    in the ten cooperating states that represent half of the U.S.
    population. Between 50 and 60 samples of each commodity are collected
    and analyzed each month. The pesticides targeted for data collection
    were selected by EPA in consultation with AMS. The commodities chosen
    for testing are among those most prevalently consumed by the American
    public. The number of fruits and vegetables collected is based on state
    population, wheat samples are collected based on state and monthly
    production data, and milk samples are collected based on state
    production and represent at least 45 percent of the available fluid
    milk in the U.S. market. Samples are collected as close to the consumer
    as possible, ensuring an estimate of actual exposure that includes
    post-harvest applications of fungicides and growth regulators. Also,
    before analysis, samples are prepared according to practices of the
    average consumer (such as peeling or washing). Since the program began,
    25 commodities have been included for testing, 19 of which are
    considered high consumption commodities by infants and children. Eleven
    commodities are currently included in the program.
        The Administration believes funding the Pesticide Data program
    through AMS is more appropriate than EPA. The program has thrived and
    grown in international stature because we were able to rely on our
    agricultural marketing expertise to develop a statistically reliable
    testing system. The AMS residue testing results have been used to
    confront barriers to international trade of U.S. agricultural
    commodities and in the establishment of international standards. USDA's
    Foreign Agricultural Service uses data from the program to convince
    foreign governments that our food is safe, and has found the program's
    findings to be an invaluable tool in facilitating U.S. exports.
    Pesticide Data Program personnel also provide information to the Codex
    Alimentarius Commission and the World Health Organization.
        AMS already has the systems, equipment and experience needed to
    consolidate and report the vast quantities of data collected, and we
    have proven that we can operate this program effectively and
    efficiently to carry out residue testing work that will satisfy the
    public's demand for a safe food supply.
                              legislative proposal
        We are again proposing authorizing legislation that will allow AMS
    to collect assessments for the Federal oversight of marketing
    agreements and orders. The proposed fees would cover the costs of
    establishing and amending the orders through public hearings, and other
    general oversight and administration of the program. Currently, all
    Federal oversight of these programs is funded from the Section 32
    permanent appropriation. The Secretary issues marketing agreements and
    orders for a given marketing area in response to requests by a majority
    of producers. Marketing orders are administrated locally by marketing
    order committees and market administrators whose costs are already
    funded from assessments on regulated producers and handlers. AMS
    proposes to recover Federal costs through increased assessments paid by
    the producers and handlers who benefit from the agreements and orders.
    Each industry would have to determine whether or not the benefits
    provided by their marketing order were sufficient to outweigh the
    additional cost. We estimate that this proposal will result in savings
    of $10.7 million, offset in fiscal year 1998 by one-time liabilities
    costs of about $500 thousand, for a net savings of $10 million in the
    first year.
                             budget request summary
        In total, our 1998 budget request includes $49.8 million in
    appropriated funding for our marketing services programs, $1.2 million
    for Payments to States and Possessions, and $16.9 million from Section
    32 funds for administration of commodity purchase services and
    marketing agreements and orders. Approval of the legislative proposal
    to charge user fees for marketing agreements and orders would reduce
    our request by $10.2 million. Thank you for this opportunity to present
    our budget proposals.
                                     ______

                      Prepared Statement of James R. Baker
        Mr. Chairman and members of the Committee, I am pleased to submit
    the fiscal year 1998 budget proposal for the Grain Inspection, Packers
    and Stockyards Administration (GIPSA).
        GIPSA is part of USDA's Marketing and Regulatory Programs, which
    are working to ensure a productive and competitive global marketplace
    for U.S. agricultural products. GIPSA's mission is to facilitate the
    marketing of livestock, poultry, meat, cereals, oilseeds, and related
    agricultural products, and to promote fair and competitive trading
    practices for the overall benefit of consumers and American
    agriculture.
        Our mission is carried out in two different segments of American
    agriculture. GIPSA's Federal Grain Inspection Service (FGIS) provides
    the U.S. grain market with Federal quality standards and a uniform
    system for applying them. Our Packers and Stockyards Programs (P&S)
    ensure open and competitive markets for livestock, meat, and poultry.
        GIPSA has both service and regulatory roles. It provides impartial,
    accurate quality and quantity measurements to create an environment
    that promotes fairness and efficiency. And, the Agency's programs
    provide financial protection to livestock producers and ensure fair and
    competitive markets.
        The existence of GIPSA as an unbiased, third-party entity helps
    ensure a fair and competitive marketing system for all involved in the
    merchandising of grain and related products, livestock, meat, and
    poultry.
                                  organization
        GIPSA is comprised of approximately 840 personnel, including full-
    time, temporary, and intermittent employees. GIPSA personnel are
    situated in field locations across the country to serve our customers.
        Federal grain personnel work with over 2,000 State and private
    inspectors to provide high-quality inspection and weighing services on
    a user-fee basis. Federal inspectors service 42 export elevators
    located in Georgia, Illinois, Indiana, Louisiana, Maryland, New York,
    Ohio, Oregon, and Texas. A small Federal staff also provides service at
    6 export elevators in Eastern Canada for U.S. grain transshipped
    through Canadian ports. Eight delegated States provide services at an
    additional 20 export elevators located in Alabama, California,
    Minnesota, Mississippi, South Carolina, Virginia, Washington, and
    Wisconsin. Sixty-five (65) designated agencies service the domestic
    market under GIPSA supervision. In 1996, this unique mix of Federal,
    State, and private inspection agencies provided 2.3 million inspections
    on an estimated 250 million metric tons of grains and oilseeds; issued
    over 118,000 official weight certificates; weighed over 114 million
    metric tons of grain; and met trade teams representing 38 countries
    around the world to teach them about GIPSA and the U.S. grain marketing
    system.
        GIPSA's Packers and Stockyards Programs' is comprised of 180 full-
    time employees; 135 of whom are employed in 11 offices strategically
    located throughout the United States to monitor compliance with the P&S
    Act. During fiscal year 1996, GIPSA concentrated resources on providing
    financial protection and promoting fair business practices and a
    competitive marketing environment for livestock, meat, and poultry. The
    Agency conducted over 2,000 investigations, disclosing over 800
    violations of the P&S Act. Formal actions were requested in 84 cases
    and 62 administrative or justice complaints were issued in order to
    bring firms into compliance with the P&S Act. Administrative decisions
    and orders were issued in 49 cases during fiscal year 1996; however,
    most violations were corrected on a voluntary basis with several
    resulting in livestock and poultry producers receiving additional funds
    for the sale of their product.
        This, of course, is only a brief summary of our accomplishments.
    I'd like to provide some more in-depth information about our programs
    and their activities.
                    gipsa's federal grain inspection service
        GIPSA's grain program plays a critically important role in
    facilitating the marketing of U.S. grain and related commodities. We
    provide the U.S. grain market with Federal quality standards and a
    uniform system to apply these standards. Through this program, GIPSA
    provides descriptions (grades) and testing methodologies for measuring
    the quality and quantity of grain, rice, edible beans, and related
    commodities, and, provides an array of inspection and weighing
    services, on a fee basis, through a unique partnership of Federal,
    State, and private laboratories.
        By serving as an impartial third party, GIPSA ensures that the
    standards are applied and the weights recorded in a fair and accurate
    manner. Our presence in the market advances the orderly and efficient
    marketing and effective distribution of U.S. grain and other assigned
    commodities from the Nation's farms to domestic and foreign buyers.
        Our guidance in carrying out these important tasks is provided by
    the U.S. Grain Standards Act (USGSA) and the Agricultural Marketing Act
    of 1946 (AMA) as it relates to the inspection of rice, pulses, lentils,
    and processed grain products. Under these two Acts, GIPSA:
      --Establishes official U.S. grading standards and testing procedures
            for eight grains (barley, corn, oats, rye, sorghum, triticale,
            wheat, and mixed grain), and four oilseeds (canola, flaxseed,
            soybeans, and sunflower seed) under the USGSA; and for rice,
            lentils, dry peas, and a variety of edible beans under the AMA.
      --Provides American agriculture and customers of U.S. grain around
            the world with a national inspection and weighing system that
            applies the official grading and testing standards and
            procedures in a uniform, accurate, and impartial manner.
      --Inspects and weighs exported grain and oilseeds. Domestic grain and
            oilseed shipments, grain and oilseed imported into the United
            States, and crops with standards under the AMA are inspected
            and weighed upon request.
      --Monitors grain handling practices to prevent the deceptive use of
            the grading standards and official inspection and weighing
            results, and the degradation of grain quality through the
            introduction of foreign material, dockage, or other nongrain
            material to grain.
        Through these permissive and mandatory programs, GIPSA promotes the
    efficient and effective marketing of U.S. grain and other commodities
    from farmers to end users.
        To better illustrate the impact and efficiency of GIPSA's grain
    inspection program, consider the following: USDA's ``Outlook for U.S.
    Agricultural Exports'' (December 4, 1996) reports that in fiscal year
    1996, U.S. exports of wheat, corn, coarse grains, rice and soybeans
    were valued at approximately $27 billion. GIPSA's grain program, which
    operates on a user fee basis, collected fee revenue of $30 million for
    over 2.3 million official inspections, 600,000 protein and oil tests,
    115,000 mycotoxin tests, and a variety of other official inspection and
    weighing services on these exports. Our revenues totaled a little over
    one-tenth of 1 percent of the total value of the exports.
        In fiscal year 1996, GIPSA's grain program pursued a number of
    initiatives to improve service delivery and organizational
    effectiveness. We recognize that reengineering and automating our
    business and administrative functions are essential if we are to
    contain costs, lessen the risks, and increase the productivity
    associated with grain handling.
        In fiscal year 1996, GIPSA continued to work closely with the U.S.
    grain handling industry on Electronic Data Interchange (EDI), an
    electronic commerce project designed to automate business transactions
    involving U.S. grain. As part of this important initiative, GIPSA is
    developing a standardized data file for its inspection and weighing
    results that will directly support the EDI functions.
        Also in fiscal year 1996, GIPSA began implementing a reengineered
    quality assurance and quality control program for the official grain
    inspection system to ensure the quality and accuracy of inspection
    results nationwide. The new, proactive program integrates automation
    technology, empowerment of front-line employees, and statistical
    quality control processes to further improve the performance of the
    official inspection system.
        GIPSA continued cooperative efforts with the National Institute of
    Standards and Technology and the National Conference on Weights and
    Measures to standardize commercial grain inspection equipment as part
    of the National Type Evaluation Program (NTEP). GIPSA serves as the
    sole NTEP laboratory for grain inspection equipment. In fiscal year
    1996, GIPSA continued to collect calibration data that were used as the
    basis for numerous grain moisture meter calibration changes to improve
    the accuracy and consistency of commercial grain moisture measurements.
        Our efforts to facilitate the marketing of U.S. grain are not
    concentrated solely within our borders. GIPSA also is working to help
    educate our worldwide customers about the quality and value of U.S.
    grain exports. In fiscal year 1996, GIPSA representatives met with 77
    teams from 41 countries to provide information, technical guidance, and
    educational seminars.
        The grain program will continue to work to ensure our relevance and
    value to American agriculture. We are reaffirming our commitment to
    facilitating the marketing of U.S. grain by responding to our
    customers' needs and providing the highest quality grain inspection and
    weighing services to all whom we serve--from farmer to domestic and
    international end users, and all those in between. Our efforts in
    fiscal year 1997 will focus on networking the Federal, State, and
    private partners comprising the system, and working with our customers
    to identify how we can apply automation to reengineer our
    administrative and inspection processes to achieve greater efficiency
    and productivity.
        In fiscal year 1997, our commitment to improved efficiency and
    effectiveness will continue to serve American agriculture well, as U.S.
    agricultural exports are expected to total $55.5 billion. Exports of
    wheat, corn, coarse grains, rice and soybeans are expected to account
    for $18.5 billion of that total (``Outlook for U.S. Agricultural
    Exports,'' December 1996).
                 gipsa's packers and stockyards programs (p&s)
        The principal purpose of GIPSA's Packers and Stockyards (P&S)
    Programs is to provide financial protection and promote fair business
    practices and a competitive marketing environment for livestock, meat,
    and poultry. Our programs foster fair and open competition, and guard
    against deceptive and fraudulent practices affecting the movement and
    price of meat animals and their products. We also work to protect
    consumers and members of the livestock, meat, and poultry industries
    from unfair business practices. To carry out these important roles,
    GIPSA:
      --Administers the Packers and Stockyards Act of 1921.
      --Carries out the Secretary's responsibilities under Section 1324 of
            the Food Security Act of 1985, which permits States to
            establish ``central filing systems'' to prenotify buyers,
            commission merchants, and selling agencies of security
            interests against farm products, and issue regulations and
            certify the systems that meet the criteria in the statute.
      --Enforces the Truth-in-Lending Act, the Fair Credit Reporting Act,
            and the Freedom of Information Act as each relates to persons
            and firms subject to the P&S Act.
        The production and marketing of livestock, meat, and poultry are
    important to American agriculture and significantly impact the Nation's
    economy. The Commerce Department estimates the annual wholesale value
    of livestock, meat, and poultry products to be approximately $95
    billion. At the close of fiscal year 1996, there were 1,348 stockyards;
    6,988 market agencies/dealers; and 2,169 packer buyers registered with
    GIPSA to engage in the livestock marketing business. There also were
    approximately 6,000 slaughtering and processing packers; an estimated
    6,500 meat distributors, brokers, and dealers; and an estimated 225
    poultry firms subject to the P&S Act.
        GIPSA's P&S Programs continues to provide payment protection to
    livestock and poultry producers by focusing on the financial area.
    Financial investigations during fiscal year 1996 resulted in $3.5
    million being restored to custodial accounts established and maintained
    for the benefit of livestock sellers. Packer and poultry trust
    activities also returned over $400,000 to livestock sellers and over
    $100,000 to poultry growers during the fiscal year. Dealers and market
    agencies are required to meet solvency requirements, a critical
    component of payment protection of the P&S Act. During fiscal year
    1996, 205 insolvent dealers and market agencies corrected or reduced
    their insolvencies by $11.2 million.
        GIPSA closely monitors anticompetitive practices which may be
    impeding the free trade of livestock. Any practice, agreement, or
    understanding that excludes potential buyers from bidding in open
    competition is considered a restraint on competition. Examples of such
    practices include apportioning territories, price agreements or
    arrangements not to compete, and payoffs or kickbacks to buyers. A high
    priority is placed on investigating all complaints and further
    developing information received concerning the failure of livestock
    dealers, market agencies, or packers to compete for the purchase of
    livestock.
        In 1996, a major investigation of fed cattle procurement practices
    in Kansas was completed. The investigation examined over 15,000
    purchase transactions involving 2 million head of cattle. The results,
    which were released in March 1996, indicated that supply and demand
    factors were the primary causes of price declines in the spring of
    1995. In fiscal year 1996, GIPSA began several actions to increase
    enforcement activities in the area of anticompetitive-type practices
    involving the Nation's major meat packers. The Agency initiated a major
    cattle procurement investigation in Texas that will examine over 37,000
    purchase transactions involving over 6 million head of cattle sold
    during 1995 and 1996. A major slaughter hog procurement investigation
    was also initiated during 1996. This investigation will examine
    approximately 50,000 purchase transactions involving over 2.5 million
    head of slaughter hogs. Using data from the Kansas and Texas fed cattle
    investigations, GIPSA will conduct economic analyses during fiscal year
    1997 on the effect of forward contracting, packer feeding, and
    marketing agreement/formula pricing arrangements.
        In fiscal year 1997, GIPSA will continue to improve the efficiency
    of its P&S Programs, and ensure that the programs play an effective
    role in the U.S. livestock, poultry, and meat marketing system. A key
    activity in our improvement process involves a review by USDA's Office
    of the Inspector General (OIG) of current enforcement practices under
    the P&S Act. The OIG review is expected to provide data on how GIPSA
    can maximize its effectiveness and make full use of its authority to
    investigate and correct anticompetitive practices and arrangements. The
    review also will examine whether GIPSA's structure and operating
    practices and procedures should be modified to enhance its
    responsiveness to the needs of a changing industry.
        Also in fiscal year 1997, GIPSA will solicit public comment on the
    need for regulations addressing contract poultry grower financial
    arrangements. Currently, the predominant method used to pay growers for
    flocks under a poultry growing arrangement is based on a system that
    compares a grower's results to that of other growers during a specified
    time period. Many poultry growers have repeatedly expressed concern
    that comparing their production costs against those of other growers to
    determine payment is unfair. Growers also have expressed concerns about
    the accuracy of feed weights and feed delivery, pickup procedures, and
    the procedures for weighing live birds picked up for slaughter.
        As you can see, a great deal was accomplished in fiscal year 1996
    and much is planned for fiscal year 1997 in both of GIPSA's program
    areas. Our efforts to continuously improve our programs and services
    were greatly enhanced last fiscal year by the development of the
    Agency's first strategic plan.
                               strategic planning
        The GIPSA Strategic Plan was developed to guide the agency into the
    next century and to help ensure that our programs and services remain
    relevant to our customers and American agriculture. The American public
    and international customers of U.S. agricultural products want an ample
    supply of quality food at a reasonable price. This means American
    markets must be efficient, competitive, and quality-conscious. GIPSA's
    general goals, as well as the agency's products and services, are
    oriented toward fulfilling this need for a fair, competitive, and
    efficient market system.
        The strategic plan, developed in a cooperative effort by all GIPSA
    employees and our customers, outlines four major goals that will guide
    our planning processes and initiatives for the upcoming years:
      --We will ensure that programs are cost-effective and responsive to
            markets served.
      --We will ensure that the credibility of programs is unquestionable.
      --We will ensure that GIPSA employees are highly-skilled
            professionals providing quality customer service.
      --We will work to harmonize customers' expectations with GIPSA's
            authority and capabilities.
        As part of the strategic planning process, GIPSA identified several
    measures that will allow us to quantitatively evaluate our performance.
    In the grain program, in fiscal year 1998, GIPSA will begin measuring
    the performance of the new quality assurance and control system for
    accuracy and consistency; the average cost of oversight per metric ton
    of grain inspected; the number of new tests developed and improved
    methods/calibrations implemented; and the average cost of export grain
    inspection per metric ton.
        For the P&S programs, GIPSA will implement a new electronic
    tracking system for complaints and investigations. This will enable us
    to establish performance goals based on the new tracking and monitoring
    system, and to provide for more effective allocation of resources. In
    developing our strategic plan, GIPSA reaffirmed its commitment to
    strengthening the cost-effectiveness, responsiveness, and credibility
    of our programs and services. In fiscal year 1998, GIPSA will be
    pursuing a number of initiatives that will reflect the goals and
    commitments outlined in our strategic plan. As mentioned above, these
    initiatives include establishing guidelines and developing the
    technology for joint industry/GIPSA ventures to automate the grain
    inspection process at export grain elevators; designing and
    implementing an investigation tracking and monitoring system;
    networking all of the Federal, State, and private partners comprising
    the official grain inspection and weighing system; implementing a new
    quality assurance and control program for grain inspection activities;
    and conducting regional and industry-wide reviews and investigations in
    the livestock, meat, and poultry industries.
                        fiscal year 1998 budget request
        To fund these important initiatives and to enable GIPSA to remain a
    valuable part of American agriculture, under current law, GIPSA's total
    budget request for fiscal year 1998 is $68.8 million, of which $25.7
    million represents appropriations. The remaining $43.1 million
    represents user fee authority for inspection and weighing services.
        For fiscal year 1998, the President's budget proposes a total
    program level for grain inspection of $54.0 million, with $10.9 million
    appropriated for compliance, standardization, and methods development
    activities. The fiscal year 1998 budget also proposes legislation to
    authorize the collection of $3.6 million in additional user fees to
    cover the costs of grain standardization activities.
        For P&S Programs, the budget proposes $14.8 million, which includes
    increases of $225,000 to allow GIPSA to establish electronic filing
    procedures for annual reports, which is consistent with the
    requirements of the Paperwork Reduction Act of 1995; $1,595,000 for
    activities in the packer competition and industry structure areas; and
    $750,000 for poultry compliance activities.
        Increasing concentration, structural change, market performance,
    and the use of complex formula and value-based marketing systems by
    packers continue to raise questions of regulatory and policy
    significance. Additional resources will allow GIPSA to expand our
    capability to monitor and investigate the competitive implications of
    structural changes and behavioral practices in the meat packing
    industry, and will increase our capability to support legal actions
    that require complex economic and statistical analyses. Continuous,
    systematic collection and analysis of data along with aggressive
    investigative activities are required to address these issues
    effectively.
        To promote competition and improve market performance and
    confidence in the livestock and poultry sectors, the Secretary's
    Advisory Committee on Agricultural Concentration recommended increased
    monitoring and enforcement of antitrust and regulatory policy and,
    specifically, increased antitrust enforcement under current regulations
    of the P&S Act. Since anticompetitive practices are complex and often
    encompass broad geographic areas, investigations involving building
    cases for unacceptable behavior has become more difficult and resource-
    intensive.
        The requested increase in funds for P&S Programs will allow GIPSA
    to conduct additional detailed investigations and analyses in selected
    geographic markets on a timely basis. It also will help us meet our
    responsibility of fostering fair and open competition, and guarding
    against deceptive and fraudulent practices that affect the movement and
    price of meat animals and meat food products.
        As the industry continues to rapidly move to value-based methods of
    pricing, the complexity and sophistication of the packing industry's
    procurement and pricing methods will continue to increase. With this
    change also comes greater opportunity for packers to engage in unfair,
    unjustly discriminatory, or deceptive practices to the detriment of
    livestock producers. The Agency must be able to commit the necessary
    resources to conduct the type of complex investigations that are
    required to ensure the integrity of the accounting and payment to
    producers.
        The Secretary's Advisory Committee on Agricultural Concentration
    also offered recommendations to address anticompetitive practices in
    the poultry industry. In recent years, contract poultry growers have
    looked to USDA for help in assuring they are treated fairly when
    dealing with large, integrated poultry companies. The Committee
    recommended that the Secretary be provided the same administrative
    enforcement authority for poultry as currently exists for red meat to
    protect contract poultry growers from unfair and discriminatory
    practices.
        The increase of $750,000 for poultry compliance will allow GIPSA to
    operate on other than a complaint-driven basis and permit increased
    compliance investigations into the poultry industry. More in-depth
    investigations will increase the Agency's ability to identify or
    address practices in the industry that may be unfair, unjustly
    discriminatory, or deceptive before practices escalate.
        Finally, as in previous years, the fiscal year 1998 budget proposes
    legislation to authorize the collection of license fees to administer
    all activities under the P&S Act. In fiscal year 1998, funds would be
    available only to the extent provided in advance in appropriations
    acts. All meat packers, live poultry dealers, stockyard owners, market
    agencies, and dealers, as defined in the P&S Act, would be subject to
    the license fees. Also included is a request to provide for a
    legislative proposal regarding a statutory dealer trust to require
    livestock inventories and accounts receivable due from the sale of
    livestock to be held in trust for unpaid cash sellers when a dealer
    fails to pay for livestock. If the user fee legislation is enacted, the
    cost of administering this provision would be recovered through license
    fees.
                                   conclusion
        Mr. Chairman, this concludes my statement. I appreciate the
    opportunity to testify on behalf of one of USDA's newest agencies. I
    will be happy to answer any questions the Committee may have.

                            Introduction of Witness

        Senator Cochran. Before proceeding with questions of you or
    your colleagues who administer these programs, I am going to
    call on Thomas Billy for his statement as well. I know that the
    Under Secretary's position is vacant. Mike Taylor was in that
    job and now is no longer with the Department I understand. I
    assume you have been elevated to be Acting Under Secretary, or
    at least you do not have a boss here. You are the head man.
    Right? [Laughter.]
        Mr. Billy. Yes, sir.
        Senator Cochran. And you have an equal footing--and I want
    everybody to understand that--with the marketing and regulatory
    programs. We consider that to be the case anyway.
        So, I am going to ask you to proceed with any comments or
    statements that you have about the budget for the Food Safety
    and Inspection Service, Mr. Billy, and then we will have a
    chance to have questions on all these subjects. Please proceed.

                          Statement of Thomas J. Billy

        Mr. Billy. Thank you, Mr. Chairman, and members of the
    subcommittee.
        I am pleased to appear before you today to discuss the
    President's fiscal year 1998 budget request for the Food Safety
    and Inspection Service. I request that my full statement be
    entered into the record.
        Senator Cochran. Without objection, it is so ordered.
        Mr. Billy. Thank you very much.
        As you may know, I became the Administrator of the Food
    Safety and Inspection Service in October 1996, after serving as
    the Associate Administrator for 2 years.

                            Food Safety Partnership

        During my years as a public servant, I have become
    convinced that the only way we can serve the American public is
    through partnerships. I believe that the Congress and FSIS are
    partners, striving toward the same results: safer food and a
    more efficient use of the taxpayers' dollars. I wish to
    acknowledge your role in supporting the 1997 budget request,
    and making an essential contribution to fulfilling our Federal
    responsibilities in food safety.
        Now, I want to tell you very briefly about our role in the
    partnership during the last year, and how we plan to continue
    to fulfill our responsibilities. I will talk briefly about the
    progress we are making because of the partnerships we have
    formed with key constituencies, including consumers, the
    regulated industry, and our own employees.

                          Fundamental Changes in FSIS

        In the last 2 years, FSIS has been working toward two
    goals: to make food safer by finding better ways to control
    pathogens and to make better use of our resources. We recognize
    that the agency would have to change its reliance on the
    traditional command-and-control method of doing business and
    that this would require a fundamental cultural change within
    the agency. Our employees and all of our constituencies would
    have to be part of that change and, more important, have a role
    in determining the nature of the changes and the methods for
    their implementation. In short, we had to form partnerships and
    work in a more open environment to make the needed changes.
        During fiscal year 1996, we set in motion a public process
    for determining what changes are needed. The product of that
    effort is a comprehensive food safety strategy. We have already
    begun making changes and will continue implementing them into
    the next century. I would like to briefly describe a few of
    those key changes and what they mean to the agency and to the
    American public.

                          Pathogen Reduction and HACCP

        The agency reached a milestone last July with publication
    of the final rule on pathogen reduction and the hazard analysis
    and critical control point system, known as 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, and that we will reinforce all of the
    plants' responsibilities in terms of producing a safe product.
        We began implementation of the rule a little more than a
    month ago. On January 27 of this year, all plants had to have
    plant-specific sanitation standard operating procedures, or
    SOP's, to ensure that they are meeting their responsibility for
    proper sanitation of facilities, equipment, and operations. 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.
        Next, all plants will develop a HACCP plan. HACCP systems
    identify critical control points that address likely product
    safety hazards.
        HACCP implementation will be phased in according to plant
    size. In recognizing the special difficulties that small plants
    will face, we have initiated an aggressive program to provide
    assistance to these small plants.
        The HACCP rule established Salmonella performance standards
    for chilled carcasses and for raw ground products. Through
    their HACCP programs, plants will be required to achieve a
    prevalence for Salmonella contamination that is below the
    national baseline prevalence for each class of product. FSIS
    will continually sample and test to verify compliance.
        Now, by January 25 of the year 2000, all provisions of the
    final rule will have been implemented. The final rule sets an
    important framework for change in FSIS, but is by no means the
    completion of our full strategy for change. We must now
    envision our food safety and consumer protection goals in a
    HACCP world.

                              FSIS Reorganization

        We also realized that FSIS would need a new organization to
    make the necessary changes to achieve our 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 our management
    structures both in headquarters and in the field and
    consolidating four former independent field structures into
    one. Our new structure will accommodate the agency's need to
    function with fewer nonfrontline staff. As we streamline our
    organization, we will increase the proportion of resources
    deployed to the frontline work force, that is, our food
    inspectors, in-plant veterinarians, our import inspectors,
    laboratory personnel, and compliance officers. This should
    allow us to handle industry growth without seeking additional
    inspection resources through the budget process.
        I am very proud that we have reduced the number of
    headquarters units reporting to the Administrator from 13 to 7.
    At the same time, we created a new Office of Public Health and
    Science which will improve the public health focus of our
    program. It will ensure that our policies meet the performance
    goal of improving public health.
        Over the next 2 years, we will reduce the number of field
    management offices from 46 to 18 district offices and a
    technical services center. I strongly believe that the 18 new
    district offices will make supervisory spans of control more
    manageable, and better balance the workload that we have.
        A new Technical Services Center has been established, and
    will open in Omaha, NE, this summer.

                         Food Safety Education Program

        We cannot operate the science-based inspection system of
    the future without first preparing our inspection work force
    for these changes. We have begun training our inspection work
    force to implement the new rule and started a new education
    program at Texas A&M University to provide in-plant inspectors
    with a more scientific foundation to work in a HACCP
    environment. The program will focus on giving a basic
    understanding of why food safety problems occur and why certain
    inspection tasks must be done rather than simply showing
    employees how to carry out the tasks.
        We also have offered to reimburse employees for courses
    that they would take on their own time near their work sites in
    subjects such as statistics and microbiology.

                               Regulatory Reform

        Another important area--we have initiated a comprehensive
    review of our entire set of operations to reduce costs and
    burden to industry and consumers without compromising public
    health and safety. As part of this effort, I am 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. We also invited comment on a list
    of regulations that may need revision to be consistent with
    HACCP.
        Now, as a down payment, at that 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
    approval for blueprints, 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 advance
    notice of proposed rulemaking to evaluate the need for meat and
    poultry standards of identity and composition.
        When our regulatory reform is completed, it will clarify
    the proper roles of Government and industry in ensuring a safe,
    wholesome food supply.

                           Emphasis on Public Health

        We are also working with CDC and FDA in terms of public
    health, and we have started a new sentinel site project in
    cooperation with those agencies where we are looking at
    developing procedures to collect better information in terms of
    illnesses that are caused by various food products, including
    meat, poultry, and egg products.

                       President's Food Safety Initiative

        On January 25, 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 is requesting funding for
    FSIS, FDA, and CDC to increase the number of sites from five to
    eight, to better equip and link the sites, and to make
    available the state-of-the-art laboratory and electronic
    technology that is needed.
        In our 1998 budget request, we are asking for additional
    funds to expand surveillance and population surveys to include
    Campylobacter infections in the sentinel site project.

                                   Egg Safety

        Another area we are emphasizing is egg safety. We are
    working to address the concerns you expressed in the fiscal
    year 1997 committee report concerning the 1991 amendment to the
    Egg Products Inspection Act establishing the average ambient
    temperature for the transportation of eggs and egg products. We
    are working closely with FDA to develop science-based
    regulatory standards for proper cooling of shell eggs and are
    looking at how best to implement the statutory shell egg
    requirements in the context of a HACCP-based farm-to-table
    strategy for eggs.

                          Food Safety Beyond the Plant

        As we implement the pathogen reduction and HACCP rule in
    inspected establishments, we have already begun exploring what
    is needed to improve food safety after products leave the
    establishments. We hear a lot from industry expressing concerns
    that you need to address every place on the farm-to-table
    continuum where hazards can develop and ensure that there are
    appropriate controls.
        On the retail level, we recognize that the primary
    responsibility for overseeing food safety resides with State
    and local governments. We fully support the forum provided by
    the Conference for Food Protection for developing the best
    model code for State adoption, and we are committed to
    strengthening how the existing code addresses meat, poultry,
    and egg products. We are also committed to providing
    appropriate assistance to see that the Food Code is adopted
    nationwide by the States.

                                 New Technology

        Another area I would like to emphasize is the importance of
    new technology. Within FSIS through our field automation and
    information management [FAIM] project which you have supported,
    we are equipping our inspectors with computers to better allow
    them to communicate, access, and apply technical regulations
    and directives, and receive training on HACCP. The FAIM
    initiative supports both the agency's field reorganization and
    HACCP implementation.
        I am pleased to say that all large plants will be covered
    by FAIM as of January 1998, the effective date for the HACCP
    rule in these establishments.
        We are also using more rapid tests and automation in our
    laboratories to speed the availability of test results, and we
    are redesigning our training and continuing education programs
    to teach our employees to take advantage of this new
    technology.
        We also are encouraging new technology outside the agency.
    During the last several years, we have approved a number of new
    technologies for use in plants to improve food safety,
    including organic acids, trisodium phosphate, and steam
    pasteurization. We will continue to help industry to test new
    technology in plants. As a result of your support in the 1997
    budget, we particularly are focusing on small plants to help
    them adapt new technology to improve food safety and assisting
    these small plants in developing alternative process controls
    that meet HACCP standards.

                              1998 Budget Request

        Now, we are encouraged by the importance placed on food
    safety throughout USDA and support the initiatives proposed by
    the Agricultural Research Service for preharvest and
    postharvest food safety research and by the Cooperative State
    Research, Education, and Extension Service for grant programs
    to be carried out by the land grant universities.
        To continue making food safety improvements and to
    accomplish our goals, we are making a current law request of
    $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 costs of State inspection programs, and a net
    increase of $2.4 million for program investments.
        In fiscal year 1998, FSIS will continue to see progress in
    terms of transforming the inspection process and will make no
    requests for increase in staffing levels. We are requesting an
    increase for pay costs to maintain the current inspection
    staffing levels so that we can cover the slaughter lines and
    the processing operations, and avoid disruption in production
    processes.
        In fiscal year 1998, FSIS proposes to build on the changes
    and investments we have started over the last 2 years, and I am
    confident that the results will improve both food safety and
    our efficiency.

                               User Fee Proposal

        Now, the administration believes that the collection of
    user fees is essential to the successful long-term
    implementation of the meat, poultry, and egg products
    inspection reforms. Legislation will be proposed to recover
    $390 million in new user fees to pay 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 provide laboratory support for inspection, animal
    production food safety investments, investments in new
    inspection systems improvements, and program administration.
    This proposal is intended to assure that resources are
    available now and in the future to provide the level of
    inspection necessary to meet the demand for such services,
    including the growth in the industry, and to maintain consumer
    confidence, with the balanced budget also held in proper
    context. The overall impact of consumer prices as a result of
    these fees is estimated to be less than one-half cent per pound
    for meat and poultry production.
        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 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.
        That concludes my oral statement.

                               Prepared Statement

        Senator Cochran. Thank you very much, Mr. Billy. We have
    your complete statement, and it will be made part of the
    record.
        [The statement follows:]
                     Prepared Statement of Thomas J. Billy
        Mr. Chairman and Members of the Subcommittee, I am pleased to
    appear before you today to discuss the President's fiscal year 1998
    budget request for the Food Safety and Inspection Service (FSIS). As
    you may know, I became the Administrator of FSIS in October 1996, after
    serving as Associate Administrator since October 1994.
        During my years as a public servant, I have learned that the job of
    ensuring food safety involves much of government and requires multiple
    resources and authorities. I've seen food safety from several sides
    now, having worked at the National Marine Fisheries Service with its
    voluntary seafood inspection program, at the Food and Drug
    Administration, and now at FSIS. I am convinced that the only way we
    can serve the American public is through partnerships.
        I believe also that Congress and FSIS are partners, striving toward
    the same results--safer food and a more efficient use of taxpayer
    dollars. I wish to acknowledge your role in supporting the 1997 budget
    request and making an essential contribution to fulfilling our Federal
    responsibilities in food safety. Now, I want to tell you about our role
    in the partnership during the last year and how we plan to continue to
    fulfill our responsibilities. I will also talk about the progress we
    are making because of partnerships with key constituencies, including
    consumers, the regulated industry, and our own employees.
                         current inspection activities
        FSIS has a long, proud history of protecting the public health. Our
    mission is to ensure that the Nation's commercial supply of meat,
    poultry, and egg products is safe, wholesome, and accurately labeled,
    as required by the Federal Meat Inspection Act, the Poultry Products
    Inspection Act, and the Egg Products Inspection Act.
        FSIS inspects approximately 5,900 plants that slaughter cattle,
    swine, sheep, goats, horses, chickens and turkeys, and process eggs as
    well as produce a wide range of processed products, including hams,
    sausage, stews, pizzas, and frozen dinners.
        In addition to inspecting animals before and after slaughter and
    during processing, our inspectors provide samples to laboratories to
    test for the presence of chemical residues. FSIS also sets standards
    for a range of activities associated with the production of meat and
    poultry products, including the use of equipment, sanitation
    procedures, and product labeling.
        In fiscal year 1996, our domestic inspectors examined approximately
    88 billion pounds of meat and poultry and 3 billion pounds of egg
    products for public consumption. While the inspection of domestically
    produced meat, poultry, and egg products consumes the bulk of FSIS
    resources, FSIS also recognizes the vital importance of inspecting
    imported products. To ensure the safety of imported products, FSIS
    maintains a comprehensive system of import controls to carry out the
    requirements of the Federal meat, poultry, and egg products inspection
    laws.
        This system of import controls involves two major components. The
    first is oversight to ensure that exporting countries have government
    inspection controls equivalent to those of the United States. Such
    countries must undergo a rigorous review process before they can become
    eligible to export product to the United States, and periodic in-
    country reviews, including on-site plant reviews, are carried out to
    maintain such eligibility.
        The second component is the reinspection of meat and poultry
    products as they enter the United States. Reinspection is based on
    statistical sampling and verifies that the foreign country's inspection
    system is working. This reinspection is carried out by approximately 74
    import inspectors covering some 160 active import inspection locations.
    In 1996, nearly 2.4 billion pounds of imported meat and poultry
    products were passed for entry into the United States.
        FSIS provides assistance to State inspection programs and reviews
    those programs to ensure that they are maintaining inspection
    requirements at least equal to those of the Federal program.
        Another part of the FSIS food safety program involves our
    laboratories, which provide scientific and technical support to
    inspection personnel through laboratory testing for chemical and
    antibiotic residues, microbiological contamination, pathology
    diagnostics, processed product composition, and economic adulteration.
        FSIS currently operates three multidisciplinary laboratories to
    carry out food safety and composition tests. During fiscal year 1996,
    over 1.7 million analyses were performed on meat, poultry, and egg
    product samples by federally operated laboratories.
        FSIS conducts compliance and enforcement activities to address
    situations where unsafe, unwholesome, and inaccurately labeled products
    have been produced or marketed. FSIS investigates cases of
    administrative, civil, or criminal violation of meat, poultry, and egg
    product regulations and works in conjunction with the USDA Office of
    the General Counsel and the Department of Justice to correct problems
    and prosecute offenders when necessary.
        In fiscal year 1996, 31,099 compliance reviews were conducted. As a
    result of these reviews and other compliance activities, more than 22
    million pounds of meat and poultry were detained for noncompliance with
    meat and poultry laws. Forty recalls were conducted involving over 2.3
    million pounds of product. In addition, 48 convictions were obtained
    against firms and individuals for violations of the meat and poultry
    inspection laws.
                          fundamental changes in fsis
        In the last two years, FSIS has been working toward two major
    goals: to make food safer by finding better ways to control pathogens,
    and to make better use of our resources. We recognized that the Agency
    would have to change its reliance on our traditional command and
    control method of doing business and that this would require a
    fundamental cultural change within FSIS. Our employees and all of our
    constituencies would have to be part of the change and, more
    importantly, have a role in determining the nature of the changes and
    the method of their implementation. In short, we had to form
    partnerships and work in a more open environment to make the needed
    changes. During fiscal year 1996, we set in motion a public process for
    determining what changes were needed. The product of that effort is a
    comprehensive food safety strategy. We have already begun making
    changes and will continue implementing them into the next century. I'd
    like to describe a few of the key changes, how they came about, and
    what they mean for the Agency and the American people.
                          pathogen reduction and haccp
        The traditional FSIS system of organoleptic inspection has
    limitations in dealing adequately with the problem of pathogenic
    microorganisms--harmful bacteria--on raw meat and poultry products. It
    cannot detect invisible bacteria such as Salmonella, E. coli O157:H7,
    Campylobacter, and Listeria monocytogenes, which contribute
    significantly to foodborne illness in the United States.
        The Agency reached a milestone last July with publication of the
    final rule on Pathogen Reduction and the Hazard Analysis and Critical
    Control Point system, known as 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 of food safety performance in
    terms of such bacteria, and will also reinforce all plants'
    responsibilities for safe product. Let me briefly describe the major
    provisions of the Pathogen Reduction and HACCP rule.
        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 (SOP's) to ensure that they are meeting
    their responsibility for proper sanitation of facilities, equipment,
    and operations. The written sanitation SOP's must describe the specific
    measures plant management will put in place to prevent direct product
    contamination. In addition, most slaughter plants were required to
    begin testing their products for generic E. coli as an indicator of
    process control effectiveness for preventing fecal contamination, the
    primary pathway for pathogenic bacteria.
        All plants will develop a HACCP plan based on the seven principles
    established by the National Advisory Committee on Microbiological
    Criteria for Foods. HACCP systems identify critical control points that
    address likely product safety hazards, rather than quality or economic
    adulteration problems.
        HACCP implementation will be phased in according to plant size.
    Large plants with 500 or more employees must have plans in place on
    January 26, 1998. For small plants with 10 to 499 employees, the
    implementation date is January 27, 1999. For very small plants, with
    fewer than 10 employees or annual sales of less than $2.5 million, the
    implementation date is January 25, 2000.
        In recognizing the special difficulties that small plants will
    face, we have initiated an aggressive program to provide assistance to
    these plants. We will provide a Guidebook for the preparation of HACCP
    Plans, a Hazards and Preventive Measures Guide, and model plans for
    various product categories. We have held special constituent meetings
    to determine what specific, tailored assistance small plants will need.
    FSIS is assessing those needs and developing assistance tools that are
    not presently available. Current plans call for demonstration projects
    for HACCP in small plants. Additionally, USDA's Fund for Rural America
    will complement FSIS efforts by providing research and extension
    assistance in rural communities to help small and very small plants
    assess and meet their training and facilities needs in order to
    implement HACCP.
        The HACCP rule established Salmonella performance standards for
    chilled carcasses and raw ground products. Through their HACCP
    programs, plants will be required to achieve a prevalence of Salmonella
    contamination that is below the national baseline prevalence for each
    class of raw product, as reflected in the FSIS baseline surveys. FSIS
    will continually sample and test to verify compliance.
        By January 25, 2000, all provisions of the final rule will have
    been implemented. The final rule sets an important framework for change
    in FSIS, but by no means is it the culmination of our strategy for
    change. We must now envision our food safety and consumer protection
    goals in a HACCP world.
                        changes in the fsis organization
        We realized early on that FSIS would need a new organization to
    make the changes necessary to achieve our 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 sought input on the changes from our constituencies and our
    employees at all grade levels throughout the Agency. As a result, the
    reorganization is based on a top-to-bottom review of the Agency's
    regulatory roles, resource allocations, and organizational needs.
        We are flattening and streamlining management structures both at
    headquarters and in the field, and consolidating four former
    independent field structures into one. Our new structure will
    accommodate the Agency's need to function with fewer non-frontline
    staff. As we streamline the organization, we will increase the
    proportion of resources deployed to the frontline work force--food
    inspectors, in-plant veterinarians, import inspectors, laboratory
    personnel, compliance officers, and first-level supervisors.
        I am very proud that we reduced the number of headquarters units
    reporting to the administrator from 13 to 7. At the same time, we
    created a new Office of Public Health and Science, which will improve
    the public health focus of our program. It will ensure that our
    policies meet the performance goal of improving public health. We also
    created a new Office of Policy, Program Development and Evaluation
    which will centralize all policy and rulemaking functions in the
    Agency.
        Over the next two years, we will reduce the number of field
    management offices from 46 to 18 district offices and a Technical
    Services Center. I strongly believe that the 18 new district offices
    will make supervisory spans of control more manageable and better
    balance the workload.
        A new Technical Services Center has been established and will be
    opened in Omaha, Nebraska, this summer. It will provide technical
    expertise and guidance to inspection personnel on the interpretation,
    enforcement, and application of domestic and import regulations,
    policies, and systems. We expect that the Center will enable FSIS to
    provide much quicker technical assistance and far more consistency in
    inspection across the country.
                               regulatory reform
        FSIS is committed to comprehensive regulatory review of our entire
    operations to reduce cost and burden to industry and consumers without
    compromising public health and safety. As part of this effort, I'm
    pleased to report that we are well underway with our efforts to convert
    our regulations to the 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. We also
    invited comment on a list of FSIS regulations that may need revision to
    be consistent with HACCP. 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
    approval for blueprints, 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 advance notice of proposed
    rulemaking to evaluate the need for meat and poultry standards of
    identity and composition.
        When our regulatory reform is completed, it will clarify the proper
    roles of government and industry in ensuring safe food. It will focus
    FSIS resources on preventing harmful bacteria and other hazards in meat
    and poultry products. And it will make the Agency more responsive to
    all our constituencies.
                           emphasis on public health
        Our major goal is an improvement in the safety of meat, poultry,
    and egg products that leads to fewer people getting sick. As you know,
    the Government Performance and Results Act of 1993 directs Federal
    agencies to measure the results of their programs in terms of societal
    impacts. Year after year, we have been able to tell you how many pounds
    of product we inspected and how many laboratory tests we conducted.
    What we now need to tell you is how these programs make a difference to
    public health.
        To assess the public health impact of a modernized inspection
    system, FSIS began working with the Centers for Disease Control and
    Prevention (CDC) and the Food and Drug Administration (FDA). Past
    estimates of the annual incidence of foodborne illness cover a very
    broad range and clearly indicate the need for more accurate data,
    including the source and cause of the problem. Limited regional studies
    have clearly implicated meat and poultry as vehicles for several
    foodborne pathogens; however, we need more precise national data.
        FSIS is working with CDC and 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, 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.
        In February 1997, the sentinel sites provided FSIS with preliminary
    data on the occurrence of diarrheal illness in 1996 due to bacterial
    foodborne pathogens, including E. coli O157:H7, Salmonella,
    Campylobacter, Yersenia, Listeria, and Vibrios. And through case-
    control studies, which are in progress, the sites will provide data to
    determine the proportion of culture-confirmed cases of illness due to
    E. coli 0157:H7 and Salmonella serogroups B and D attributable to
    eating meat and poultry products; and through population surveys, we
    will learn more about how people handle and prepare food. In our 1998
    budget request, we are asking for additional funds to expand
    surveillance and population surveys, and to include Campylobacter
    infections in the Sentinel Sites case-control study.
        With sentinel site information, FSIS can review HACCP programs and,
    where appropriate, trigger changes to prevent future outbreaks of
    foodborne illness. The sites will provide critical human health
    information to support risk assessments to determine whether pathogen
    performance criteria and standards are effectively reducing the
    incidence of foodborne illness.
        As you know, we were directed by you in the fiscal year 1997
    Committee Report to report on the incidence of foodborne illness in
    cooperation with CDC. The report found that there were 7,259 laboratory
    confirmed cases of diarrheal illness in calendar year 1996 in the five
    sites. Also, Campylobacter was the most frequently isolated bacterium,
    with Salmonella second, Shigella third, and E. coli fourth. CDC will
    officially close its books on 1996 at the end of March and we will
    provide updated information to you when final figures are available.
        We are continuing our nationwide baseline studies to measure the
    levels of pathogens that currently exist on meat and poultry products.
    With this and other information, we expect to know earlier in the
    process if a potential public health problem exists and be able to
    carry out risk assessments, as required.
        As a regulatory agency focused on public health, we must be able to
    rapidly adjust our policies and procedures to new information and
    emerging public health risk. With our enhanced front-line capability
    under the new organizational structure, we will be better able not only
    to address immediate public health problems, but to adjust our
    regulatory policies and procedures as necessary.
                             changes in inspection
        With implementation of the final rule on Pathogen Reduction and
    HACCP, there are additional opportunities to improve the way we carry
    out inspection activities, to improve both food safety and allocation
    of resources. We believe the implementation of HACCP will permit us to
    make improvements in the inspection process and redeploy some of our
    current in-plant inspection work force both to HACCP verification
    tasks, and to new tasks outside of traditional in-plant settings in
    furtherance of our farm-to-table strategy.
        I also strongly believe that the final HACCP rule will provide much
    greater consistency in meat and poultry inspection across the country
    and between meat and poultry inspection. But it will be a consistency
    based on a common, consistent regulatory framework. It will not be
    based on the command and control philosophy of the past.
        We are aware that there are activities we carry out within plants
    as part of the inspection process that have limited value in terms of
    public health protection or meeting other consumer protection
    responsibilities. We also know that there are important public health
    tasks we do not carry out under the current system of inspection. We
    are planning demonstration projects to explore improved methods for
    conducting inspection, and will follow a public process to obtain input
    from all stakeholders.
                                   egg safety
        Egg safety is another important area that deserves our attention.
    One emerging issue regarding the safety of eggs relates to phage-type 4
    Salmonella enteritidis (Se).
        We are monitoring the situation, and our concerns are growing.
    Through reports from the CDC, we know that human illnesses caused by
    phage-type 4 Salmonella enteritidis are increasing and spreading
    geographically. The first human cases of salmonellosis due to
    Salmonella enteritidis phage-type 4 occurred in California and Texas.
    It has now been found in Utah and other parts of the U.S.
        The good news is that studies in U.S. broilers to date have not
    shown an increase in Se following the detection of Sephage-type 4 in
    this country. We believe that the steps we are taking now to reduce Se
    in eggs are important regardless of the type of Se we are dealing with;
    but we need to take some additional steps based on information that
    suggests phage-type 4 Se may be an invasive infection in poultry.
        We have allocated funds to perform phage-typing of Se poultry
    isolates taken from our pathogen reduction testing program under HACCP.
    As I stated earlier, FSIS will conduct a Salmonella testing program
    under HACCP. We are also considering conducting a sampling program for
    liquid eggs and spent hens to monitor national trends for phage-type 4
    Se.
        We are working to address the concerns you expressed in the fiscal
    year 1997 Committee Report concerning the 1991 amendment to the Egg
    Products Inspection Act establishing an average ambient temperature for
    the transportation of eggs and egg products. We plan to work closely
    with FDA to develop science-based regulatory standards for proper
    cooling of shell eggs and are 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 Food and Drug Administration (FDA),
    FSIS has undertaken a number of activities to address shell egg safety.
    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 conducting a science-based, quantitative risk
    assessment for shell eggs and egg products, and are talking with
    industry regarding steps they might take voluntarily to address the
    problem of Salmonella enteritidis. 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. We plan to address this issue in the same public way we
    have addressed meat and poultry safety over the past few years, and
    will base actions on available science. In addition to working on shell
    egg safety with FDA, we are evaluating options for proposed regulations
    to mandate HACCP for plants that process shell eggs.
                          food safety beyond the plant
        As we implement the Pathogen Reduction and HACCP rule in inspected
    establishments, we have already begun exploring what is needed to
    improve food safety after products leave establishments. Opportunities
    to improve food safety exist all along the farm-to-table chain and we
    have an obligation to explore how best to take advantage of these
    opportunities by working with other Federal, State and local regulatory
    agencies.
        On November 22, FSIS and FDA published in the Federal Register an
    advanced notice of proposed rulemaking to seek input on ways to improve
    food safety during transportation and storage. We are seeking comment
    on how the Federal government should be involved in this area. The
    November conference we sponsored with FDA on time, temperature, and
    transportation identified desirable and feasible temperature control
    interventions and verification techniques to improve food safety.
        On the retail level, we recognize that the primary responsibility
    for overseeing food safety resides with State and local governments. 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 the meat, poultry, and
    egg products. We also are committed to providing appropriate assistance
    to see the Food Code adopted nationwide.
           changes in the way we communicate with all constituencies
        When we began the changes at FSIS, we knew that HACCP could greatly
    improve food safety by identifying and controlling hazards before
    products reach consumers. HACCP principles have already been proven
    effective. However, simply imposing a new regulatory system over the
    old one would never work. To be successful, the Agency had to enlist
    the full participation of consumers, the meat and poultry industry, and
    all other constituencies.
        FSIS far exceeded the requirements of the Administrative Procedures
    Act in reaching out to involve all stakeholders in this program. In
    addition to normal communication channels, such as notices in the
    Federal Register, letters were sent to thousands of organizations
    representing consumers, the industry, the public health community,
    academia, and other Federal, State, and local agencies. The Agency held
    seven information briefings on the proposal throughout the country, a
    two-day hearing in Washington, D.C. and three Scientific and Technical
    Conferences. The commenters raised new issues, questioned traditional
    wisdom, and related personal experiences. To share the new information,
    FSIS held another six meetings, this time focusing on specific issues
    raised during the comment process, culminating in a Food Safety Forum
    hosted by Secretary Glickman.
        FSIS made substantial changes to the proposed HACCP regulation,
    based on the results of this outreach effort. For instance, the
    ``indicator organism'' for testing for basic safety was changed from
    Salmonella to E. coli and the testing requirements were changed to be
    much less burdensome on small plants.
        After the final rule was published in July 1996, FSIS held more
    than a dozen additional meetings, in Washington, D.C. and across the
    country, to explain how the regulation would be implemented and to
    explain specific aspects, as well as identify the assistance available
    to help small plants implement HACCP. Again, we encouraged suggestions
    to help us fine tune implementation of the regulation.
        For FSIS, a significant achievement was the process for consensus-
    building among competing and sometimes combative interests and a new
    openness to ideas. Naturally, all FSIS constituencies did not agree on
    every detail of the HACCP regulation and its implementation. However,
    they universally praised the open process that considered all
    viewpoints and brought together divergent constituencies that had
    believed themselves forever locked in opposition. It was the first time
    that such a variety of FSIS constituencies discussed their differing
    viewpoints face to face, gaining an understanding of each others' needs
    and concerns. For instance, the mother of a child who died from E. coli
    O157:H7 after eating a hamburger talked directly to the owner of a
    small meat plant who questioned whether he could ever guarantee that
    meat was free of pathogens. A union official, a plant manager, and a
    consumer advocate all agreed that inspectors need more scientific
    training. Many constituencies have asked that FSIS continue to hold
    public meetings, on all aspects of the Agency's work. We will do so.
        During the process, we reached out to our employees in ways that we
    had not tried before. Now, we are investing in our employees. We cannot
    operate the science-based inspection system of the future without first
    preparing our inspection work force for these changes. We have begun
    training the inspection work force to implement the new rule and
    started a new education program at Texas A&M University to provide in-
    plant inspectors with a more scientific foundation to work in a HACCP
    environment. The program will focus on giving a basic understanding of
    why food safety problems occur and why certain inspection tasks must be
    done, rather than simply showing employees how to carry out such tasks.
    In addition, we will reimburse employees for the cost of courses they
    take on their own time near their work sites in subjects such as
    statistics and microbiology.
                            forming new partnerships
        We are forming new partnerships with state and other government
    agencies and with academia, to ensure that we have the best information
    on which to base policy decisions. The Sentinel Sites project that I've
    already discussed is one such effort.
        For the past couple of years, we have been working closely with FDA
    and State government agencies to address food safety gaps in the
    transportation and retail areas.
        Our 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. Further, we must leverage our limited animal
    production food safety resources with producer groups, academia,
    States, and other Federal agencies to identify improvement
    opportunities in animal production.
        FSIS is publishing three notices in the Commerce Business Daily to
    indicate our intent to work with animal producers, scientists in
    academia and government agencies at both the Federal and State levels
    to develop and foster voluntary food safety measures that can
    reasonably be taken on the farm, through marketing channels and during
    pre-slaughter preparation to decrease public health hazards in animals
    presented for slaughter.
                                 new technology
        New technology will play a vital role in the new FSIS, both within
    and outside the Agency.
        Within FSIS, through the Field Automation and Information
    Management (FAIM) project which you have supported, we are equipping
    our inspection work force with computers to better allow them to
    communicate, access and apply technical regulations and directives, and
    receive training on HACCP. The FAIM initiative supports both the
    Agency's field reorganization and HACCP implementation. All large HACCP
    plants will be covered by FAIM as of January 1998, the effective date
    of the HACCP rule for these plants.
        We are using more rapid tests and automation in our laboratories to
    speed the availability of test results, and we are redesigning our
    training and continuing education programs to teach our employees to
    take advantage of this technology.
        We will encourage new technology outside of the Agency. During the
    last several years we have approved a number of new technologies for
    use in plants to improve food safety--including organic acids,
    trisodium phosphate, and steam pasteurization. We will continue to help
    the industry to test new technology in plants. As a result of your
    support on the 1997 Budget, we particularly are helping small plants
    adapt new technology to improve food safety and assisting small plants
    in developing alternative process controls that meet HACCP standards.
                             international changes
        Our changes in regulation extend to imported products as well. The
    inspection systems of foreign countries must be equivalent to the U.S.
    system before product can be imported into the United States. Nations
    wishing to export to the United States had until January 27 to advise
    us they would implement the January 27 provisions of the Pathogen
    Reduction and HACCP regulation into their inspection systems.
    Otherwise, their product will not be allowed entry.
        Working through the Codex Alimentarius Commission, we will continue
    to stress the role of science in international standard-setting and
    actively participate in the process.
                              1998 budget request
        We are encouraged by the importance placed on food safety
    throughout USDA and support the initiatives proposed by the
    Agricultural Research Service for Pre-harvest and Post-harvest food
    safety research, and by the Cooperative State Research, Education, and
    Extension Service for grant programs to be carried out by land grant
    universities.
        To continue making food safety improvements and to accomplish our
    goals, we are making a current law request of $591.2 million--an
    increase of $17.2 million over the amount provided for 1997. This
    proposal includes increases of $13.7 million for statutory pay
    increases, $1.1 million for the increased costs 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. To support our partnership with employees, we are
    requesting an increase for pay costs to maintain current inspection
    staffing levels.
        In fiscal year 1998, FSIS proposes to build on the changes and
    investments we have begun during the last two years. I am confident
    that the results will improve both food safety and FSIS' efficiency.
    Let me describe the initiatives for program investment covered by this
    budget request.
                            1998 budget initiatives
        Changes in the FSIS organizational structure, particularly in field
    support, have been driven largely by the need to operate more
    efficiently as we carry out our regulatory responsibilities in a more
    scientific manner under the HACCP regulation. The first two initiatives
    address the need for additional resources to facilitate completion of a
    streamlined field management structure and to make this new
    organization fully functional to manage its changing responsibilities.
        We are requesting an increase of $1,000,000 for relocation costs to
    complete the restructuring process. Up to 75 employees will be
    transferred to the new district offices and the Technical Services
    Center during fiscal year 1998. Due to the cost of mandatory salary
    increases, inflation, and relocations in fiscal year 1997, the Agency
    will need an increase of $1 million to begin a two-year effort to
    complete the restructuring of FSIS field management.
        An additional $1,250,000 is requested to begin equipping field
    staff in the new district offices and Technical Services Center with
    upgraded automated data processing (ADP) and telecommunications
    technology in order to link the field, headquarters, and plants as we
    streamline our organizational structure. We need to maximize the
    productivity of a finite work force charged with managing an increased
    workload. As I mentioned earlier, FSIS will consolidate 46 program
    field offices into 18 district offices, a Technical Center and two
    administrative centers, with a major reduction in support personnel.
    The consolidation will continue through fiscal year 1999. In fiscal
    year 1998, funds are needed to provide updated ADP and
    telecommunications equipment to support local area network (LAN) and
    wide area network (WAN) capabilities.
        As the importance of international trade increases, so has the
    workload of the Office of U.S. Codex in FSIS, which carries out
    government-wide responsibilities. The requested increase of $100,000 is
    needed to provide for increased staffing support and to meet the USDA
    commitment to provide one-third of the cost for a meeting of the
    reactivated Codex Committee on Fresh Fruits and Vegetables, with the
    balance of funding for this meeting being provided by other Federal
    agencies.
        As part of the President's Food Safety Initiative and our farm-to-
    table strategy, we are requesting an increase of $565,000 to provide
    training in HACCP principles for State and local food regulatory
    officers responsible for both meat and poultry inspection and
    distribution and retail compliance. During the past several years,
    consumers have come to demand convenient and easily-prepared meat and
    poultry food products. This change has resulted in retail stores and
    restaurants using manufacturing techniques previously used only in
    inspected establishments. In addition, traditional processes, such as
    meat grinding, that were once considered ``low risk'' are now
    recognized as a ``significant risk'' to food safety.
        We believe that the State and local officials who regulate food
    safety at the retail and restaurant level must receive HACCP-related
    training that is comparable to what our inspectors receive. The
    requested increase is needed to begin a two-year program to train FSIS
    and State food safety regulators who will then train State, county and
    city inspectors across approximately 3,000 government agencies.
        Reflecting the emphasis we place on improving public health as we
    work in partnership with other agencies, we request an increase of
    $500,000 to support expanded pathogen data analysis in the CDC's Food
    Safety Early Warning System. This initiative will enable FSIS to get a
    more complete picture of the incidence of foodborne illness by
    including data on the high priority pathogen, Campylobacter. CDC has
    shared preliminary data which indicate that Campylobacteris the most
    common foodborne pathogen and the requested increase is needed so that
    we can determine the impact of Campylobacter on public health and
    identify appropriate follow-up actions.
        Additional savings of $1,000,000 in non-inplant field management
    staffing is expected to result from continued implementation of the
    Field Automation and Information Management (FAIM) Project.
                                   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. 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 provide 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
    assure that resources are available now and in the future to provide
    the level of inspection necessary to meet the demand for such services
    and maintain consumer confidence, within the balanced Federal budget
    context. The overall impact on consumer prices as a result of these
    fees would be less than one-half cent per pound of meat and poultry
    production.
        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 that 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.
                                   conclusion
        Mr. Chairman, this concludes my prepared statement. Thank you for
    the opportunity to testify on how FSIS is meeting its responsibilities
    in the partnership that we have with Congress to improve the safety of
    meat, poultry, and egg products, and thereby reduce the incidence of
    foodborne illness. I will be happy to answer any questions that you or
    other members of the Subcommittee may have.

                 Fiscal Year 1996 Funds for In-Plant Inspection

        Senator Cochran. Mr. Billy, there was one thing that I
    wanted to ask you at the outset, and then I will yield to my
    colleagues for any questions that they have.
        The Omnibus Consolidated Rescissions and Appropriations Act
    of 1996 made $363 million available for salaries and benefits
    of in-plant inspection personnel, unless the Secretary
    certified to the House and Senate Appropriations Committees
    that a lesser amount would be adequate to fully meet in-plant
    inspection requirements for the fiscal year.
        A letter was received from the Secretary on January 2,
    1997, saying that the FSIS had spent $354 million of the 1996
    appropriation on the salaries and benefits of its inspection
    work force, and that ``the employment adjustments, subsequent
    to the April 26, 1996, statute, enabled FSIS to avoid
    disruptions in inspection service for the balance of the
    year.''
        I am told that several poultry plants in the Southeast have
    had to shut down inspection lines due to the shortage of online
    inspectors, and that some of these shutdowns have resulted in
    the destruction of poultry.
        What is meant by the statement in that letter? And, how
    many FSIS full-time and intermittent inspectors are on the
    payroll to adequately meet in-plant inspection requirements?
        Mr. Billy. Mr. Chairman, I do not have the specific
    information, but I would be happy to provide that for the
    record. Let me give you a general response.
        We were committed to providing the services that are needed
    by slaughter plants and processing plants in terms of
    inspection coverage. Because of the processes of balancing
    expenditures in terms of the cost of salaries and benefits and
    at the same time making the appropriate investments that are
    talked about in terms of the HACCP approach and introducing the
    new technology into the agency, we worked very hard to maintain
    an appropriate balance and minimize to the maximum extent
    possible any impact on the plants.
        So, that continues to be our goal. We are in the process of
    continually hiring new inspectors to replace those that choose
    to leave, and as a result of that, I think we are doing a good
    job of providing the services as required under the law.
        [The information follows:]

        In the first part of fiscal year 1996 in-plant inspection
    employment dropped and, due to recruitment difficulties, did
    not rebound until spring. To assist in recruitment, FSIS
    removed the cap on other than permanent full-time employment to
    cover all requests for on-line inspection, and increased
    permanent full-time employment. Permanent full-time employment
    increased from its lowest level of 7,347 in January 1996 to
    7,531 at the end of September 1996. In addition, by the end of
    fiscal year 1996 FSIS had the full-time equivalent of 539 other
    than permanent full-time employees, which was an increase of 74
    over fiscal year 1995.

        Senator Cochran. Do you anticipate any shutdowns being
    required under the budget request that you are submitting to
    the committee?
        Mr. Billy. No, sir; this will enable us to provide full
    service to the plants as they need it.

                HACCP Implementation and Inspection Alternatives

        Senator Cochran. To what extent is HACCP permitting a
    downsizing of the inspectors that are located in the plants for
    individual inspections of poultry?
        Mr. Billy. Our first focus is to implement HACCP in the
    plants. The first wave of plants to have HACCP in place will be
    in January 1998. That will be a total of approximately 500
    plants, the largest plants. The remainder of the roughly 5,500
    plants will implement HACCP over the succeeding 2 years. So, we
    are really on the front edge of implementing HACCP throughout
    the industry.
        Tied to that implementation, where the plants set up a
    HACCP plan and implement it and we verify that they are
    following their HACCP plan, we have announced our intent to
    publish a notice to reevaluate how we provide inspection
    coverage, particularly focused on slaughter plants, and through
    a public process so that all of the stakeholders have an
    opportunity to participate, explore alternative inspection
    strategies for meeting the mandate in the law, carcass-by-
    carcass inspection, and assuring that the products produced are
    safe and wholesome. This will all be done under the context of
    a HACCP approach.
        Through that process, we will then implement pilot studies
    in various plants--already a number of plants have volunteered
    to participate--where we will explore alternative staffing
    strategies that both meet the requirements and assure that the
    product produced is safe and wholesome.
        If in fact those pilot studies demonstrate that alternative
    approaches under a HACCP basis are effective, we would then
    propose to do a rulemaking to modify our current requirements
    in terms of how we approach inspection and slaughter
    facilities. We believe that this will result in an opportunity
    to free up a number of inspectors which we intend to assign in
    distribution areas beyond the plants. This is an area that has
    been emphasized by both industry and the consumer community in
    terms of addressing the food safety hazards beyond the
    slaughter and processing plants.

                             HACCP-Based Assistance

        Senator Cochran. Are you going to move into the restaurants
    and retail outlets or what?
        Mr. Billy. No, sir; it is unrealistic for us to consider
    that. There are approximately 1 million retail establishments,
    and they are under the jurisdiction of State and local
    authorities. What we think we can do is provide better
    technical assistance to the States in terms of how to approach
    what they do on a HACCP basis, develop new standards, and
    perhaps provide some training as well to assist the States and
    the local authorities in ensuring that meat, poultry, and egg
    products are handled effectively at the retail level.

                              Transition to HACCP

        Senator Cochran. I read your statement and on page 17, I
    notice that you compared the final HACCP rule with the command-
    and-control philosophy of the past and suggested that once the
    rule is implemented and in place, we will have a modern, up-to-
    date, new regulatory framework.
        One thing that concerns me is the suggestion that you keep
    talking about the command-and-control philosophy of the past.
    It seems to me that we are still in the past in terms of the
    philosophy. Is that an incorrect observation?
        Mr. Billy. I think, Mr. Chairman, that we are in a period
    of transition. It is a fact that there exist in our rules
    currently a number of command-and-control type requirements
    that need to be modified. I outlined in my statement examples
    of where we are proceeding to do that and either eliminate them
    or shift them to performance standards.

                               Regulatory Reform

        Senator Cochran. I hear talk about it and everybody is
    saying that there is change occurring, but I do not know what
    it is. I cannot tell from reading your statement what it is and
    I do not hear from out in the field what it is. We talk about
    this new system and that changes are being made, and your
    statement is evidence of what I am talking about: ``We are
    aware that there are activities we carry out within plants as
    part of the inspection process that have limited value in terms
    of public health protection or meeting other consumer
    protection responsibilities.''
        My question is then why are you doing them?
        Mr. Billy. They reflect current and longstanding regulatory
    requirements that we are in the process of changing. Let me
    give you two examples.
        One is for years the agency has required plants to submit
    blueprints, equipment requirements, process control plans to
    the agency for prior approval. We have published a proposal to
    eliminate those kinds of requirements.
        I was struck by the comparison between my experience at the
    Food and Drug Administration and FSIS now where the rest of the
    food industry seems to be able to design and build plants and
    select equipment without the Government prior-approving every
    step that they take, and I believe we can eliminate those
    requirements.
        The interesting thing is, when we put out the rulemaking
    proposal to do that, the majority of the comments we got back,
    primarily from the industry, say do not eliminate those
    requirements; we are comfortable with them. But I still believe
    it is the right thing to do, to stop having those kinds of
    command-and-control type requirements.
        Another example is requirements for the production of
    various types of products. I will use the example of roast beef
    where if you look at our existing regulations, they spell out a
    several-step process which every plant must follow to produce
    that product rather than simply establishing the end result
    requirement. Here is the food safety requirement you have to
    meet. It is up to you decide how you produce this product to
    give the industry more flexibility.
        We have similarly proposed in a proposed rule to eliminate
    that several-step requirement and strip that right out of the
    regulations so that plants have more flexibility to do it, but
    to assure at the same time that the food safety objective is
    met.
        And that is the process that we are moving on to change
    these kinds of requirements, but we must do it through a
    rulemaking process. That is why I mentioned several examples in
    my prepared statement that we are proceeding through this
    process and we will complete it. It is important to us to
    eliminate those kinds of command-and-control requirements and
    to fundamentally rely on HACCP as the basis for addressing food
    safety.
        Senator Cochran. Thank you.
        Senator Bumpers.

                          Pathogen Reduction and HACCP

        Senator Bumpers. Pursuing Senator Cochran's line of
    questioning, Mr. Billy, what percentage reduction in bacteria
    on a chicken carcass do you get with HACCP as opposed to the
    old method? I am for it. I do not mean to be offensive.
        Mr. Billy. No; I understand.
        What we have proposed to do in the HACCP and pathogen
    reduction rule is to require with the implementation of HACCP
    that all plants meet the national prevalence for Salmonella.
        Senator Bumpers. What does that mean, national prevalence?
        Mr. Billy. National prevalence? Sort of the national
    average that the industry is now accomplishing. What that means
    is that those plants that are not currently performing at that
    level will have to improve their process control to meet that
    national average, if you will. That is the step that is
    contained in the new rule to provide for improvement in terms
    of the presence of Salmonella and other similar pathogens on
    poultry or meat products.
        Senator Bumpers. That is going to be a shifting target, is
    it not? Because as you implement this program between now and
    the year 2002?
        Mr. Billy. The year 2000.
        Senator Bumpers. The average is going to continue to climb.
    So, a plant that might be in compliance in 1998--because the
    improvement is going to continue to climb, somebody that is in
    compliance in 1998 may not be in compliance in the year 2000 or
    2002. Do you follow the question?
        Mr. Billy. Yes, I do.
        To address that question, what we are planning to do is to
    conduct new baseline surveys over the course of a year--you
    need to do it over the course of a year to get the seasonal
    variation--and measure, if you will the performance of the
    industry with the implementation of HACCP. If it looks like, in
    fact, what you have laid out in your scenario is the case, then
    we would consider whether we would propose through rulemaking
    to modify the performance standards we now have in place to
    reflect those kinds of improvements. So, that is the strategy
    that is contained in our new rule.
        Senator Bumpers. Well, let me ask the first question in a
    slightly different way. How much improvement, if you can tell
    me, as a percentage will we see under HACCP in the year 2002
    than we experienced under the old inspection system?
        Mr. Billy. I think that we will see significant improvement
    because with the performance standards for Salmonella and the
    E. coli testing that are required in the new regulation,
    slaughter plants in particular for the first time will be using
    microbiological testing to monitor their process control. That
    kind of information is not available through the current
    inspection approach, where we are using visual inspection to
    monitor for fecal contamination. But you cannot see the
    bacteria, so shifting to this kind of microbiological testing
    regime, we think, will give us real data to show progress and
    show the kind of reductions that you are asking about.
        I am not able to tell you what we will be able to
    accomplish by the year 2000. We are only now implementing this
    new system. There is a lot of information out there to show
    that HACCP works very well, and I think many in the industry
    are already using HACCP because of the advantages that it
    provides. So, I think we will see very good progress in terms
    of reducing the levels of pathogens on products coming out of
    slaughter plants.

                                 Cost of HACCP

        Senator Bumpers. What kind of economic burden, if any, does
    it place on the industry to implement HACCP?
        Mr. Billy. We provided in the final rule a detailed
    economic cost impact analysis, and it will cost the industry
    several hundred million dollars to implement HACCP and pathogen
    reduction over the full course of the 3\1/2\-year
    implementation period.
        Senator Bumpers. You are talking about the implementation.
    Is that also true on a continuing basis? I assume it is going
    to cost them money to implement it, but is the cost of
    inspection, once it is implemented, higher than the old system
    as far as the industry is concerned?
        Mr. Billy. The cost of inspection? No, sir; it will not be
    higher.
        Senator Bumpers. It will not be higher?
        Mr. Billy. No.
        Senator Bumpers. Has the Department done any studies as to
    consumer confidence on the poultry industry so far as pathogens
    and bacteria are concerned?
        Mr. Billy. I am not aware, sir, of any such surveys. I can
    say this, that there was a very wide support for the final
    HACCP and pathogen reduction rule. Certainly those that
    represent the public, the consumers, have embraced it and
    believe that it is a very positive step forward, and have so
    indicated in their publications and statements. So, that is the
    indirect measure.
        Senator Bumpers. Does FSIS have any follow-on inspection
    system in mind? Are you working on anything? HACCP is not going
    to be pertinent--you are not going to eliminate all the
    bacteria.
        Let me ask you this question. Under the old system, what
    percentage of poultry that came through a processing plant had
    bacteria on it?
        Mr. Billy. Well, all poultry would have bacteria on it. If
    you are focusing on the pathogens, the things that cause people
    to get sick, it depended on the type of poultry that you are
    talking about. Our national baseline surveys, if I recall
    correctly--and I will provide this for the record in detail--
    broilers had approximately 20 percent positives for Salmonella
    as an example, and for ground turkey I believe it was up around
    50 percent. So, that is the number of samples that you would
    find positive. The analysis phase of the baseline study on
    whole turkeys will be completed in July 1997.

        [Clerk's note.--The information referred to will not appear
    in the hearing record, but is printed in the Federal Register,
    Vol. 61, No. 144, Thursday, July 25, 1996, pp. 38806 and 38846-
    38847.]

        Senator Bumpers. But you cannot tell me what studies so far
    show will be the case after we implement the HACCP system?
        Mr. Billy. No; there is no information like that, sir, to
    answer your question. That is why we are going to do the
    follow-on baseline surveys to develop that specific kind of
    information.
        Senator Bumpers. I think that is very important, otherwise
    we do not know what we are getting here for this cost.
        Mr. Billy. Can I add one other thing?

                              Sentinel Site Survey

        Senator Bumpers. Certainly.
        Mr. Billy. The sentinel site project that we have started
    with CDC and FDA is also going to provide us new, important
    information because everyone pretty much acknowledges that the
    traditional reporting system for illnesses associated with food
    products has a number of flaws in it that do not allow us to
    rely on it to measure such progress.
        Toward that end, we are cosponsoring the sentinel sites
    project, where in five geographic locations around the country
    we are very proactively looking for illness associated with
    food products, and in our case those products that we regulate.
    The data that will be developed under that sentinel sites
    project will be extrapolated out to reflect the national
    situation. It is designed statistically to do that. It will
    allow us to have much better information about actual illness
    caused by products that we regulate.
        We started this over a year ago. We are currently
    developing, if you will, the baseline information, and then as
    HACCP kicks in and the pathogen reduction performance
    standards, we will be able to use that system to do a very
    direct comparison and show the progress that we are making in
    terms of actual illness.
        Senator Bumpers. Do you have any doubt whatever in your
    mind that HACCP is going to be a major improvement?
        Mr. Billy. I have no doubt whatsoever. It will make a huge
    difference.
        Senator Bumpers. What was your answer to my question, do
    you have any follow-on system in mind. You said no?
        Mr. Billy. No.

                                  Boll Weevil

        Senator Bumpers. Shifting gears and a similar question on a
    separate subject and that is the boll weevil eradication. Do
    you have any studies to show what the profit margins have been
    for farmers who have had the boll weevil eradicated in their
    States as compared to those that have not?
        I am sorry. Mr. Medley, that is your question.
        Mr. Medley. The Cotton Council and grower foundations have
    acquired information about improved cotton yields and reduced
    production costs on over 4 million successfully eradicated
    acres. The rate of return on funds invested in boll weevil
    eradication is estimated to be at least $12 for every $1 in
    program cost.
        Senator Bumpers. Mr. Medley, in your budget justification,
    here is what you say. ``Two separate economic studies indicate
    that once boll weevil eradication is accomplished, there is an
    estimated yield increase of at least 69 pounds per acre,
    pesticide savings of $30 per acre, and land value increases of
    $14 per acre.''
        That is a lot of money.
        Mr. Medley. Yes, it is, Senator.
        Senator Bumpers. So, you have done a study to verify this?
        Mr. Medley. Yes; starting with our successful eradication
    in the Carolinas, we have been able to track over the years,
    not only the increase in acres planted and yield from
    successful eradication, but the significant profits that you
    referred to as well. There are increased benefits for gins and
    mills resulting from increased yields. The Agricultural
    Research Service recently published a document that verifies
    the economic benefits of this very successful eradication
    program.
        Senator Bumpers. I have been pretty excited about this
    program ever since it started and I have been anxiously
    awaiting it coming to Arkansas. Of course, as you know, we
    turned it down, and I think one of the reasons we turned it
    down was because of the up-front cost. The farmer has to put up
    70 percent. Is that not correct?
        Mr. Medley. It was on a 70-30 basis for initial programs in
    the Southeast and Southwest. In recent expansion areas like
    Texas, the grower share is even higher and can be as much as
    100 percent.
        Senator Bumpers. Why does it vary from State to State?
        Mr. Medley. We have tried to move from the 70-30 split,
    which had been the initial share, to where the Department only
    provides technical assistance to grower foundations and limited
    startup costs. In expansion areas like in Texas, producers are
    substantially bearing all the costs of the program through
    referendum.
        Senator Bumpers. What has been the cost per acre for most
    farmers as far as their participating share was concerned?
        Mr. Medley. In active eradication areas, producers may pay
    between $10 to $35 per acre per year. In areas where the
    program has been completed, producers pay $2 to $3 per acre per
    year.
        Senator Bumpers. Is that for 1 year or more?
        Mr. Medley. We normally consider active eradication
    covering a 3- or 4-year period.
        Senator Bumpers. So, you are talking about $6 to $8?
        Mr. Medley. The annual acreage assessment for growers can
    range from $10 to $35 for active eradication areas.
        Senator Bumpers. Did you mean $2 per acre per year?
        Mr. Medley. The $2 per acre per year assessment would be in
    posteradication areas.
        Senator Bumpers. Do you have any idea why a farmer would
    vote no when he is going to get an increase of 69 pounds per
    acre and $14 an acre increase in the value of his land? I would
    like to invest in that one.
        Mr. Medley. Unfortunately, Senator, there have been other
    issues affecting this program. For example, last year because
    of heavy infestations of the beet armyworm, some producers felt
    that the eradication program, because of the use of the
    chemicals, reduced beneficial organisms and therefore caused a
    reduction in yield. This could have been the reason some of the
    producers voted no.
        Senator Bumpers. Mr. Medley, in my State the farmers
    generally north of I-40 I think oppose this. Those south of it
    would approve of it. Is there any way to redraw the regional
    lines for the election to allow the farmers----[Laughter.]
        Mr. Medley. Senator, you are probably a lot more familiar
    with that type of gerrymander than I am. [Laughter.]
        Senator Bumpers. Well, then does that mean you are going to
    turn it over to me? [Laughter.]
        Mr. Medley. We provide technical assistance and may provide
    a portion of the startup cost when growers pass a referendum.
        Senator Bumpers. As I stated in my opening questions, I
    think one of the reasons Arkansas turned it down was because of
    the up-front cost. Now, you had a loan program and all these
    other people have had the benefit of the loan program, but now
    you are terminating that. So, I think the loan program could
    have been sold to people as long as they could pay it back
    while they were getting this 69 pounds an acre more.
        Mr. Medley. The Farm Service Agency administers the loan
    program--that loan program of $34 million was authorized for
    fiscal year 1997. The idea behind the loan program was to help
    provide funds to cover those types of up-front costs.
        Senator Bumpers. I am going to talk to my farmers. I had
    really been anxiously awaiting that program coming to our State
    and was a little dismayed about the outcome of it. But I want
    to talk to these people and find out really what is on their
    minds, and if it is the up-front costs, then I may try to, with
    Senator Cochran's assistance, get the loan money restored.
        Mr. Medley. Senator, we definitely feel that the boll
    weevil eradication program is an excellent example of using
    integrated pest management to deal with serious agricultural
    pests for the benefit of agriculture.
        Senator Bumpers. Mr. Chairman, I have few questions for the
    record that I will submit.
        Senator Cochran. Thank you very much, Senator.
        Senator Burns.
        Senator Burns. Thank you very much.
        I will come down and draw your lines for you. [Laughter.]

                          Spot Shortages in Inspection

        Mr. Billy, just to give you an example of how slow I am, I
    listened to you very intently and I do not know any more now
    than I did before you started.
        Senator Bumpers. Well, that is not a very nice way to start
    the questions.
        Senator Burns. Well, no. I know it is not.
        Did it actually happen? Did they have to shut down some
    plants because the inspection was running behind and there was
    some carcasses lost? Did that actually happen? I think that was
    asked.
        We are going to substitute here. We are going to send in a
    tight end. [Laughter.]
        Dr. Reed. We did have some temporary spot shortages. We did
    have some plants that had to drop shackles and there were some
    inspector locations where so many people were out, we just
    could not cover them. But they were spot shortages and we
    generally had a plan to get people in there right away.

                            Current User Fee System

        Senator Burns. OK. Being as that happened, can you tell me
    the difference, if any--describe the difference of the fee
    situation on who pays what with respect to fowl inspection and
    red meat inspection.
        Mr. Billy. Yes, Senator. What we are planning to do----
        Senator Burns. No; not what you are planning to do. I mean
    right now.
        Mr. Billy. Oh, the current fees that are charged? We
    currently charge overtime and holiday fees when inspectors have
    to work.
        Senator Burns. No, no; but I mean who pays what in a
    chicken plant and who pays what in a slaughter plant handling
    red meats. Do the taxpayers pay most of it in one and not the
    other, or vice versa? Or are they the same?
        Mr. Billy. It is the same set of rules that apply to both.
    If plants have approved shifts, a primary shift, even a
    secondary shift, then that is paid for by the taxpayer. If a
    plant has unexpected overtime where they have to keep operating
    to complete the processing of animals that have arrived, then
    that unexpected overtime is paid for through fees, and that
    applies equally to meat and poultry slaughter facilities.
        Senator Burns. Both of them are collected the same.
        Mr. Billy. The same way.
        Senator Burns. Both of them pay the same fee.
        Mr. Billy. Yes, sir.
        Senator Burns. I see a lot of heads out there going that
    way. OK. That is not the story I get, but I will accept that.

                         Inspection of Canadian Imports

        Now, walk me through what we do with processed meats coming
    in from Canada. Do we have inspectors in Canadian plants?
        Mr. Billy. No, sir; we rely on the Canadian inspection
    system which we review periodically to verify that it is
    meeting our requirements in terms of our rules and procedures.
    Then we reinspect the product at the border to make sure that
    the Canadian inspection system has, in fact, worked
    effectively. That is done through a statistical sampling
    program where a certain number of shipments are sampled,
    examined by the inspector, and perhaps sampled for residues,
    and the labeling is reviewed. That system is applied not only
    to Canada, but to all other countries that are approved to ship
    product to the United States.
        Senator Burns. Now, is there another inspection?
        Mr. Billy. If the product is further processed--in other
    words, it goes through an import inspection station and then is
    shipped to a processing plant to be further processed--then
    that material would be considered a raw material entering that
    inspected establishment and would be further inspected to
    assure that it is wholesome and suitable for processing.
        Senator Burns. Now, I have been told--are all the trucks,
    are all the loads that cross, say, at Sunburst--is every truck
    inspected?
        Mr. Billy. No, sir; the determination is made based on the
    paperwork that accompanies a shipment whether a particular
    shipment will be subject to anything beyond a review of the
    paperwork.
        Senator Burns. Who makes that determination?
        Mr. Billy. Our inspectors. Our inspectors receive
    instructions from an automated system that is designed
    statistically to ensure that an appropriate number of shipments
    from all the plants that are approved to ship are sampled on a
    continuing basis. So, it is a statistically based system.
        The data that is collected, based on inspection, is fed
    back into the system and it could well trigger more frequent
    inspection of a plant if that is warranted based on the
    inspection results, but that would be reflected in the
    instructions that the inspector receives for each shipment as
    it comes through the border.
        Senator Burns. Who makes the decision on what box you look
    at and what box you do not look at?
        Mr. Billy. It depends on what the product is. If it is
    carcasses, for example, we have a brandnew strategy for dealing
    with carcasses that come across the border. We started jointly
    with Canada back in 1994 to develop a revised approach for
    sampling carcasses.
        The way it works is that we would make sure the Canadian
    inspectors assure that the carcasses that are put on the back
    of the truck are randomly picked from the whole load and are so
    identified. If that shipment then is subject to inspection, we
    would look at those carcasses as the first order of business to
    determine whether, in fact, the carcasses meet all of our
    requirements. If they do not, the shipment would be refused
    entry into the United States. If they do, then that shipment
    would be cleared and shipped on for further processing.
        This new system has added an additional check and balance,
    in that we will be routinely checking further at the point of
    receipt of these shipments to verify that, in fact, the entire
    load met the same requirements, and that will be done on an
    ongoing basis. So, that is a new check and balance that we have
    added into our inspection protocol, and we think that it will
    provide stronger information in terms of the effectiveness of
    this approach.
        Now, if it is a packaged product, we would then randomly
    sample the packages depending on the type of product that was
    on a truck.

                             Animal Damage Control

        Senator Burns. Mr. Medley, we are kind of concerned about
    another area. You have cut your ADC funds half in two, and we
    have got a little situation--I am going to be very provincial
    about this--up in Montana where coyotes are just really--we are
    in big trouble. You are asking the States to pick up more of
    that, but yet it is a Federal program that puts wolves on us.
    It is Federal programs that keeps off of public lands or
    Government-owned lands where you have a high prevalence of
    these predators. Then I have another question, but is there any
    reason why this cutback in these dollars?
        Mr. Medley. Senator, the proposal is to achieve a 50-50
    cost share with the States in carrying out animal damage
    control activities. Currently, there is a disparity in the
    level of support that is being provided by individual States,
    ranging from approximately zero to 94 percent of total State
    program cost. This proposal is to have Federal contributions no
    more than 50 percent of total program costs for each State.
        It would not impact the wolf program where specific funds
    were allocated to the Department as well as to Interior for
    carrying out that program.
        In Montana, the State pays about 37 percent of the program
    operating costs. This proposal would reduce Federal
    contributions so the Montana program would become a 50-50 cost
    share. We would try to minimize any impact, but that is the
    proposal, Senator.
        Senator Burns. Well, but that is going to impact us more
    and more and more. I would hope, working with my chairman, that
    I could replace some of those dollars because we are in big
    trouble.
        We have had two things that have been devastating to us.
    First, we lost our wool incentive program. It cost the taxpayer
    nothing. So, our numbers continue to drop. And then the coyotes
    are just absolutely--they are bad.
        Now, there might be nothing to eat anyway because we have
    had a pretty good winter up there in that part of the world, so
    we are concerned about the ADC funds and this type of thing.

                         Responsibility for Food Safety

        We are in this mind set, Mr. Billy, of why is it that you
    think that the industry has more at stake in food safety than
    the consumer does?
        Mr. Billy. In fact, Senator, I believe that the
    responsibilities are shared across the whole spectrum from the
    producer, the slaughter plant, the processor, the distributor
    or the retailer, and the consumer. At each point there are
    responsibilities that have to be met.
        It is for that reason, with respect to consumers, that we
    believe we need to partner with industry and others to develop
    a more effective approach for consumer education so that
    consumers can carry out their responsibilities.
        When I was a young man--and I suspect this was true with
    you as well--I took a home economics class in junior high
    school to learn the basics about food safety and how to prepare
    and store foods. That has fallen by the wayside, and as a
    result, we have got young people coming out of school that do
    not begin to understand their basic responsibilities for food
    safety.
        I think that is costing our Nation. I think we need to find
    a way to change that and to better equip the consumers to carry
    out their responsibilities. So, it does not all fall on one. I
    think it is a shared responsibility across the board.
        Senator Burns. I am glad to hear you say it. Now, I didn't
    take home economics. Maybe I should have. But I am glad to hear
    you say that. I wish everybody would go around here and start
    putting these back in schools.
        Mr. Billy. I agree.
        Senator Burns. We got another hearing going on right down
    here. It is the AmeriCorps, volunteers do something for
    America. Of course, they only cost you $28,000 for them to
    volunteer. That is a hell of a volunteer.
        You are right. It is passe. Everybody thinks that that is
    kind of--that was old days. FFA, that is old days. The 4-H is
    old days. And those are things that are ingredients that really
    made this country tick. Yet, you go around to these grey poupon
    and white wine parties and if you want to talk about weeds or
    home economics, you are going to be standing there talking by
    yourself. So, I am certainly glad to hear you say something
    about it.
        I want to work with you on your fees because I think the
    consumers of America have as much at stake in food safety as
    the producer does because I think the producer basically tries
    to do a good job.
        Mr. Billy. I agree.
        Senator Burns. He loses control of that, however, when that
    last whatever walks off the back of the truck. He loses all
    control. He is completely in the hands of somebody else, but
    yet if something happens down the line, he is the one that
    takes the lick. And that is just plain, simple American, good
    old agriculture kind of philosophy, and it has always been that
    way.
        And I do not know how you change it, but I say--and I still
    say--that the second thing we do everybody in this room--the
    second thing we do every day after we get up is eat. I do not
    know the first thing you do. You got a lot of options.
    [Laughter.]
        But the second thing you do is eat. I think they have as
    much at stake that they are getting a food product that is,
    one, nutritious and, one, that it is safe.
        I would concur with all of us here. That is basically why I
    am very supportive of this panel and what they do, but I am
    very concerned about are we sometimes being penny-wise and
    dollar-dumb in some of our investments. So, I would hope that
    we could work with the chairman and maybe move some dollars
    around and get it done.
        But basically I think you do a good job.
        The Canadian thing I do not think you allayed many fears
    with our people in Montana when your people were up there. We
    are going to have a hearing up there, as you well know. That is
    to allow your people to present what we are planning to do as
    far as inspection that make sure that the people north of that
    border--now, you have never been involved in border wars like
    we are in Montana. You got to remember, we got 200 to 300 loads
    of cattle coming across that border every day plus processed
    stuff, and now they love to market their grain down here.
        We have a hell of a time moving anything north. One time we
    could not get in there because our wheelbase on our tractors
    was too long. We could not get across the border to market our
    product, and yet we are supposed to have a Free Trade
    Agreement. Now, that is not right.
        So, that is all the questions I have. I just look forward
    to working with you and on these budgets to make sure that we
    put the dollars where they need to be put because our problems
    are not like the problems that they have in Mississippi. We do
    not want to step on the problems and not address the problems
    they have in Mississippi, but on the other hand, we want to
    solve some of ours too and make sure that we look at this in an
    equitable manner.
        I get a big kick. We are all down there looking and sending
    emergency dollars down South on them floods now. We are going
    to lose a half a million head of cattle due to this winter in
    the Dakotas and eastern Montana. A half a million head. And
    there ain't nobody going to come roaring up there with any
    checkbook or draft book wanting to buy them carcasses whenever
    we start finding someplace to go with them. I will guarantee
    you that.
        And all that water has got to come down, so you are going
    to get hit again, by the way. We are going to send it all down
    to you again as soon as the sun comes out, anyway.
        So, thank you very much, Mr. Chairman. I just want to work
    with you to make sure that we got some equity in the budget.
    That is what I am concerned about.

                                 Import/Export

        Senator Cochran. Thank you, Senator Burns.
        Let me ask a couple of questions about the Marketing
    Service. I noticed in the statement of Secretary Dunn comments
    about how AMS does things behind the scenes to help pave the
    way for the marketing of U.S. food products and commodities in
    overseas markets. We have been successful in many specific
    instances in that connection, one of which was to deal with the
    problem Russia raised 2 years ago, or whenever it was, with our
    poultry exports. They were shutting them down because of
    suspected problems with food safety or contamination and the
    like. You mentioned specifically having opened up new markets
    for pork products in Russia.
        Tell us about both of those. Have there been any recurrent
    problems in connection with poultry exports? And, what did you
    do to help pave the way to increase access in that market for
    our pork products?
        Mr. Dunn. Thank you, Mr. Chairman.
        I am going to ask Administrator Medley to address those
    questions.
        As you are well aware, the Russian group was over here in
    the United States. They did a tour with not only USDA
    Agricultural Marketing Service agencies but also with Farm
    Service agencies and FSIS to take a look at our organization.
    It was a joint effort on the part of the agencies at the
    Department of Agriculture working in cooperation with each
    other, and I will let Mr. Medley address what we did to assure
    the health of the chickens that we utilize in the poultry
    business.
        Mr. Medley. Thank you, Mr. Dunn. I will call on Mr. Billy
    to add information because it was a partnership among APHIS,
    FSIS, as well as the State veterinary services, the State
    veterinarians, and industry.
        Mr. Chairman, Russia was raising concern about numerous
    poultry diseases and our ability to certify that our poultry
    was free of those particular diseases. We were able, with the
    help of industry, State, and Federal participants, to show our
    counterparts in Russia that we do have an overall system to
    certify the safety of our poultry products.
        In addition to specific diseases, we clarified issues about
    the pathogens which cause the disease.
        Very recently, we conducted a followup meeting in Russia
    which again focused on some of the science issues that are
    associated with the certification process.
        We see this, Mr. Chairman, as part of our responsibility in
    APHIS to facilitate exports and also to maintain markets by
    making sure that when sanitary/phytosanitary issues are raised,
    that they are legitimate and that we address them. This is what
    we did in this particular case. We assured our Russian
    counterparts that our poultry disease reporting system was
    adequate for us to be able to certify the health status of the
    poultry being exported.
        Mr. Billy. We did a similar thing, Mr. Chairman, with
    regard to the food safety issues that focused on Salmonella and
    various types of residues that could potentially be present in
    poultry. We were able to negotiate an arrangement, where
    through a minimal amount of testing, we could verify that, in
    fact, these were not problems in terms of meeting the Russian
    requirements for such products.
        We were very pleased to sign that new agreement with my
    counterpart, Dr. Avilov, last April. As I understand it, the
    products have been flowing in very smoothly and effectively.

                       Market Access and Trade Practices

        Senator Cochran. The question of how we are going to
    continue to ensure access to markets is always one that is on
    our minds. I cannot help but notice the continued trade
    deficits that we have in some places. Japan, for example, is
    almost $50 billion I think this year. China is developing a
    huge trade surplus with us now.
        What efforts are we making in those two markets, if any, to
    try to break down barriers, if any exist, in areas similar to
    those described in your statements where we have had success
    stories in the past? Are there problems that are outstanding
    with these two countries, and is there anything we can do about
    it through the agencies that are represented here today?
        Mr. Medley. Mr. Chairman, in fiscal year 1996 we had almost
    $60 billion in agricultural exports. Our largest market, of
    course, was Japan, followed by Europe. In agricultural exports,
    we had a surplus of over $27 billion in 1996 and we are
    anticipating a surplus of over $22 billion in 1997.
        To maintain and expand markets, we are making sure that any
    trade restrictions or requirements on trade are based only on
    valid, sanitary/phytosanitary conditions. We are working with
    the Foreign Agricultural Service as well as the U.S. Trade
    Representative to create a level playing field for U.S.
    agriculture.
        It is not always easy. There are certain areas where basic
    phytosanitary principles have not been accepted or not fairly
    applied. In bilateral negotiations, we seek to correct these
    situations. This week, we are in bilateral negotiations with
    Japan to deal with certain phytosanitary issues.
        Mr. Dunn. Mr. Chairman, specifically on China, just this
    last month we signed an agreement with a contingency of Chinese
    experts that were over here in the United States to take a look
    at how APHIS operates.
        But one of the things that we have found in order for our
    producers and our processors and traders to be extremely
    knowledgeable about what is happening in the international
    sector is that they need the same type of information on
    agricultural market news that they have here domestically. I
    would ask Mr. Lon Hatamiya maybe to elaborate a bit on that.
        Senator Cochran. Mr. Hatamiya.
        Mr. Hatamiya. Mr. Chairman, if you have seen our budget
    request this year, we are asking for additional funds to
    increase our international market news collection and
    dissemination. Much of that will be in the areas where you
    mentioned, in the Pacific Rim, in terms of China, Southeast
    Asia, and Japan, as well as South America where we think there
    are emerging markets where domestically grown products can be
    sold.
        Another area that we are actively involved in is in
    standards development. We believe the U.S. standards should be
    used as a standard worldwide, so we are actively involved with
    international standards organizations to ensure that our voice
    is there to break down any kinds of trade barriers that may
    exist due to differing standards from one country to the next.
        But we believe that the key to gaining access for U.S.
    producers to sell in these countries is to have as much
    information as possible so the producers can maintain their
    competitiveness when they try to enter into these markets, as
    well as to gain further access to these markets.
        Senator Cochran. Senator Bumpers raised a question about
    the boll weevil loan program. We included in the fiscal year
    1997 appropriations act, funding for this new loan program but
    nothing has happened to date. There were never any regulations
    issued, so none of the funds have been used. Why not?
        Mr. Dunn. Mr. Chairman, the approval of that program about
    5 months ago was for our Farm Service Agency to be able to give
    a loan program to supplement the producers to buy into the boll
    weevil eradication program.
        The Farm Service Agency has been, in fact, working on their
    regulations. I met with them earlier this week to find out
    exactly where we were on those regulations. They have assured
    me that they have been completed and are in the process of
    completing the internal review that we have for those
    regulations.
        I do have some concerns that it is getting late in the
    season and that we are losing our opportunity to use that
    program this year.
        One of the concerns that the Farm Service Agency had was
    the need for an EIS or environmental assessment for their
    program which is required by law. What I have offered for them
    to do is have APHIS provide that service for them and I am
    guardedly optimistic that we are on track to getting that
    program out so that we can still utilize those funds that were
    appropriated, Mr. Chairman.
        Senator Cochran. The President's budget for this next year,
    fiscal year 1998, proposes to terminate the boll weevil
    eradication loan program. Is there any additional information
    that you can give the committee as to why the administration is
    proposing to terminate it?
        Mr. Dunn. I would have to defer to the Farm Service Agency
    folks when they are here or maybe to Mr. Kaplan on an overview.
        Mr. Kaplan. It was just due to the cap on the discretionary
    budget, sir, and the fact that it has not been implemented yet.
        Senator Cochran. The President did not request a rescission
    of the funds or a deferral or anything like that, did he? Is
    this called impoundment? Is that not what we had the Budget Act
    passed for? If funds are appropriated for a program, shouldn't
    they be spent as the Congress and the law directs that they be
    spent?
        Mr. Kaplan. As Assistant Secretary Dunn said, we still hope
    to get the regulations out this year and make the funds
    available.
        Senator Cochran. Does the Department have a view--or should
    we ask others when they appear before us--why USDA has stalled
    and why the Department may not share our view that this is a
    good way to accelerate the eradication of boll weevil
    infestations?
        Mr. Dunn. I think on the contrary, Mr. Chairman, I think we
    do view this as a good opportunity to use those funds this
    year. The Farm Service Agency has established those regulations
    internally. I know many folks wonder what passes for work for
    an Assistant Secretary, and it is my responsibility to ensure
    that we get those out and I have to take part of the blame
    here. I can assure you that is on my radar screen. I have had
    inner-departmental meetings to get those regulations out so we
    can still use those funds this year.
        Senator Cochran. Well, I appreciate hearing that, and I am
    encouraged by that answer, Mr. Secretary. I worry that the
    President's budget request is down $9.8 million from the fiscal
    year 1997 appropriated level for the APHIS boll weevil
    eradication program and no funding is proposed for the loan
    program.
        There are several areas that have not participated in the
    program. Some are having additional referenda. Senator Bumpers
    mentioned the situation in Arkansas. We have had a region in
    our State where approval has not been obtained to complete
    statewide coverage of the program, but I understand that the
    proponents are working on that and are dealing with information
    awareness and whatever else may be needed to complete this
    program.
        One thing that we noticed was that in Alabama the per-acre
    costs were higher than in other neighboring States.
        Do you have any information that you could give the
    committee as to why this disparity exists and what the cost
    differences are?
        Mr. Dunn. I have asked our internal management people to
    take a look at that situation and to give us back a report. I
    have not received it at this time, Mr. Chairman.
        Senator Cochran. When you do have it, would you give us at
    least some information on that subject if you have it available
    to you?
        Mr. Dunn. Yes, sir.

                          Ambient Temperature of Eggs

        Senator Cochran. There is also another statute and
    directive on the subject of ambient temperature of eggs that
    regulations should have been issued on 7 years ago. I think it
    was 1991 when a law directed that be done, and it still has not
    been done as far as we can tell. This is touched on, I think,
    in Mr. Billy's statement to the effect that FDA and others are
    being asked for input into the process, and that this may get
    done sometime soon.
        I think one of the reasons why the industry is so concerned
    is that you have identified some outbreaks of Salmonella. This
    may have been prevented if the regulations on ambient
    temperature had been developed and implemented as contemplated
    by the congressional directives.
        What is going on here? What is the problem?
        Mr. Billy. Mr. Chairman, the specific requirements that are
    contained in that amendment would have us establish a
    requirement that vehicles that convey eggs to the marketplace
    meet an average ambient temperature of 45 degrees. When the
    Department started to develop regulations to implement that
    provision, it became clear, based on the comments received,
    that there were several problems with that approach.
        First, that approach would have a very high impact on the
    small companies that transport eggs to market because of the
    cost involved in implementing that provision. So, there was a
    concern about the cost impact in particular on small operators.
        Second, there were concerns about how you would enforce
    such a requirement because if you open the truck to take
    samples, depending on when you would check that temperature,
    you could have a problem with what the ambient temperature is
    in the back of the truck, and not necessarily have it reflect
    what the temperature of the eggs were, and whether they were,
    in fact, being cooled down below the temperature at which
    pathogens can grow and multiply.
        Finally, there was no provision for looking at the
    continuum of when eggs are first laid and then washed and put
    into cartons, and then as they move through the process of
    distribution to the marketplace. You could have that provision
    met, yet have temperatures in the eggs because of how they are
    handled prior to distribution where the temperature was high
    and would not be lowered significantly during transportation.
    That provision does not specifically target the question of
    temperature in the sense of getting the temperature down so
    that pathogens cannot grow and multiply if they are present.
        The approach that we are taking is to look at that
    continuum in terms of when the eggs are laid, how they are
    handled at that stage, so that we can, in fact, properly manage
    the combination of time and temperature. The temperature is
    brought down in a consistent manner to meet the requirements of
    how the eggs are shipped and sold at retail. So, we think a
    more comprehensive approach that focuses on the temperature of
    the eggs rather than the temperature of the vehicle in which
    they are being transported will net us a better result in terms
    of egg safety.
        We are doing a risk assessment, as required, to look at
    that continuum and identify what the most effective approach
    from both the public health and cost point of view would be in
    terms of dealing with that issue. In the meantime, we have
    encouraged the industry, those that have the means, to meet
    that requirement. To the extent that it does provide some
    margin of positive impact, we welcome that and we are
    encouraging that. But we think our approach will be more
    comprehensive and focus in particular on the eggs in terms of
    getting their temperature down to assure that any pathogens
    present are not multiplying on the way to the marketplace.
        Senator Cochran. Were the recent HACCP regulations designed
    to cover shell eggs?
        Mr. Billy. No, sir; we are approaching that on a separate
    rulemaking basis jointly with FDA because they have
    responsibility for shell egg safety, except for this one
    provision on the transportation of shell eggs to market, which
    is a requirement that USDA must address.
        Senator Cochran. Do you intend to mandate HACCP for plants
    that process shell eggs?
        Mr. Billy. Yes; we believe that that is an appropriate step
    that would accomplish two or three things.
        One, we think that it will allow us again to modify our
    inspection approach to focus on the key control measures that
    are critical from the point of view of the safety of egg
    products. We have talked to the industry and they seem to be
    very supportive of that kind of a transition to a HACCP-type
    approach. In fact, we have received a petition that would
    encourage us to move forward in terms of a HACCP-type approach
    for egg products.

                             HACCP for Egg Products

        Senator Cochran. This may be too big of a question for this
    hearing, and if it is, I will be glad to entertain your
    suggestion that it be submitted for the record.
        What are your options for proposed regulations under HACCP?
        Mr. Billy. Well, we think that we can have several
    approaches considered. One perhaps would be to look at whether
    we could do it on a voluntary basis. If there is very strong
    interest and commitment from the industry, perhaps we can
    approach this on a voluntary basis and end up with the same
    kind of result that would be otherwise the case if we chose a
    mandatory approach.
        We also need to look at whether HACCP is needed for all
    types of egg products. It may be the case with certain types of
    products that you do not need to take that step in terms of
    assuring the safety of the product.
        Then we need to carefully look at the timing, the phase-in,
    and what we would discontinue doing in terms of our current
    continuous inspection approach.
        So, there are different ways of implementing such a new
    requirement that would minimize the cost impact and any
    disruption, but at the same time properly address the safety of
    egg products.
        Senator Cochran. Thank you very much.
        I do not want the Grain Inspection Service to think that we
    have forgotten about you over there.
        Mr. Baker. I did not think you had.

                              Packer Concentration

        Senator Cochran. There is one area that I wanted to touch
    on. The Secretary may want to comment, of course, and certainly
    we would appreciate his doing so if he wants to.
        The budget proposes an increase of $2.3 million for the
    Grain Inspection, Packers and Stockyards Administration to
    carry out recommendations of the Advisory Committee on
    Concentration. There has been a good deal of speculation and
    concern that prices being paid to producers were low because we
    had just a few big packers and stockyards. The producers and
    the beef cattle farmers and ranchers were suffering as a result
    of that, and there were some recommendations made.
        How are you going to spend that money? What are you going
    to do with the $2.3 million in additional funds and what
    activities are going to be carried out?
        Mr. Dunn. Mr. Chairman, I will lead off while Mr. Baker
    collects his thoughts on that.
        This has been one of Secretary Glickman's highest
    priorities since he has become Secretary of Agriculture. He
    initially started off, went around the country, and had town
    meetings. He heard over and over again that concentration was a
    big issue of great concern by all segments of the agriculture
    industry.
        As a result, he put together an advisory committee made up
    of 21 members, and they have given us some 68 recommendations
    of things that they would like us to do.
        We have asked the Office of Inspector General, in fact, to
    take a look at packers and stockyards to see if we have the
    right mix, the right makeup, the proper people there, and are
    we going about the investigations as we ought to to ensure that
    we can address these concentration issues.
        We are going to be in the future taking a look at
    increasing some economists to do an econometric model of what
    the industry ought to look like, increase some legal staff to
    give us some better insight of how we go about gathering
    information, working closer with the Office of General Counsel
    to ensure that we go through and get some better convictions or
    a better record on our convictions.
        Now, specifically on the dollar amount we have requested, I
    will let Mr. Baker respond to that.
        Mr. Baker. Mr. Chairman, approximately one-third of that is
    money that is being requested in the poultry area where our
    agency can gear up to better evaluate and better investigate
    contract poultry production dealing with large, complex
    integrators and poultry people. That is basically one-third of
    it.
        The other two-thirds is in refocusing our efforts in the
    procurement of packers and the complex industry that is out
    there. We do, I think, an excellent job in dealing with the
    average-type cases that are brought before P&S and all, but the
    big anticompetitive cases that we are presently involved in are
    requiring tremendous resources that are not available to us.
    For us to gear up and get into that picture, we have got to
    have more money. This is the third year we have asked for it.
    Maybe the third year is the charm, and we sure need more money.

                                Market Reporting

        Senator Cochran. AMS also has $500,000 requested to carry
    out the findings of that committee. How are you going to use
    that, Mr. Hatamiya?
        Mr. Hatamiya. Mr. Chairman, there are a number of proposals
    we are putting together, but primarily they are in the area of
    market information and collection. From the advisory
    committee's report, there was a need for more value-based
    information both at the cattle, hogs, sheep, at all levels
    where concentration exists.
        What we are going to do is try to implement the $500,000 we
    are requesting to better report prices and to do it in a matrix
    format where the value reporting will give some essential
    understanding across geographic regions. We are also adding
    people at auction markets for direct coverage of daily trading
    to better reflect contract pricing.
        So, there are a number of issues in all of these areas
    where we think we can better cover markets and revise what we
    have been doing in the past to produce information that is more
    usable for the producer in this day and age. With the changes
    in international trade, we think it is also important to have a
    better basis for what we are reporting.
        Senator Cochran. I appreciate very much the cooperation
    that you all have given to our subcommittee. You have been
    patient with our questions and our requests for information to
    help us better understand the budget request and its
    implications for the agriculture and food industries and for
    consumers, who I guess have the most to lose of anybody if we
    have a contaminated food supply.
        My impression from what I have heard today and also just as
    general information that is available to the public is that we
    have the safest food supply in the world. We have a system that
    is probably more intense, in terms of the concentration of
    effort, science and energy, to help assure the safety of the
    food supply than that of any country in the world.
        I think we can all take pride in that. We have worked very
    hard over a long period of years, and our predecessors in these
    jobs have as well, to help achieve these goals. So, we take it
    very seriously here in the Senate and we know the agencies of
    the Department of Agriculture, who are all represented here
    today, do as well. So, for that good effort, I want to
    personally commend you all.

                              Submitted Questions

        I thank you all again for being here and for your
    testimony. The additional questions that we will submit we hope
    will be answered in a timely fashion, for which we will be very
    grateful.
        [The following questions were not asked at the hearing, but
    were submitted to the Department for response subsequent to the
    hearing:]
                       Food Safety and Inspection Service
                     Questions Submitted by Senator Cochran
                      fsis computer technology investments
        The President's budget requests an increase of $1.25 million to
    upgrade automated data processing (ADP) and technology in support of
    the Agency's computer technology enhancements. USDA has not implemented
    agency-wide architecture by February 1, as Deputy Secretary Rominger
    stated in his November 12 letter. The agency has not even completed the
    strategic planning necessary to identify and understand its core
    business processes.
        Question. FSIS has stated that funds are necessary in fiscal year
    1998 to provide ADP and telecommunications equipment which are
    currently not available. Has FSIS constructed a strategic plan that
    coordinates with USDA's overall plan?
        Answer. FSIS conducts an ongoing long-range planning process for
    information resource management (IRM) to maximize the use of
    information technology (IT) in facilitating and supporting our agency's
    program mission, and to improve the availability, quality, management
    and use of information throughout FSIS. FSIS updates its IT Long-Range
    Plan annually to ensure compliance with the overall USDA IT
    architecture.
        FSIS has contributed several staff members to work with the
    Department on USDA's Information Technology (IT) Architecture. By
    working with USDA on the overall IT structure, we are very confident
    that FSIS plans are compliant with the USDA IT architecture. FSIS
    actively supports and serves on the USDA IRM Council Board, the IRM
    Planning Sub-Council, the Data Administration Sub-Council and the
    Telecommunications Sub-Council. The agency fully participates in the
    ongoing USDA IRM modernization initiative, which addresses prioritized
    action items selected by the USDA IRM Council Board on the basis of the
    recommendations identified in the USDA IRM Modernization Report.
        Question. If USDA has not implemented the agency-wide architecture
    or completed the strategic planning, then is FSIS limited in its
    ability to move forward?
        Answer. In January, FSIS requested and received an IT waiver from
    USDA to conduct computer acquisitions for the Field Automation and
    Information Management (FAIM) project. The waiver enables FSIS to
    continue implementation of the FAIM project through the purchase of
    desktop and notebook computers for use by FSIS inspection personnel. As
    a result of this waiver, FSIS is able to move forward with providing
    the necessary infrastructure to support the FSIS field reorganization
    and new inspection methodologies, such as HACCP.
        USDA continues to develop information architecture, its Enterprise
    Network. Telecommunications is part of information architecture and is
    included in the USDA-wide Enterprise Network. FSIS has submitted its
    inventory forecast needs and a Telecommunications Management Plan to
    the Department for review. We have every expectation of approval and
    implementation within the time frames specified.
        Question. Is this subject to the Department's moratorium on new
    computer system investments?
        Answer. The requested increase of $1.25 million for upgraded
    automated data processing (ADP) and telecommunications technology would
    be subject to the Department's moratorium, based on the agency's
    experience with FAIM in fiscal year 1997. However, we would expect to
    request a waiver, based on a similar justification for FAIM, that the
    requested equipment purchases are essential to implementation of the
    field reorganization.
        Question. How much has been invested in the Field Automation and
    Information Management (FAIM) project to date (please indicate by
    fiscal year).
        Answer. Direct FAIM obligations total $9.75 million through January
    1997. This includes hardware, software, supplies, maintenance, travel
    for trainees to the training center at Texas A&M University, training,
    contracting, and associated telecommunications costs. In addition,
    there are agency costs that are identified as part of the OMB Circular
    A-11 Exhibit 43 on Information Technology. For example, the FAIM staff
    receives programming assistance for FAIM applications from others
    within the agency, for which FAIM has identified the staff years as
    part of the system life-cycle, and which are included in the Exhibit 43
    under ``Personnel work-years.''
        [The information follows:]

            Fiscal year                                                 Cost
    1996 \1\................................................      $7,230,000
    1997 through January 31, 1997...........................       2,520,000
                        --------------------------------------------------------
                        ____________________________________________________
          Total obligations.................................       9,750,000

    \1\ Of the total $8.4 million appropriated, $1.2 million was ``carried
    over'' into fiscal year 1997 for the purchase of a new hardware/software
    platform.

        Question. What is the total cost of this system?
        Answer. Through fiscal year 1997, the cost for FAIM is $16.95
    million. An additional $8.5 million is requested for fiscal year 1998,
    the third year of the five year FAIM project.
                         fsis employee relocation costs
        The fiscal year 1998 budget requests $1 million for relocation
    costs of FSIS employees.
        Question. What is the status of the FSIS centralized administrative
    offices located in Minneapolis, Minnesota and Urbandale, Iowa?
        Answer. All field personnel functions are being consolidated in
    Minneapolis, MN, which is the site of an existing field personnel
    office. Consolidation is expected to be completed by the end of fiscal
    year 1997 and the office will be fully staffed to manage personnel
    functions, including hiring, merit promotions, lateral reassignments,
    and work reductions.
        The Financial Processing Center in Urbandale, Iowa opened at the
    end of September 1996 and expects to complete consolidation of field
    finance functions by the end of fiscal year 1997, including pay, the
    collection of revenues from reimbursements and trust funds, and
    processing of payments for travel.
        Question. What is the status and location of the new district
    offices?
        Answer. The new district offices are currently being established
    and will begin operating with core staff by June 1997. The location of
    these offices are as follows: Alameda, CA; Salem, OR; Boulder, CO;
    Minneapolis, MN; Lawrence, KS; Springdale, AR; Dallas, TX; Madison, WI;
    Chicago, IL; Pickerington, OH; Philadelphia, PA; Albany, NY; Boston,
    MA; Greenbelt, MD; Raleigh, NC; Des Moines, IA; Atlanta, GA and
    Jackson, MS.
        Question. On what basis was a site selected for the Technical
    Services Center?
        Answer. An FSIS committee scored and ranked each site considered
    based on a number of criteria, including space availability and cost,
    labor market conditions, and air service. For the six cities that best
    met these criteria, both first year and ten year costs were compared,
    and there was not a significant difference on the cost amortized over
    ten years.
        Consideration then was given to additional characteristics of the
    sites, including: time zone that facilitates nationwide contacts; a
    rural agricultural community surrounding; population levels in terms of
    the impact of FSIS employment; advantages offered by site
    representatives such as financial and family relocation services; and
    immediate availability of suitable office space facilities.
        In reviewing the top sites based upon these factors, Omaha, NE was
    selected because it offers several advantages. It is a mid-size city in
    the Central Time Zone with a rural agricultural community surrounding.
    In addition, Omaha offered a three year supplement of $300,000 each
    year to offset costs to the Federal Government. The city provides
    family relocation services in conjunction with those provided by FSIS,
    and has identified several office buildings with suitable space
    available for occupancy consistent with FSIS time frames.
        Question. Will $1 million be adequate for the relocation of
    employees beginning in fiscal year 1997 and completing the relocation
    by the end of fiscal year 1999? If not, how much do you project will be
    needed for fiscal year 1998 and fiscal year 1999?
        Answer. An increase of $1 million in fiscal year 1998, to be
    continued in fiscal year 1999, is needed to complete relocation of
    positions to the district offices, technical services center, and
    centralized administrative offices. The requested increase will provide
    sufficient funds to complete the relocation through fiscal year 1999.
        Question. What is the total net savings from FSIS field management
    streamlining once this process is completed?
        Answer. From fiscal year 1995 through fiscal year 1997, FSIS will
    have met targets for streamlining and administrative cost reductions
    that total nearly $11 million and more than 300 staff years.
    Implementation of the agency reorganization to consolidate field
    management will enable FSIS to manage within this reduced level of
    staffing and funding levels.
                                     haccp
        1. The President's budget requests $565,000 to provide Hazard
    Analysis and Critical Control Point (HAACP) training to state and local
    food regulatory officers.
        Question. Will restaurants and retail stores be required to
    implement HACCP in the future?
        Answer. FSIS and FDA have no plans to impose HACCP requirements on
    restaurants or retail stores. Nonetheless, the federal agencies are
    encouraging all who process food commercially to adopt HACCP
    voluntarily because it is a rational, effective, and universally
    applicable method for assuring the safety of processed foods.
        Question. What is the Administration's position on merging state
    and federal meat inspection so meat inspected by state agencies can be
    sold across state lines?
        Answer. USDA is not philosophically opposed to interstate shipment
    of state inspected products and is ready to address the concerns of
    state inspected plants and State Departments of Agriculture underlying
    this issue. However, it is not ready to endorse the ``merging'' of
    state and federal inspection or other specific solutions proposed for
    those concerns without further analysis of the issues. USDA has
    committed to holding public meetings on this issue June 16 and 17,
    1997, in Sioux Falls, South Dakota, and on July 8, 1997, in Washington,
    DC, to get more information and provide a record upon which it can base
    a full analysis of its policy options.
        USDA is very concerned that state inspected processors wishing to
    distribute their product across state lines view the obtaining of
    federal inspection to be an unreasonable obstacle in their path, and
    would consider changes in how FSIS grants federal inspection to such
    plants if warranted. Similarly, USDA views state inspection programs as
    an essential part of the nation's food safety network, and is open to
    new ideas on how to better support them and keep them viable. The
    Department wants to have the best possible working relationship with
    state meat and poultry inspection programs and the establishments they
    inspect.
        Any additional major changes in USDA's inspection program, on top
    of major organizational changes already underway within FSIS, would
    divert USDA resources from implementing HACCP and pathogen reduction
    requirements, and could lead to delays in these risk reduction efforts.
    That is, the public benefits of instituting such changes at this
    juncture should be carefully weighed against the public costs.
        2. When do you plan to have all the HACCP regulatory reforms in
    place and completed?
        Answer. The target for completing all HACCP regulatory reforms is
    1999.
        3. It is my understanding that FSIS is considering publishing on
    the Internet and through other media the results of the agency's
    Salmonella testing of meat and poultry processing establishments.
        Question. Is FSIS considering publishing the agency's Salmonella
    testing of meat and poultry processing establishments on the Internet?
        Answer. Last fall, during public meetings explaining the regulatory
    provisions of FSIS' HACCP final rule, Agency officials indicated that
    the Agency was considering publication of Salmonella test results on
    the Internet, Since those public meetings, FSIS has received oral and
    written correspondence from interested parties expressing concern over
    the Agency's intention to make the test results available on the
    Internet. In response to this interest, FSIS is holding a public
    meeting March 6, 1997, to hear these concerns and to receive public
    input on the best method for making the test results available.
        Question. Is this data you are publishing intermediate results?
        Answer. The data under consideration for publication includes pre-
    implementation and compliance results.
        Question. If so, how can you justify publishing this information?
        Answer. FSIS will collect samples from meat and poultry
    establishments prior to the scheduled date for HACCP implementation for
    that group of plants. The test results from these pre-implementation
    samples are intended to provide information on what FSIS needs to know
    in order to effectively administer and enforce the regulation; what
    individual establishments need to know about their present level of
    compliance with the Salmonella performance standards in order to
    develop HACCP plans that ensure that products meet those pathogen
    reduction performance standards; and what FSIS, the industry, and the
    general public need to know about Salmonellalevels at the starting
    point for the new system of regulating meat and poultry products.
    Information gathered on Salmonella testing is subject to release under
    the Freedom of Information Act. The possible publication of data on the
    Internet would facilitate the general public's ability to know about
    Salmonella levels at the starting point for the new system of
    regulating meat and poultry. On the other hand, very legitimate
    concerns were raised about the improper use of such available data,
    particularly by foreign interests and foreign markets. We expect to
    make a decision in mid 1997.
        Question. Will it lead to any enforcement action?
        Answer. The data collected during the pre-implementation period
    will not lead to enforcement action. Once the effective date for
    compliance with the Salmonella performance standards has occurred for a
    given group of plants, the test results of sample analysis of product
    from those plants may lead to enforcement action, if the plant's test
    results reflect that it is not complying with the pathogen reduction
    performance standard. It should be noted that data associated with a
    regulatory case is withheld, pending a final outcome.
        Question. Will this lead consumers and prospective international
    customers into believing that the U.S. products tested are unsafe or
    unwholesome?
        Answer. FSIS has conducted Salmonella testing on ready-to-eat
    products for many years. Testing on ready-to-eat products has been on a
    product acceptance basis, meaning that the test results do signify
    whether the products are wholesome and safe for consumption. The
    presence of any pathogen in ready-to-eat products indicates that the
    food production process is out of control and the product produced
    under the process is adulterated. FSIS works with industry to recall
    ready-to-eat products contaminated with human pathogens to protect the
    public health.
        This is not true, however, with Salmonella testing on carcasses and
    raw ground products. FSIS' Salmonella testing program on carcasses and
    raw ground products serves to verify the effectiveness of establishment
    process control activities in reducing pathogen levels on raw products.
    The test results from this program are not used for product acceptance
    purposes. FSIS is aware that the objectives of this testing program are
    different than those of testing programs on ready-to-eat products. For
    that reason, FSIS intends to provide explanatory information with the
    release of test results to insure that consumers and international
    customers understand that positive findings of Salmonella on raw
    products are not an indication of unsafe or unwholesome product.
                         in-plant inspection personnel
        1. HACCP is to be implemented in increments through year 2000. As
    HACCP becomes the inspection system in all plants, in-plant inspectors
    will no longer be needed.
        Question. Is this correct?
        Answer. No. In-plant inspection will be required under HACCP.
    Implementation of HACCP is not a means to reduce the size of, or
    eliminate the need for, in-plant inspectors. Under HACCP, inspectors
    will be needed both within and beyond slaughter and processing plants
    as FSIS broadens the scope of food safety activities. FSIS is requiring
    HACCP, along with pathogen reduction, and Sanitation Standard Operating
    Procedures (SOPs), to improve food safety and begin the long-awaited
    modernization of USDA's meat and poultry inspection system. FSIS
    expects this combination of HACCP-based process control, microbial
    testing, pathogen reduction performance standards, and sanitation SOPs
    to significantly reduce contamination of meat and poultry with harmful
    bacteria and reduce the risk of foodborne illness. FSIS's non-safety
    regulatory responsibilities for wholesomeness, product integrity and
    labeling under the laws will continue to require inspection activity in
    plants.
        Question. Explain how personnel will be altered through year 2000
    as the current inspection system is replaced by the HACCP system.
        Answer. Implementation of the final rule on HACCP and Pathogen
    Reduction systems will result in far-reaching changes in the respective
    roles of industry and FSIS inspection personnel in assuring the public
    a meat and poultry supply that meets appropriate sanitation and safety
    standards and is not adulterated or misbranded. The Pathogen Reduction
    and HACCP systems rule represents a change in regulatory philosophy and
    thus will change the focus, tasks, behavior, and priorities of agency
    employees, particularly front-line inspection personnel. It will more
    clearly define and separate the role of the food producer and
    regulator.
        Traditionally, some plants have relied on inspectors to identify
    deficiencies on a daily basis before the company would take action to
    correct food safety problems. This factor, and the prescriptive nature
    of the requirements, has often blurred the line between industry and
    regulator. Under HACCP, plant owners and operators will be responsible
    for manufacturing products that are not adulterated or misbranded and
    that meet performance criteria and standards. Inspectors will be
    responsible for inspecting facilities, operations, records, and
    products to verify that regulatory requirements have been met and for
    taking enforcement action when there is sufficient evidence that
    requirements have not been met. Under the new system, inspection
    personnel will exercise the following regulatory oversight
    responsibilities.
        [The information follows:]
         haccp responsibilities to be performed by inspection personnel
      --Evaluation: to determine that each plant's sanitation SOP and HACCP
            plan conforms with the regulatory requirements.
      --Verification: to determine, on an ongoing basis, that a plant is
            carrying out its SOP and HACCP plan, including microbial
            verification.
      --Documentation: to prepare written material to document failure to
            meet regulatory requirements.
      --Enforcement: to take appropriate actions when a plant is not in
            conformance with established regulatory requirements.
        4. How much money do you have budgeted for reimbursement to
    employees' for continued education?
        Answer. In fiscal year 1997, FSIS expects to reimburse
    approximately $300,000 to in-plant inspection employees for the cost of
    courses they take on their own time near their work sites in subjects
    such as statistics and microbiology.
        To further enhance the ability of our food inspectors to work in a
    HACCP environment, the new Food Safety Educational Program was
    developed in conjunction with Texas A&M University in College Station,
    Texas. This program is budgeted for $1,000,000 in fiscal year 1997, and
    will cover such topics as microbiology, risk assessment, environmental
    sanitation, food chemistry, and statistical quality control. Students
    will have the opportunity to experience ``hands-on'' laboratory
    training to support lectures. This four week academic program is
    intensive and demanding, and covers as much as would be expected in a
    normal college semester. College credit will be earned for successful
    completion of the course. This program will provide nine four-week
    classes, with 30 inspectors in each class.
        5. Why was Texas A&M University chosen to provide in-plant
    inspectors a scientific foundation in a HACCP environment?
        Answer. In 1987, Texas A&M University was competitively awarded a
    five year contract to assist in providing training and educational
    opportunities to FSIS personnel. The University successfully competed
    for a second five year contract which began in 1993. During the nine
    years FSIS has collaborated with Texas A&M University, they have
    demonstrated a willingness and capacity to provide high quality
    educational support. Further, those nine years have given them a
    greater understanding of the FSIS mission and the environment our
    personnel work in on a daily basis. The College of Agriculture and
    College of Veterinary Medicine at Texas A&M have programs in Food
    Science and Food Technology as well as a highly regarded faculty that
    FSIS can draw upon to develop educational programs that will help
    prepare FSIS employees for their changing inspection roles. The current
    contract allows for development of new programs within the existing
    provisions to respond to emerging or changing needs.
        6. In your statement Mr. Billy, you propose to increase the
    proportion of resources for the front-line workforce. Food inspectors
    is one of the areas targeted.
        Question. Does this mean there will be a net increase in front-line
    workforce, including inspectors, as HACCP is fully implemented?
        Answer. The 1997 Appropriation provided an increase of $3.2 million
    for increased inspection staffing to enable FSIS to provide adequate
    inspection resources as we make the transition from the current
    inspection system to HACCP-based inspection. In addition to this
    increase, the proportion of inspection staff will increase as
    streamlining of non-front-line positions continues. The fiscal year
    1998 budget request includes no further increases for inspection
    staffing, but includes an increase for full pay costs to maintain
    current staffing levels in order to cover the slaughter lines and
    processing operations.
        Question. Are we to assume all employee cuts will occur in
    administrative positions?
        Answer. The intent of continued streamlining efforts is to reduce
    non-front-line positions which include administrative and program
    positions. Front-line positions include food inspectors, in-plant
    veterinarians, import inspectors, circuit supervisors, compliance
    officers, and laboratory personnel.
        7. The Committee's fiscal year 1997 recommendation included the
    full amount requested in your budget to fill all inspector vacancies
    and to fully implement the hazard analysis and critical control points
    (HACCP) system.
        Question. What actions is FSIS taking to streamline the inspection
    system for efficiency?
        Answer. The agency is reforming its existing regulations to be
    consistent with HACCP principles and greater reliance on performance
    standards and to remove unnecessary regulatory obstacles to innovation.
    On December 29, 1995, FSIS published an advance notice of proposed
    rulemaking (ANPR) and additional rulemaking proposals describing the
    agency's strategy for regulatory and inspectional reform and initiating
    the rulemaking process required to achieve necessary changes. On May 2,
    1996, FSIS also published two additional regulatory reform documents--a
    proposal to eliminate the prior approval system for facility
    blueprints, equipment, and most partial quality control plans and a
    proposal to add a performance standard alternative to the current
    command-and-control requirements governing cooked meat and poultry
    products. FSIS will ensure that current regulations are revised as
    necessary before the implementation dates to ensure consistency with
    the new rules.
        FSIS will soon begin a public process to develop and evaluate new
    approaches to inspection that would ensure that FSIS is making the best
    possible use of its resources to improve food safety while still
    meeting all of the consumer protection objectives of the current
    system. FSIS anticipates a redeployment of some of its inspection
    resources to successfully implement HACCP and better target food safety
    hazards during transportation, storage, and retail sale.
        Question. Are your HACCP regulations not making it intensive by
    layering new programs on top of old ones?
        Answer. FSIS is undergoing a transition from the traditional
    inspection system to HACCP-based inspection. Until HACCP provisions are
    fully implemented, there will be unavoidable, but temporary overlap in
    inspection activities to ensure the safety of meat and poultry
    products. FSIS is pursuing the implementation of HACCP provisions in
    accordance with the time frames in the final rule--for fiscal year
    1997, January 27 implementation of sanitation SOPs in all plants and
    generic E. coli testing in slaughter plants. At the same time, the
    agency's top rulemaking priority is eliminating regulatory provisions
    that are not consistent with HACCP.
                            risk of mad cow disease
        The Washington Post reported that new machines used to debone meat
    have raised concerns from consumer groups of the existence of ``Mad Cow
    Disease''. The machines not only separate meat from bone but also
    extract bone, bone marrow, and even spinal cord tissue. The disease may
    be contracted by humans from eating meat containing spinal cord tissue
    from infected cows. There has been no discovery of this disease in the
    United States.
        Question. What is USDA's opinion of the advanced meat recovery
    (AMR) process currently being used by the beef industry?
        Answer. USDA considers the meat derived from bones by properly
    controlled and operated AMR systems to be wholesome and safe for human
    consumption. Neither spinal cord, central nervous system tissue, nor
    excessive bone material should be present if the AMR process is
    properly controlled by the establishment. USDA does not believe that
    spinal cord, central nervous system tissue, or excessive bone material
    should be included in product labeled as boneless meat regardless of
    the process through which the product is derived.
        Question. How have the consumers' concerns been allayed?
        Answer. The Food Safety and Inspection Service is preparing a
    directive to define inspection tasks which will specifically deal with
    the inappropriate presence of spinal cord in boneless meat derived from
    AMR systems. FSIS will continue to analyze AMR system survey data to
    determine the necessity of regulation which addresses the composition
    of product from AMR systems. FSIS will consider what rule-making or
    other regulatory action may be appropriate to clarify the status of
    product derived from AMR systems.
                                research funding
        In your statement Mr. Billy, you mention several areas where
    research will play an integral role in the Food Safety Initiative.
        Question. What is the Department's total budget for the food
    safety/pathogen reduction research?
        Answer. The Department's overall budget for food safety research is
    estimated at about $63 million in 1997. The 1998 President's budget
    funds food safety research at $72 million, or about $9 million or 14
    percent above 1997.
        About $50 million or 80 percent of the total research is conducted
    by the Agricultural Research Service (ARS). The agency aims to improve
    the quality and safety of animal products used as food for humans and
    to reduce losses in animal productivity resulting from pathogens,
    diseases, parasites, and insect pests. ARS conducts both pre- and post-
    harvest research to reduce potential risks for consumers by targeting
    toxicants, chemical residues, and other substances which contaminate
    the food supply.
        An increase of $4.1 million in the ARS 1998 budget is focused on
    control of pathogens which cause food-borne illness such as Salmonella,
    Campylobacter, and E. coli, and to develop pre-harvest detection and
    enumeration methods required to identify specific control points and
    strategies to limit infection in meat and poultry products. The request
    also provides for post-harvest research to facilitate the development
    of effective Hazard Analysis and Critical Control Point (HACCP)
    programs in the slaughter and processing of meat and poultry products.
        The land-grant universities with financial support from the
    Cooperative State Research, Education, and Extension Service (CSREES)
    are the other major providers of food safety technology and research-
    based information. The CSREES budget for food safety research is about
    $12 million in 1997. The agency uses formula funds and special research
    grants to develop rapid, selective and sensitive methods for pathogen
    detection prior to consumer consumption, and to develop intervention
    technologies to eliminate pathogens. In addition, the National Research
    Initiative (NRI) supports studies on risk assessment that will lead to
    improved methods for detection and/or control of disease-causing
    microorganisms, and to benefit and cost analysis in support of HACCP
    regulations.
        An increase of $2 million is proposed in the CSREES 1998 budget for
    competitively awarded special research grants to investigate pre- and
    post-harvest issues for detection and control of pathogens and for
    production, processing, and handling management practices and enhance
    food safety education programs emphasizing pre-harvest activities,
    HACCP and other quality assurance programs, and industry compliance
    education. An additional $2 million is proposed to enhance food safety
    education programs focusing on pre-harvest activities, HACCP and other
    quality assurance programs, state certification programs, and industry
    compliance education.
        Research activities carried out by other Departmental agencies
    include improving the early warning system for foodborne illness and
    for providing HACCP training for state and local health officials, and
    for improving consumer education.
        In addition to food safety research, the Secretary has allocated
    $10 million of the Fund for Rural America to address four specific
    activities, one of which is aimed at assisting small meat and poultry
    processors implement HACCP plans. This assistance will complement
    efforts by FSIS to provide direct technical assistance to small
    establishments for achieving improved food safety under the new
    inspection system. The Department is currently evaluating proposals
    submitted for this activity and will announce actual funding
    allocations this summer.
                                grants-to-states
        The budget request for fiscal year 1998 is $1.13 million to defray
    increased costs in State inspection programs and to pay for State
    inspectors.
        Question. How many states currently participate in the Grants-to-
    States program?
        Answer. Currently, 26 states participate in the Grants-to-States
    Program.
        Question. What amount does each participating state receive?
        Answer.
        [The information follows:]

                                          [Obligations in Thousands of Dollars]
    ----------------------------------------------------------------------------------------------------------------
                                  State                                    1996            1997            1998
    ----------------------------------------------------------------------------------------------------------------
    Alabama.........................................................          $1,275          $1,290          $1,325
    Alaska..........................................................             341             345             355
    Arizona.........................................................             585             605             621
    Delaware........................................................             213             217             223
    Florida.........................................................           1,967           2,044           2,099
    Georgia.........................................................           2,404           2,473           2,540
    Hawaii \1\......................................................             293  ..............  ..............
    Illinois........................................................           4,361           4,698           4,825
    Indiana.........................................................           1,653           1,704           1,750
    Iowa............................................................           1,011           1,059           1,088
    Kansas..........................................................           1,283           1,412           1,450
    Louisiana.......................................................           1,755           1,843           1,893
    Mississippi.....................................................           1,099           1,103           1,133
    Montana.........................................................             341             353             363
    New Mexico......................................................             419             423             435
    North Carolina..................................................           2,849           3,061           3,143
    Ohio............................................................           4,620           4,633           4,757
    Oklahoma........................................................           1,617           1,631           1,676
    South Carolina..................................................           1,133           1,189           1,221
    South Dakota....................................................             483             480             493
    Texas...........................................................           4,603           4,776           4,903
    Utah............................................................             771             828             850
    Vermont.........................................................             284             296             304
    Virginia........................................................           1,293           1,309           1,344
    West Virginia...................................................             597             609             626
    Wisconsin.......................................................           2,985           3,034           3,116
    Wyoming.........................................................             284             313             322
          Total.....................................................          40,519          41,728          42,855
    ----------------------------------------------------------------------------------------------------------------
    \1\ As of November 1, 1995, the Hawaii inspection program converted from State to Federal inspection.

                     the president's food safety initiative
        1. Before the President's budget was released, The Washington Post
    reported on January 25, 1997, that President Clinton would request a
    total of $43 million to fight outbreaks of food contamination. The
    article also stated that $31.5 million would be requested for food
    safety research and inspection systems. Of that amount, FSIS would get
    under this proposal $8.5 million.
        Question. Please provide the activities and the money requested in
    the fiscal year 1998 budget that are considered to be a part of the
    President's Food Safety Initiative.
        Answer. The January 25, 1997, Washington Post article incorrectly
    reported that FSIS would receive $8.5 million under the President's
    food safety initiative. The initiative includes $9,179,000 for USDA, of
    which $1,065,000 is for FSIS initiatives. This includes $500,000 for
    the Sentinel Site Survey to support the ``Early Warning System'' for
    public health surveillance and $565,000 to provide HACCP training for
    State and local food regulatory officers.
        Question. Which activities are currently the existing mission of
    the FSIS? Which proposals are new to FSIS and are a result of the
    President's initiatives?
        Answer. FSIS currently provides $1 million annually and works with
    the Centers for Disease Control and Prevention (CDC) and the Food and
    Drug Administration (FDA) on the Sentinel Site Survey to assist our
    efforts at protecting the public health through ensuring the safety of
    meat, poultry, and egg products. The objective of the Sentinel Site
    Survey is 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.
        With sentinel site information, FSIS can identify areas of concern,
    review HACCP programs and, where appropriate, trigger changes to
    prevent future outbreaks of foodborne illness. The requested increase
    of $500,000 will enable FSIS to obtain information on the high priority
    pathogen, Campylobacter, the most common foodborne pathogen. This
    information will provide FSIS with a more complete picture of the
    incidence of foodborne illness, which is necessary in order to identify
    appropriate measures for controlling and preventing foodborne illness.
        FSIS is committed to assisting States with implementation of HACCP
    requirements. The requested increase of $565,000 to provide HACCP
    training to State and local regulatory officials at the retail level
    will further assist States, and address the risk to food safety in meat
    and poultry processing activities regulated by State and local
    authorities.
        2. The President's Food Safety Initiative creates an early warning
    system that consists of five food sentinel sites. In addition, the
    President's budget also requests monies for additional states to have
    improved surveillance, investigation, control, and prevention of food
    borne disease outbreaks.
        Question. What is FSIS's role in the new ``Early Warning System''?
        Answer. The ``Early Warning System'' described in the President's
    Food Safety Initiative builds on the existing Sentinel Site
    Surveillance Project, recently named ``FoodNet''. FSIS has scientific
    input through its membership on the project steering committee and its
    participation in investigating outbreaks of illness associated with
    meat and poultry products.
        Question. How much money does FSIS contribute to each of the five
    food sentinel sites?
        Answer. Through an agreement with CDC, FSIS provides $1 million per
    year to FoodNet and has proposed an increase of $0.5 million for fiscal
    year 1998 to cover Campylobacter case control studies at the expanded
    eight sites. FoodNet activities and resources at the sites are managed
    by CDC, who also selects each site through a competitive process.
        Question. How many total sites does the President's Food Safety
    Initiative propose and what are their locations?
        Answer. The President's Food Safety Initiative proposes to conduct
    FoodNet in no less than eight sites. Surveillance will continue at the
    five sites established in 1995, which encompass the Minneapolis/St.
    Paul, Minnesota metropolitan area; Oregon; selected counties in
    Northern California; Connecticut; and the Atlanta, Georgia metropolitan
    area. These sites represent approximately 13 million people, or 5
    percent of the U.S. population.
        An additional three sites will expand surveillance coverage to
    about 10 percent of the U.S. population. These sites are being selected
    by CDC through a competitive process. Two of the sites are the
    Rochester, NY area and the Baltimore, MD area. The selection process
    has not been completed for the eighth site.
        Question. Are these sites permanent which will require yearly
    allocations?
        Answer. CDC manages the selection and surveillance of sites.
    Funding requirements for FoodNet are expected to continue on a yearly
    basis, as proposed.
        Question. How will the requested funds be used to improve
    surveillance, investigation, control, and prevention of food borne
    disease outbreaks?
        Answer. The requested increase would cover Campylobacter case-
    control studies at the expanded eight sites. Expanding surveillance
    coverage to eight sites, or 10 percent of the population, would
    increase the statistical significance of the effort among the sites and
    federal agencies. By strengthening FoodNet, the initiative will create
    the ``early warning'' capability described by the President. Such a
    system could detect large outbreaks as they begin, then quickly alert
    states 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.
        Question. Outline your farm-to-table strategy for inspection.
        Answer. The final HACCP rule addresses hazards within slaughter and
    processing plants. FSIS recognizes, however, that these measures must
    be part of a comprehensive food safety strategy that addresses hazards
    at other points in the farm-to-table chain. To that end, FSIS is
    broadening the scope of its food safety activities beyond slaughter and
    processing plants, with particular new emphasis on hazards that arise
    during transportation, distribution, and retail sale.
        To improve food safety at the animal production and intermediate
    stages before the slaughter plant, FSIS is working with industry,
    academia, and other government agencies to develop and foster measures
    that can be taken on the farm, and through distribution and marketing
    of animals to reduce food safety hazards associated with animals
    presented for slaughter. FSIS does not intend to mandate production
    practices at this stage, but instead believes that the voluntary
    application of food safety assurance programs based on HACCP principles
    can be useful in establishing risk reduction practices on the farm and
    during intermediate marketing stages. The agency believes that
    continued public concern about foodborne pathogens and the adoption of
    HACCP and performance standards will increase incentives for producers
    to adopt food safety practices at the animal production level.
        Food safety during transportation, storage and retail sale are also
    important links in the food safety chain. In these areas, FSIS, FDA,
    and State and local governments share authority for oversight of food
    products. FSIS and FDA are jointly working to develop standards
    governing the safety of foods during transportation and storage, with
    particular emphasis on the importance of temperature control in
    minimizing the growth of pathogenic microorganisms.
        In the retail area, FSIS and FDA are working with state officials
    to ensure the adoption of uniform, science-based standards and to
    foster the adoption of HACCP-type preventive approaches. State and
    local authorities have primary responsibility for food safety oversight
    of retail stores and restaurants, but FSIS and FDA, working through the
    Conference for Food Protection, can provide expertise and leadership to
    support local authorities and foster the development of sound food
    safety standards and practices nationwide.
        Even as progress is made in reducing contamination during these
    stages, it will remain critical that retail food handlers and consumers
    follow safe food handling practices. Proper storage, preparation, and
    cooking of meat and poultry products are essential to achieving the
    goal of reducing the risk of foodborne illness to the maximum extent
    possible. FSIS intends to augment its food handler education efforts by
    expanding its collaboration with industry, other government agencies,
    consumer and public interest groups, educators and the media to foster
    the effective delivery of food safety education and information.
        Question. What resources are required?
        Answer. For fiscal year 1998, a program level request of $591.2
    million is required to maintain the inspection workforce at its current
    level in order to provide inspection; to provide laboratory capability
    to meet HACCP requirements for product sampling and testing; and
    provide scientific leadership on food safety priorities, such as the
    FoodNet.
                                   user fees
        1. The fiscal year 1998 President's budget proposes user fees to
    recover the full cost of direct on-site product inspection. It is
    estimated that this proposal will generate $390 million in new
    revenues. Last year, the Administration proposed user fees to pay for
    inspection incurred during overtime. The industry and Congress balked
    at this proposal and refused to incorporate user fees.
        Question. If user fees for overtime shifts were proposed and
    rejected by the Congress and industry, why do you believe a user fee
    proposal to recover the full costs of inspection would fare any better?
        Answer. 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. If industry takes
    responsibility for the cost of inspection, industry would be assured of
    sufficient resources to efficiently operate plants, and the
    Administration could then fully focus its efforts on developing and
    implementing necessary inspection reforms which would thereby improve
    consumer confidence in meat, poultry, and egg products. With inspection
    no longer subject to annual budget pressures, the agency will not have
    to balance food safety reform initiatives against inspection staffing
    needs.
        Question. Has this proposal been submitted to the Congress?
        Answer. The legislative proposal will be submitted to Congress in
    the next few weeks.
        Question. What benefits would consumers receive if these fees were
    authorized?
        Answer. If industry takes responsibility for the cost of
    inspection, the Administration can then fully focus its efforts on
    developing and implementing necessary inspection reforms which would
    thereby improve consumer confidence in meat, poultry, and egg products.
        Question. How does the agency plan to implement these user fees?
        Answer. FSIS is analyzing a number of user fee approaches. These
    include systems based on inspection staff years, pound of liveweight or
    raw meat input, numbers of carcasses, and registration for inspection.
    Through the rulemaking process, the agency will seek input from the
    public on developing a user fee system that is equitable, cost-
    effective and accountable. The Department has developed, and is
    pursuing an implementation schedule to ensure that regulations will be
    in place to implement the fees on October 1, 1997, assuming enactment
    of the legislation.
        Question. Were all of the inspector vacancies filled with the
    fiscal year 1997 allocation?
        Answer. The 1997 Appropriation is sufficient to provide inspection
    coverage that is adequate to ensure the safety of regulated product, as
    well as accommodate industry growth.
        Question. Was HACCP fully implemented with the fiscal year 1997
    allocation?
        Answer. In accordance with the provisions of the final HACCP rule,
    pre-HACCP sanitation standard operating procedures, SOPs, were
    implemented in all plants and E. coli testing was begun in all
    slaughter plants, effective January 27. HACCP implementation will begin
    in fiscal year 1998, and the implementation schedule will be based on
    plant size. Large plants with 500 or more employees are required to
    have their HACCP systems in place by January 26, 1998. Small plants
    with 10 to 499 employees are required to implement HACCP by January 25,
    1999. Very small plants with fewer than 10 employees or less than $2.5
    million in annual sales have until January 25, 2000 to implement HACCP.
        2. Your total request for FSIS is $591 million for fiscal year
    1998. For fiscal year 1998, appropriations the Administration's
    legislative proposal for inspection user fees would require $201
    million to provide laboratory support for inspection, animal production
    food safety investments, investments in new inspection system
    improvements, and program administration.
        Question. How would the adoption of this user fee legislation
    impact the fiscal year 1998 appropriations request for the FSIS?
        Answer. The 1998 budget includes the assumption that adoption of
    the user fee legislation would reduce the FSIS Appropriations request
    from $591.2 million to $201.2 million for fiscal year 1998. Upon
    enactment of the legislation, FSIS will do rulemaking to implement a
    user fee system to recover an estimated $390 million in inspection
    costs.
        3. Assuming the enactment of the Administration's user fee
    proposal, the FSIS appropriations request for fiscal year 1998 is $201
    million. The assumption would also be that the legislative proposal for
    FSIS recovers $390 million in user fees which will be paid by the
    industry. Your testimony states that the industry assumes 70 percent of
    the total cost of the program if the user fee proposal is enacted.
        Question. What are the projected appropriations needed for fiscal
    year 1998 and the succeeding five years out?
        Answer. Under current law, the projected appropriations needed are
    $591.2 million for fiscal year 1998. Assuming enactment of the proposal
    to recover the cost of salaries and benefits for mandatory inspection,
    the projected fiscal year 1998 appropriations needed are $201.2 million
    for laboratory support for inspection, animal production food safety
    investments, new inspection system improvements designed to enhance
    safety and productivity, and program administration. The long term
    implications of the proposed legislation are as yet to be determined.
        Question. What specific costs would be borne by the industry for
    fiscal year 1998 and the succeeding five years out?
        Answer. Industry would be responsible for the cost of all salaries
    and benefits of personnel performing mandatory inspection of meat,
    poultry, and egg products.
        Question. What assumptions are these appropriations and user fee
    collections based on in terms of the cost of the fees paid and the
    activities provided by these fees, e.g. fees collected only cover costs
    of in-plant inspections?
        Answer. The estimated collection of $390 million in the user fee
    proposal is based on the fiscal year 1998 projected cost of salaries
    and benefits for the fiscal year 1997 staffing ceiling of permanent
    full-time employees and other than permanent full-time employees who
    perform mandatory inspection of meat, poultry, and egg products.
        Question. Do these assumptions change once HACCP is implemented?
        Answer. The proposed legislation provides user fees for salaries
    and benefits of personnel conducting inspection and compliance services
    incident to the inspection of meat, poultry, and egg products. Under
    HACCP, we continue to recover the same costs.
        Question. Have you consulted with industry on this user fee
    proposal?
        Answer. Industry representatives are being invited to a meeting
    scheduled for March 10, to comment on the user fee proposal.
                             salaries and expenses
        The Under Secretary for Food Safety and Inspection Service position
    remains vacant.
        Question. What has been done with the funds provided for fiscal
    year 1997 and previous fiscal years?
        Answer. The first annual appropriation for the Office of the Under
    Secretary for Food Safety was provided for fiscal year 1996. The total
    costs in fiscal year 1996 for this office were $440,000 for the
    salaries and benefits, travel, and other operating costs of the Acting
    Under Secretary, one confidential assistant, and two clerical staff.
    For fiscal year 1997, very little of the funding for this office has
    been obligated since positions in the Office of the Under Secretary
    were vacated early in the fiscal year.
        Question. Why was a request for funds made in the fiscal year 1998
    President's budget?
        Answer. Funding for the Office of the Under Secretary for Food
    Safety was included in the 1998 President's budget based on the
    expectation that positions for that office will be filled in fiscal
    year 1998.
                                     ______

                      Questions Submitted by Senator Burns
                  explanation of haccp final rule to producers
        Question. Mr. Billy, can you provide the committee information on
    what you are doing to explain the new rules and regulations on meat
    inspection to the people on the ground, the producers?
        Answer. The Food Safety and Inspection Service (FSIS) has planned a
    series of meetings on the Plant Communications Initiative to improve
    communications with inspected establishments, especially small and very
    small plants, as they implement new federal food safety requirements
    for meat and poultry plants. These requirements are contained in the
    Hazard Analysis and Critical Control Points (HACCP) final rule.
        FSIS has scheduled ten public meetings across the country,
    including one teleconference, to facilitate direct input on how the
    Agency can better communicate with plants. Locations for the meetings
    include Tennessee, Pennsylvania, Massachusetts, Missouri, Alabama,
    California, Illinois, North Carolina, Texas, and Wisconsin.
        At each meeting, FSIS Administrator Thomas J. Billy and Dr. Craig
    Reed, Deputy Administrator for Field Operations, will meet with plant
    managers to discuss information and communication needs. In particular,
    the Agency would like to know:
      --What kind of information plants need from FSIS to successfully
            implement HACCP;
      --What are the best ways FSIS can meet plant needs, including working
            with new technologies; and
      --How can FSIS get a consistent inspection message to all plants.
        In addition to meetings, the Agency is working with groups of small
    and very small establishments and their institutional cooperators
    (universities, trade groups, and consultants) on projects which are
    designed to demonstrate how small plants can meet the requirements of
    the HACCP final rule. Material under development to explain the
    requirements for small and very small plants includes the following:
      --Guidebook for the Development of HACCP Plans;
      --Hazards and Controls Guide;
      --13 Generic HACCP Models;
      --Reproduction of a HACCP Plan Development Video Produced by
            Agriculture Canada and Agri-Food Canada;
      --Guidance Material for E. coli Testing for Livestock and Poultry;
      --Video for Sampling Carcasses for E. coli Testing; and
      --Guidance Material on Statistical Process Control.
        FSIS also recognized early that the implementation of the final
    HACCP rule would have a significant indirect impact on the food animal
    production community. The Agency is working proactively with the
    various industry and professional organizations which represent all
    segments of the food animal production process to raise the level of
    awareness about the regulation, its potential ramifications for their
    respective members, and what action they may wish to consider.
        At the animal production level, the FSIS strategy is to encourage
    the voluntary use of the existing commodity food safety and quality
    assurance programs, which are based on HACCP principles, to reduce food
    safety risks. We believe that producers who implement the practices
    recommended in these programs will be able to provide slaughter plants
    with the assurances they need regarding the residue safety of the
    animals they process.
        Question. In December of last year, the Food Safety and Inspection
    Service was asked to come to Montana to discuss the rules and
    regulations on meat inspected coming in from Canada to the general
    membership of the Montana Stockgrowers Association. There had been talk
    that there may be some discussion on a personnel matter in the agency
    at this same meeting. However, I believe all that was resolved and the
    topic of discussion was to be the inspection of meat coming across the
    border from Canada. Yet, a day later when I met with these same people
    they were anything but confident in the process and the discussion that
    had occurred. I would hope you could make it a part of this new program
    to make sure that the producers understand the process and the costs
    that they will ultimately bear. Can you assure this committee that you
    will meet with producer groups to make sure that they do understand
    what it is that they will be paying for?
        Answer. A major objective of the ten public meetings FSIS has
    scheduled across the country is to find out from plant managers the
    kind of information plants need from FSIS to successfully implement
    HACCP. We intend to provide the needed information, and work with
    plants to assist them in implementing HACCP.
                           interstate shipment issue
        Question. What is the Agency doing at this time to resolve the
    differences that have recently occurred between the state inspection
    process and the federal?
        Answer. FSIS is ready to address the concerns of state-inspected
    plants and state Departments of Agriculture underlying this issue, but
    is not ready to endorse the ``merging'' of state and federal inspection
    or other specific solutions proposed for those concerns without further
    analysis of the issues. FSIS is publishing a notice in the Federal
    Register announcing two public meetings on this issue on June 16 and
    17, 1997, in Sioux Falls, South Dakota, and on July 22, in Washington,
    DC. These meetings are to solicit information on ways to improve
    Federal and State cooperation in the implementation of the Federal
    inspection laws and whether, and if so, how, those laws should be
    changed to permit State inspected product to move in interstate
    commerce.
        USDA is very concerned that state-inspected processors wishing to
    distribute their product across state lines view the obtaining of
    federal inspection to be an unreasonable obstacle in their path, and
    would consider changes in how FSIS grants federal inspection to such
    plants if warranted. Similarly, USDA views state inspection programs as
    an essential part of the Nation's food safety network, and is open to
    new ideas on how to better support them and keep them viable. The
    Department wants to have the best possible working relationship with
    state meat and poultry inspection programs and the establishments they
    inspect.
        FSIS is in the process of making major changes in how it conducts
    federal inspection; changes aimed at reducing risks to public health
    through a shift to HACCP-based inspection and imposition of new
    pathogen reduction requirements. It is important that FSIS implement
    these changes with care and without delay, and that state programs have
    the guidance and assistance they need to make their inspection programs
    ``equal to'' the federal program in a timely fashion. Any additional
    major changes in its inspection program would divert USDA resources
    from risk reduction efforts and could lead to delays in implementing
    HACCP and pathogen reduction requirements. That is, it is suggested
    that the public costs of instituting such a change at this juncture may
    well outweigh the public benefits.
                 differences in inspection of meat and poultry
        Question. As I mentioned in my statement, in Montana we do not have
    a large number of chicken producers. However, if agriculture pulls the
    wagon of the economy in Montana, then livestock's production is the
    beast of burden. Can you put in real terms, that all America can
    understand, the difference in the treatment of white meat products and
    red meat products in the inspection process, and the cost difference?
        Answer. FSIS contracted with the Research Triangle Institute (RTI)
    to conduct a comprehensive comparative study of meat and poultry
    regulations. RTI completed its study in June 1993. For the record, I
    will provide the study by RTI, and the FSIS analysis of the study. In
    summary, the study found that differences in the regulations and the
    inspection process are sometimes justified by the fact that ``the two
    industries deal with different animals, and have different production
    processes,'' and that the ``laws for market protection were designed to
    protect the markets within each industry . . . and to] use industry
    standards; and FSIS has no authority to reconcile those standards
    between industries.'' The study found that the cost of an inspector's
    salary and benefits per pound of inspected product is $0.0020
    liveweight for red meat and $0.0046 liveweight for poultry.
        [The information follows:]

                    [Research Triangle Institute, June 1993]

          Comparison of Meat and Poultry Regulations (Summary Report)
                                   background
        The Food Safety and Inspection Service (FSIS) of the U.S.
    Department of Agriculture (USDA) is responsible for inspecting all meat
    and poultry products shipped in interstate commerce and for assuring
    consumers that meat and poultry products are wholesome; not
    adulterated; and are properly marked. labeled, and packaged. The
    Federal Meat Inspection Act (FMIA) and the Poultry Products Inspection
    Act (PPIA), both as amended, provide USDA this mandate. FSIS
    administers and reviews inspection activities to ensure that the
    agency's policies and regulations are consistent with the FMIA and
    PPIA.
        Industry representatives have expressed concerns that differences
    in USDA regulations for meat and poultry inspection may benefit or harm
    one segment of the industry or the other. In response, the FSIS
    Administrator requested a comprehensive comparison of the meat and
    poultry regulations to identify and describe significant requirement
    differences. Consequently, Research Triangle Institute and three
    independent consultants (hereafter RTI) reviewed Title 9, Code of
    Federal Regulations, Subchapters A (Mandatory Meat Inspection [Parts
    301-335]) and C (Mandatory Poultry Products Inspection [Part 381]) \1\
    to identify all substantive regulatory requirements not already
    identical, outline the significant differences by specie, and classify
    the bases for those significant differences. The purpose of this report
    is to document RTI's findings and to outline its method of evaluation
    regarding this comprehensive regulatory comparison.
    ---------------------------------------------------------------------------
        \1\ 9 CFR Parts 301-335, and 381, respectively; Revised as of
    January 1, 1992, with ancillaries.
    ---------------------------------------------------------------------------
                                    findings
        In general, the regulations covering meat and poultry have been
    designed with the same intent--to protect ``the health and welfare of
    consumers by assuring that meat and meat food products [or poultry
    products] are wholesome, not adulterated, and properly marked, labeled,
    and packaged'' (p. 1139).\2\ However, although the intent of the
    regulations remains the same, the actual requirements are quite
    different. This is to be expected considering that the regulated
    species have inherently different characteristics. These different
    characteristics were considered as the rules and regulations evolved.
    The regulations contain and present the means for effectively
    accommodating those differences as the respective meat and poultry
    industries go about challenges of converting raw materials into foods
    for humans and into other byproducts (e.g., pet food).
    ---------------------------------------------------------------------------
        \2\ 21 U.S.C. Sec. 602 and Sec. 451.
    ---------------------------------------------------------------------------
        It is within this context that we attempted to outline the
    differences that currently exist between the meat and poultry
    regulations and to classify the bases for those differences. RTI
    applied a ``general acceptance'' rule in making its determinations. If
    RTI judged that objective and knowledgeable professionals would
    generally agree on the identification and classification of the
    regulatory differences found, then our findings were stated
    accordingly. Industry was not consulted, nor were cost evaluations
    conducted for determination of minor vs. significant differences.
    Furthermore, RTI did not attempt to justify the regulatory differences
    found. The following is the summary of our findings.
    Minor Regulatory Differences In General
        The meat and poultry regulations contain hundreds of differences in
    regulatory requirements. Most of these differences were identified as
    ``minor.'' Most of these ``minor'' regulatory differences are based on
    language variations (e.g., poultry regulations generally are shorter
    and more concise than are those for meat). These variations probably
    developed as a result of the time differential between regulatory
    enactment of the FMIA (1907) and the PPIA (1957).
        Regulatory differences are deemed ``minor'' when the intent of the
    regulation is essentially the same and in RTI's opinion there is no
    identifiable difference between the burdens imposed on meat and poultry
    producers. These differences are denoted in the main report document as
    ``minor,'' and no bases for these differences are given.
    Significant Regulatory Differences in General
        The regulations also reflect a number of significant regulatory
    differences that stem primarily from inherent differences in the two
    industries. First, the species slaughtered and processed are different,
    and they have different diseases and conditions. Thus, the procedures,
    processes, and equipment used to obtain consumer-ready products vary
    considerably between meat and poultry species. Differences of this type
    are outlined in the Appendix and are noted as being primarily based on
    inherent specie differences, which require variations in slaughter,
    processing, inspection, and labeling methods to ensure wholesome,
    nonadulterated products.
        Second, the poultry industry had been growing and expanding under
    voluntary poultry inspection for many years prior to the mandatory
    Federal legislation of 1957. When the regulations were written for
    mandatory poultry inspection, customary and usual industry practices
    and standards of the time were incorporated into the regulations.
    Consequently, poultry regulations that are similar in subject category
    to meat regulations (c.g., standards of identity) reflect differences
    in 19`traditional'' industry practices that continue today (e.g.,
    ``chili con carne'' must have a minimum of 40 percent fresh meat;
    ``(poultry) chili'' must have a minimum of 28 percent cooked, deboned
    meat). Differences of this nature are outlined in the Appendix, and the
    basis for these differences are classified as ``traditional'' (i.e.,
    ``traditional'' industry practices were included in the regulatory
    language at the time of codification).
        Finally, the poultry regulations in some parts contain very
    detailed requirements while the counterpart meat regulations are very
    general in content. This can be attributed largely to the fifty or so
    years difference in the ages of the FMIA and the PPIA The meat
    inspection program evolved mostly during a period when policies and
    procedures were published in directives, manuals, and similar
    publications. The more recent poultry inspection program was developed
    mostly during a period when policies and procedures were promulgated by
    rulemaking, to permit public comment and better public notice
    consistent with the Administrative Procedure Act. (It should be noted,
    however, that in the last decade or so Federal agencies were
    discouraged from issuing new regulations, leading to a return to
    greater reliance on directives and policy guidance issued directly by
    FSIS for both meat and poultry inspection matters). It can be argued
    that such differences are also attributable to larger, more drastic
    technological and marketing changes occurring in the poultry industry
    in recent decades than in the red meat industry, leading to greater
    need for poultry inspection procedures to change and adapt. These
    differences have been outlined in the Appendix and their basis for
    differences identified primarily as ``historical.''
        These specie, traditional, and historical-based regulatory
    requirement differences are deemed ``significant'' in that they are not
    ``minor'' differences (i.e., the potential burden on producers for such
    regulations may be greater on one industry or another). These
    ``significant'' differences are outlined in the report and the basis
    for those differences are given.
    Specific Significant Regulatory Differences
        Although most regulatory differences between meat and poultry are
    minor and/or of no real consequence to either the meat or poultry
    industries, there was a general agreement at RTI and among its
    consultants that a small number of differences may be viewed as
    potentially significant in terms of cost advantage to one industry or
    another (or to FSIS in terms of the relative costs of administering the
    two regulatory programs). Again, these differences identified reflect
    the judgment and consensus of RTI; industry was not consulted, nor were
    cost evaluations done. These specific significant differences are
    outlined below by subject area. In addition, the Appendix page numbers
    and CFR citation references are given for ease in locating each
    difference.
    1. Carcass Chilling Procedures
        Traditional chiding methods for meat and poultry carcasses are
    different Meat is chilled by exposing it to cold air. Poultry chilling
    by cold air and by cold water immersion are both permitted. Poultry
    carcasses normally are immersed in chilled water and ice. The immersion
    chilling method for poultry allows for the absorption of 8 percent or
    more of water by weight into the poultry carcass, a gain in carcass
    weight that dry chilling methods do not impart to livestock carcasses.
    Livestock carcasses may be sprayed while being chilled, but are not
    permitted to gain weight in the process. The basis for these
    differences is primarily traditional (i.e., current industry practices
    written into-the regulations at the time of codification).

    ------------------------------------------------------------------------
               Page No.                Meat CFR            Poultry CFR
    ------------------------------------------------------------------------
    F-10 to F-15..................  None            Sec.  381.66(d)(1)-(6).
    ------------------------------------------------------------------------

    2. Humane Slaughter
        There exist regulatory requirements--with their related procedures,
    controls, and penalties--for the humane slaughter of livestock. There
    are no corresponding laws or regulations for poultry. The basis for
    these differences is statutory (i.e., requirements for humane slaughter
    of livestock are contained in the FMIA; no comparable requirements for
    the humane slaughter of poultry are included in the PPIA). (See 21
    U.S.C. Sec.  603[b], 610[b].)

    ------------------------------------------------------------------------
                 Page No.                   Meat CFR          Poultry CFR
    ------------------------------------------------------------------------
    I-1 to I-12......................  Sec.  313.1         None.
                                       Sec.  313.2         None.
                                       Sec.  313.5         None.
                                       Sec.  313.15        None.
                                       Sec.  313.16        None.
                                       Sec.  313.30        None.
                                       Sec.  313.50        None.
    ------------------------------------------------------------------------

    3. Poultry Reprocessing
        Carcasses contaminated on the slaughter floor are considered
    adulterated. Poultry carcasses may be reprocessed by washing of
    contaminated areas with chlorinated water; poultry regulations allow
    for such reprocessing and provide for equipment and procedures to
    accomplish it. Contaminated meat may not be washed. Trimming of
    contaminated areas is the only accepted method for removal of ingesta
    or fecal materials from livestock carcasses. The PPIA expressly permits
    reprocessing of poultry; the FMIA has no such provision. (See 21 U.S.C.
    Sec. 455[c].)

    ------------------------------------------------------------------------
               Page No.                Meat CFR            Poultry CFR
    ------------------------------------------------------------------------
    H-27 to H-28..................  None            Sec.  381.91(b)(1)-(2).
    ------------------------------------------------------------------------

    4. Poultry Slaughter Modernization
        Certain regulations that provide for new poultry inspection
    procedures, responding to the modernization of poultry slaughter
    technologies. could have comparable applications to livestock slaughter
    but have not been adopted in meat post-mortem inspection. These
    include:
        (a) The use of quality control (QC) concepts and cumulative sum
    (CUSUM) in establishing and controlling product nonconformities.
        (b) Plant-operated QC programs and personnel for the purpose of
    attaining maximum production potential.
        (c) Finished Product Standards (FPS) published in the regulations.
        The basis for these differences is essentially ``unknown'' (i.e.,
    these procedures could, with modification, be done for meat species the
    same as for poultry species).

    ----------------------------------------------------------------------------------------------------------------
                    Page No.                             Meat CFR                           Poultry CFR
    ----------------------------------------------------------------------------------------------------------------
    G-23 to G-24...........................  None                             Sec.  381.76(b)(3)(i)(a)-
                                                                                (d), (g), (h).
    G-28 to G-50...........................  None                             Sec.  381.76(b)(3)(iv)(c)+.
    ----------------------------------------------------------------------------------------------------------------

    5. Exemptions
        Generally, the regulatory exemptions from inspection are more
    liberal for poultry than for meat. For instance, the meat regulations
    permit the uninspected slaughter and processing of livestock for
    household use only, but the poultry regulations permit the uninspected
    slaughter, processing, and sale of limited quantities of poultry and
    poultry products to consumers. In addition, the poultry regulations
    exempt from inspection certain products containing small amounts of
    poultry that would otherwise receive inspection under the meat
    regulations. The basis for most of the exemption differences is
    statutory. (See 21 U.S.C. Sec. 464 and Sec. 623.)

    ----------------------------------------------------------------------------------------------------------------
                   Page No.                               Meat CFR                           Poultry CFR
    ----------------------------------------------------------------------------------------------------------------
    A-4...................................  Sec.  303.1(d)(2)(i)(c)              Sec.  381.10(d)(2)(i)
    A-19..................................  None                                 Sec.  381.10(a)(1).
    A-20..................................  None                                 Sec.  381.10(a)(5).
    A-21..................................  None                                 Sec.  381.10(a)(6), (a)(7).
    A-22..................................  None                                 Sec.  381.10(a)(7)(b), (c).
    A-22..................................  None                                 Sec.  381.11(a).
    A-23..................................  None                                 Sec.  381.12.
    ----------------------------------------------------------------------------------------------------------------

    6. Sanitation
        The meat regulations require the mandatory use of 180  deg.F water
    to clean and disinfect slaughter equipment in marry instances. There
    are no such requirements in poultry. The basis for this differences is
    ``unknown.''

    ------------------------------------------------------------------------
               Page No.                   Meat CFR            Poultry CFR
    ------------------------------------------------------------------------
    D-4...........................  Sec.  308.3(d)(4)     Sec.  381.50(b).
    D-12..........................  Sec.  308.8(c)        Sec.  381.58(a).
    ------------------------------------------------------------------------

    7. Mechanically Separated Product
        Mechanically Separated (Species) (MS[S]) meat product conforming to
    prescribed compositional standards is permitted to be used in limited
    quantities in certain products. Label and use restrictions are
    required, along with calcium content testing and labeling. A QC program
    is necessary for a plant to produce MS(S). Mechanically separated
    poultry (MSP), a comparable product, is permitted to be used in
    unlimited quantities in poultry products and labeled as chicken or
    turkey. Bone content is the only compositional standard required. A
    court decision declaring that mechanically separated meat product is
    not ``meat,'' coupled with relatively quick, large-scale introduction
    of MSP into various poultry products, appear to be the primary bases
    for these regulatory differences.

    ------------------------------------------------------------------------
               Page No.                   Meat CFR            Poultry CFR
    ------------------------------------------------------------------------
    L-75.........................  Sec.  318.18           None.
    M-2..........................  Sec.  319.5(a)         Sec.  381.117(d).
    M-3..........................  Sec.  319.15(c)        Sec.  381.160.
    M-4..........................  Sec.  319.300          Sec.  381.167.
    M-5..........................  Sec.  319.301          Sec.  381.167.
                                   Sec.  319.302          Sec.  381.167.
                                   Sec.  319.304          Sec.  381.167.
    M-6..........................  Sec.  319.305          Sec.  381.167.
                                   Sec.  319.311          Sec.  381.167.
                                   Sec.  319.312          Sec.  381.167.
    M-8 to M-10..................  Sec.  3195(e)(1)-(2)   None.
    M-10 to M-11.................  Sec.  319.6            None.
    M-17.........................  Sec.  319.105(b)       None.
    ------------------------------------------------------------------------

    8. Cooking Temperatures
        There exist regulatory requirements (and attendant controls and
    procedures that go with them) concerning time/temperature cooking
    relationships for the control of salmonella in beef, and for the
    control of trichina in pork There is not a similar approach to cooking
    poultry rolls, which only require cooking to 160  deg.F. or to 155
    deg.F if cured and smoked. The basis for these differences is that
    certain meat products are eaten ``rare'' by consumers; poultry products
    are generally not eaten ``rare.''

    ------------------------------------------------------------------------
               Page No.                     Meat CFR            Poultry CFR
    ------------------------------------------------------------------------
    L-35 to L-36..................  Sec.  318.17(a)-(c)(3)    Sec.  381.150.
    L-71 to L-75..................  Sec.  318.17(d)(1)-(k)    None.
    ------------------------------------------------------------------------

    9. Use of Skin
        The poultry regulations provide that poultry carcasses, cuts, and
    products may contain skin. The percentage permitted ranges from 8 to 20
    percent (natural proportions) and may be added to the product without
    label declaration. In meat, pork jowls with attached skin is permitted
    in processed products with a proper label declaration. Detached skin is
    not permitted. The poultry regulations also permit the use of skin in
    natural proportions in poultry burgers and patties; hamburger must be
    made of beef of skeletal origin. Traditional poultry industry practice
    is the primary basis for these differences.

    ------------------------------------------------------------------------
                Page No.                    Meat CFR           Poultry CFR
    ------------------------------------------------------------------------
    M-3.............................  Sec.  319.15(b)       Sec.  381.160.
    M-46............................  None                  Sec.  381.168.
    ------------------------------------------------------------------------

    10. Chilling and Freezing Requirements
        The poultry regulations contain numerous requirements concerning
    time/temperature relationships for the chilling or freezing of poultry
    carcasses and parts. These requirements consume inspector time to
    assure compliance. There are no such requirements for meat carcass
    chilling or freezing. The basis for these differences is traditional
    industry practice.

    ------------------------------------------------------------------------
               Page No.               Meat CFR            Poultry CFR
    ------------------------------------------------------------------------
    F-6 to F-10..................  None           Sec.  381.66(b)-(c)(5).
    F-17 to F-18.................  None           Sec.  381.66(c)-(f)(6).
    ------------------------------------------------------------------------

    11. Standards of Identity
        In similar meat and poultry products with standards of identity,
    the required percentage content of cooked poultry is usually less than
    the meat content. For examples ``(meat) hash'' must contain a minimum
    of 35 percent fresh meat; ``(poultry) hash'' must contain a minimum of
    30 percent cooked, deboned meat. The basis for these differences is
    traditional industry practices.

    ------------------------------------------------------------------------
                Page No.                   Meat CFR           Poultry CFR
    ------------------------------------------------------------------------
    M-4............................  Sec.  319.300        Sec.  318.167.
    M-5............................  Sec.  319.301        Sec.  318.167.
                                     Sec.  319.302        Sec.  318.167.
                                     Sec.  319.304        Sec.  318.167.
    M-6............................  Sec.  319.305        Sec.  318.167.
                                     Sec.  319.311        Sec.  318.167.
                                     Sec.  319.312        Sec.  318.167.
    M-7............................  Sec.  319.313        Sec.  318.167.
    ------------------------------------------------------------------------

    12. Moisture Limitations in Processed Products
        Moisture limitations in processed products tend to favor poultry.
    For example:
        (a) Fresh Meat Sausage must have 3 percent added water;
    Fresh Poultry Sausage has no limit.
        (b) Cooked Meat Sausage must have 40 percent combined
    fat and water; Cooked Poultry Sausage has no limit.
        (e) Pork Ham is protein fat free (PFF) controlled for both Domestic
    and Foreign Imports; Turkey Ham has no PFF control.
        (d) Meat Roast must have label declaration of any added moisture;
    Poultry Roast may contain 10 percent added moisture without
    label declaration.
        The Appendix's entry under ``basis for no compatible [poultry]
    regulation,'' with regards to items (a)-(c), is ``unknown.'' With
    regards to item (d), the ``basis for the difference'' is traditional
    industry practices.

    ------------------------------------------------------------------------
                Page No.                    Meat CFR           Poultry CFR
    ------------------------------------------------------------------------
    M-21...........................  Sec.  319.140           None.
    M-26...........................  Sec.  319.180           None.
    M-14 to M-15...................  Sec.  319.104           None.
    M-16 to M-18...................  Sec.  319.105           None.
    L-76 to L-83...................  Sec.  318.19(a)(5)      None.
    P-39 to P-44...................  Sec.  327.23            None.
    ------------------------------------------------------------------------

                              method of evaluation
        Figure 1 is a Flow Diagram of the method of evaluation.
        [GRAPHIC] [TIFF OMITTED] T01MA04.038

    Identify Regulatory Requirements for Meat and Poultry
        RTI reviewed Title 9, CFR, Subchapters A (Mandatory Meat
    Inspection, Parts [301-335]) and C (Mandatory Poultry Products
    Inspection [Part 381]) \3\ to identify all substantive requirements for
    meat and poultry, respectively. The substantive regulatory requirements
    reviewed correspond to 18 specific subject areas, as listed in the
    Appendix table of contents. All of Title 9, CFR, Subchapters A and C,
    was included in the study except 9 CFR Sec. 301.1-2, Sec. 302.1-3,
    Sec. 303.2, Sec. 318.21, Sec. 318.300-311, Sec. 321.1-2, Sec. 331.1-6,
    Sec. 318.1-7, Sec. 318.153, Sec. 381.185-186, Sec. 318.220-225, and
    Sec. 318.300-311. These sections were not included in the comparison
    because the regulations for meat and poultry were essentially identical
    in composition or the sections were not considered substantive
    regulatory requirements for comparison purposes (i.e., they were not
    included among the required subject categories listed in the Appendix
    table of contents). RTI used FSIS's Document Issuance Automated Library
    System (DIALS) to retrieve and download the most current issuance of
    the CFR.
    ---------------------------------------------------------------------------
        \3\ Revised as of January 1, 1992, with ancillaries.
    ---------------------------------------------------------------------------
    Division of Comparable and Non-Comparable Meat and Poultry Regulatory
            Requirements (Part I vs. Part II)
        After identifying all substantive meat and poultry regulatory
    requirements, the RTI staff input regulations into tables using word
    processing software. The tables were organized by subject category
    (e.g., ``Exemptions'') and visually reviewed for comparability. The
    meat regulations were left essentially intact, and poultry regulations
    were electronically matched with the appropriate meat regulation. Any
    meat or poultry requirement not having a similar counterpart
    requirement was therefore also identified. Accordingly, the regulatory
    requirements in each subject category are separated into two pans
    (e.g., the subject category ``Exemptions'' is broken into ``Exemptions
    [Part I]'' and ``Exemptions [Part II]''). Part I contains the meat and
    poultry requirements win comparable counterparts, and Part II contains
    the meat and poultry requirements without comparable counterparts.
    Identify and Classify Differences of Comparable Meat and Poultry
            Regulatory Requirements (Part I)
        Comparable meat and poultry requirements in each category were then
    reviewed and their differences identified. If there were no differences
    (i.e., the regulatory requirements were identical), the meat and
    poultry counterparts were identified as ``same'' and no further
    consideration was given. If differences existed, but the burden on the
    producer for such differences was deemed insignificant, the meat and
    poultry counterparts were identified as ``minor'' and no further
    consideration was given. If differences existed that were deemed
    significant, then they were summarized and listed in the table.
        For the meat and poultry counterparts with significant differences,
    a classification was then made as to the ``basis for differences.'' Any
    notes or explanations germane to the differences were also included for
    informational support. The bases for differences were classified in the
    following order:
        1. Statutory.--RTI examined the United States Code (primarily 21
    U.S.C. Sec. 451-Sec. 470 and Sec. 601-Sec. 695) to determine whether
    each significant difference identified was based firmly on differences
    in the statutes. If it was, we noted this fact and gave the U.S. Code
    citation reference. No further consideration was given to regulatory
    differences based on statutory differences.
        2. Inherent Specie or Technical Differences.--Significant
    regulatory differences between species without a clear basis in
    statutory differences were further assessed to determine any inherent
    specie or technical-related basis for the differences. Inherent specie
    differences (e.g., size, weight, age, type/severity/susceptibility of
    disease, etc.) or variations in safety, inspection, slaughter,
    processing, or labeling due to inherent specie differences were the
    primary bases identified. RTI applied a ``general acceptance'' rule in
    making these determinations. If we judged that objective and
    knowledgeable professionals would generally agree that a regulatory
    difference can be based on one or more inherent differences in specie-
    related food safety and/or production methods, we stated so. No further
    consideration was given to differences of this type.
        3. Other Reasons or Unknown.--For significant differences without
    apparent statutory, inherent specie or technical basis, other reasons
    for the differences were explored. The primary reasons identified were
    traditional or historical industry practices that were codified into
    the regulations as the two industries grew and developed. Institutional
    and operational agency bases for differences were also identified. If
    no clear basis for a significant difference between meat and poultry
    regulatory requirements could be identified, then we so noted (e.g.,
    response of ``unknown'').
    Classify the Basis for Non-Comparable Meat and Poultry Regulatory
            Requirements (Part II)
        For non-comparable meat and poultry regulatory requirements, no
    differences exist to identify or classify. Instead, for these
    requirements we classified the ``basis for no comparable regulation.''
    We followed the same evaluative format as was done for comparable meat
    and poultry regulatory requirements to determine their ``basis for
    significant differences.'' In other words, the ``basis for no
    comparable regulation'' was identified as (1) Statutory, (2) Inherent
    Specie or Technical Reason, or (3) Other Reasons or Unknown.
        It should be noted that the essential question being answered for
    non-comparable meat and poultry requirements is much different than the
    question being answered for those meat and poultry requirements that
    are comparable. Namely, identifying the ``basis for no comparable
    regulation'' (or the reason why there is no meat/poultry counterpart)
    is not the same as identifying the ``basis for differences.'' There
    exist no requirements for which to identify differences. Thus the
    choice of evaluative bases (1), (2) or (3) for non-comparable
    requirements will not necessarily be the same as when they are being
    chosen for comparable requirements.
                                     ______

                        Memorandum From Terry L. Medley
    To: Patricia Jensen, Acting Assistant Secretary, Marketing and
        Inspection Services
    From: Terry L. Medley, J.D., Acting Administrator
    Subject: Comparison of Meat and Poultry Regulations

        In response to complaints from industry, some of them long-
    standing, that the Agency is ``not regulating meat and poultry
    equitably,'' FSIS contracted out to Research Triangle Institute (RTI) a
    comparison of the meat and poultry regulations. The report (see last
    tab) found many differences in the two laws and narrowed down to 12 the
    areas of the law in which they believed there were significant
    differences in the regulations.
        The Agency (after combining two of the areas to simplify
    presentation and analysis), has studied these areas of the law to
    determine whether, in the actual conduct of inspection, they result in
    an inequitable application of the inspection laws, and, if so, what
    might be done to mitigate the inequities. The attached paper contains
    the FSIS analysis of the RTI results and some options for your
    consideration.
        Although in this effort the Agency's primary focus has been on
    equity, it has also had to consider the underlying purpose of the laws
    to assure that all proposed options meet the Department's
    accountability for effective meat and poultry inspection as well as for
    an equitable application of the law. As indicated in Figure 1 there
    were problems in four areas with how well the Agency was meeting the
    underlying objectives of the law, and in one of those areas, there were
    both effectiveness and equity problems. FSIS has assumed in its
    analysis that the Agency's responsibility is, first, to assure the
    objectives of these laws are being effectively met, and, second, to
    make the enforcement of the laws as equitable as possible.
        The analysis helps to clarify the meaning of ``equity'' as an
    Agency regulatory responsibility and why there is an appearance of
    inequity in many instances where actual inequity does not exist. The
    following factors contribute to the appearance of inequity where none
    may exist:
      --Some differences in the law are justified by the fact that the two
            industries deal with different animals and have different
            production processes.
      --Some laws may be stated differently, but in application are
            enforced to the same objective.
      --Laws for market protection were designed to protect the markets
            within each industry, not between them. These laws use industry
            standards, and the Agency has no authority to reconcile those
            standards between industries.
        Time has obscured the differences in the way the laws originated
    for regulation of these two industries. Many enforcement standards in
    the meat laws were generated to protect against changes in certain meat
    products or bring about desired changes in meat production processes.
    When the poultry laws were passed at a much later date, many of those
    changes were already an accepted part of industry practice and were not
    specified in the law. In most of these areas, the Agency has not
    interpreted the differences in the law to reflect an intended
    difference in objectives and has tried to enforce the law to the same
    end in both industries. Thus, this analysis, in looking at Agency
    practice as well as the laws themselves, has found that not all
    differences in the laws result in inequitable regulation.
                                     ______

    ----------------------------------------------------------------------------------------------------------------
                                                                              Status of Enforcement
                                                           ---------------------------------------------------------
                    Tab/Area of regulation                                                             Effectiveness
                                                             No inequity  Inequity \2\  Effectiveness   and inequity
                                                                 \1\                     question \3\   question \4\
    ----------------------------------------------------------------------------------------------------------------
    1. Mechanically separated product.....................  ............  ............  .............             X
    2. Humane slaughter...................................             X  ............  .............  .............
    3. Use of skin........................................             X  ............             X   .............
    4. Standards of composition or identity...............             X  ............  .............  .............
    5. Sanitation.........................................             X  ............  .............  .............
    6. Slaughter inspection modernization.................  ............             X  .............  .............
    7. Cooking/Heating temperatures.......................             X  ............  .............  .............
    8. Removal of contamination...........................  ............             X  .............  .............
    9. Carcass chilling procedures: moisture limitations..  ............  ............             X   .............
    10. Exemptions........................................  ............             X  .............  .............
    11. Processed Products: moisture limitations..........             X  ............             X   .............
    ----------------------------------------------------------------------------------------------------------------
    \1\ Differences in regulations where no inequity was found in the application of the law.
    \2\ Differences in regulations where an inequity was found in the application of the law.
    \3\ Differences in regulations which raise a question as to whether the law is being enforced as effectively as
      possible.
    \4\ Differences in regulations which raise both a question of inequity and effectiveness.

                         mechanically separated product
    I. Issue
        Mechanically Separated (Species) (MS[S] \1\)--a meat food product--
    is strictly regulated as to its preparation, composition, usage, and
    labeling; mechanically deboned poultry (MDP) is not. These differences
    raise two policy issues. The first is whether current regulations are
    adequately protecting consumers. The second is whether different
    regulatory treatment for these similar substances is justified. The
    meat industry claims, and has sued the Department on this point, that
    differences in USDA regulations are unjustified.
    ---------------------------------------------------------------------------
        \1\ Mechanically Separated (Species) is a generic term. Specific
    products would include Mechanically Separated Beef, Mechanically
    Separated Pork, etc. Originally, this product was known as Mechanically
    Deboned Meat. Other names have been used or proposed over the years.
    For simplicity, this paper uses only the current term.
    ---------------------------------------------------------------------------
    II. Background
        ``Mechanical Separation'' and ``Mechanical Deboning'' are methods
    of using machinery to separate tissue from meat and poultry bones to
    produce a very finely ground substance which contains bone, bone
    marrow, and certain minerals as well as muscle tissue. Before this
    relatively recent innovation, it was not economically feasible to use
    these tissues in meat and poultry products.
        Mechanically Separated (Species) became the subject of consumer
    criticism in the mid-1970's after USDA proposed, in order to equate
    meat with poultry policy, to allow its use in meat products and let
    processors label it as beef, pork, etc., without qualification to
    explain that it was not exclusively muscle tissue. This criticism led
    to a lawsuit in which the court found that MS(S) was not ``meat''
    within USDA's regulatory definition and that it was an added substance
    which must be identified in the product label ingredient list.
        After the lawsuit, USDA undertook to resolve three consumer
    protection issues raised by mechanically separated products.
      --Does the product present inherent health hazards?
      --Is the product a unique ingredient that should be identified
            separately to distinguish it from ``beef,'' ``pork''
            ``chicken,'' etc.?
      --Should use of the product be limited, i.e., should it be restricted
            to a certain percentage of the foods in which it is used?
        As to the first point, scientific studies established no unique
    health risks associated with the mechanical separation technique.
    However, it was determined that MS(S) is sufficiently different from
    muscle tissue meat in consistency and composition to require separate
    labeling. Usage limitations were also found to be necessary.
        These findings led USDA to issue extensive regulations in 1978
    which set preparation, composition, usage, and labeling constraints for
    MS(S) and required that it be produced only under a strict quality
    control program to be approved by the Agency. This rule assigned a
    definition and standard of identity for MS(S) which necessitated it be
    listed separately from meat in the ingredients statement of food
    product labels and on the principal display panel.
        Additional rulemaking in 1982 reaffirmed the Department's position
    that MS(S) was not ``meat.'' USDA further determined it was sufficient
    for processors to declare this substance in the product ingredient
    statement unless its use altered basic product characteristics, in
    which case it had to be identified on the principal display panel.
        During this same period, MDP underwent product development
    separately from MS(S) without USDA regulation. Early distinctions in
    regulatory treatment were largely due to historical differences in how
    the two industries used these products and the way in which they came
    to public attention. One significant difference is that MS(S) was being
    considered for use in products that had previously contained only
    muscle meat.
        The use of MDP in poultry hotdogs created less controversy. Poultry
    hotdogs did not exist before they were made with this substance, and
    consumers had no prior expectations about the formulation.
    Nevertheless, the same consumer protection issues were applicable to
    MDP. USDA, during its 1982 rulemaking for MS(S), promised to establish
    similar rules for the regulation of MDP at a later date. In 1983, the
    Agency developed, but did not publish in the Federal Register, a
    proposed regulation for MDP that paralleled the existing MS(S) rule.
    Continuation of the differences in regulatory treatment of MS(S) and
    MDP since that time has been attributable to decisions made at
    political levels in the Department. The effect of those differences has
    been a reluctance for processors to use MS(S) while MDP use has
    expanded.
        For example, the meat industry has not used much MS(S) in product
    formulations. It claims that consumers will not buy products if they
    see MS(S) on the label. Similarly, the poultry industry claims that if
    they had to label MDP as a poultry hotdog ingredient, consumers will
    think the product has changed and they would stop buying it. FSIS has
    no information to verify these assumptions. FSIS has no information to
    show how much attention consumers pay or will pay to ingredients
    statements on a label. There is some question as to whether consumers
    know what mechanically separated/deboned products are.
        If, as the two industries contend, people will not buy a product
    when its ingredients are accurately listed on the label, the current
    regulations requiring disclosure for MS(S) are clearly needed and
    consideration should be given to requiring MDP labeling as well.
    Additional health issues concerning MDP also need further analysis.
        Earlier studies concluded there are no unique health risks in the
    use of mechanically separated product when it is used as an incidental
    ingredient in meat food products. This finding does not necessarily
    extrapolate to MDP which is frequently the main ingredient in poultry
    products. Known issues such as the calcium and cholesterol content of
    MDP will be resolved when nutrition labeling regulations take effect.
    Some evidence exists that the meat industry is getting around USDA's
    extensive MS(S) regulatory requirements by adding MDP to meat food
    products in what are now allowable proportions of ``poultry.''
        In recent developments, the Agency has been sued by several sausage
    manufacturers who have argued that imposing labeling requirements on
    MS(S) while not imposing similar requirements on MDP is inconsistent
    and inequitable. In response to this lawsuit, FSIS issued an Advance
    Notice of Proposed Rulemaking (ANPR) in June 1993. The ANPR solicited
    comments, information, scientific data, and recommendations regarding
    the need for labeling poultry products produced by mechanical deboning
    and products in which MDP is used. Over 2,700 responses were received.
    A little over half the comments favored labeling of MDP, while the
    remainder did not. No compelling health and safety issues were raised,
    leaving what is substantially a consumer protection issue wrapped in
    the cloak of an economic controversy.
        Because of the response to the ANPR, on March 3, 1994, FSIS
    published another ANPR seeking public comments on the Agency's
    tentative positions in pursuing the development of a proposed rule on
    the definition and labeling of poultry products produced by mechanical
    deboning and also by a more advanced mechanical separation system. A
    proposed rule was also published by FSIS on that date regarding meat
    products separated by mechanical means more advanced that the previous
    method of producing MS(S). This proposed rule declares products
    produced through the use of advanced separation machinery as ``meat''
    without use limitations or specific labeling. Advanced meat/bone
    separation machinery and recovery systems do not crush, grind, or
    pulverize bones to remove tissue from carcasses. Such operations must
    be conducted under a USDA approved QC program. This proposed standard
    would not affect the current standard for MS(S).
        FSIS received 108 comments on the ANPR regarding MDP and 28
    comments on the proposed rule regarding use of advanced separation
    systems for the production of meat. In compliance with a court order to
    decide the outcome of these issues, FSIS anticipates issuing a proposed
    rule on MDP and a final rule on the production of meat through use of
    advanced separation systems in August 1994.
    III. Options
        1. Propose regulatory requirements for MDP which are comparable to
    those for MS(S)
        2. Maintain existing regulatory differences in the treatment of
    MS(S) and MDP.
        3. Reassess how USDA should regulate both MS(S) and MDP in light of
    the new nutrition labeling requirements.
                                humane slaughter
    I. Issue
        Federal meat inspection regulations contain substantial provisions
    to govern the humane slaughter of livestock They provide for the
    characteristics of livestock pens, driveways, and ramps; descriptions
    of approved methods of slaughter; and procedures for tagging equipment
    and facility hazards that could lead to the inhumane treatment of
    animals.
        Federal poultry inspection regulations also require the humane
    slaughter of poultry. The applicable regulation simply states that
    poultry will be slaughtered in accordance with ``good commercial
    practices'' and that birds must have ceased breathing prior to carcass
    scalding.
        These differences in regulations reflect the fact that the statute
    for meat inspection contains specific requirements for humane slaughter
    of livestock, but the poultry inspection statute is silent on humane
    slaughtering.
        It has been suggested that the differences in these regulations are
    resulting in an unjustified economic advantage for the poultry
    industry.
    II. Background
        Humane slaughter regulations have two objectives: the avoidance of
    unnecessary psychic or physical pain to the animal, and the avoidance
    of harm to human beings or animals that could result from the behavior
    of an excited animal. These objectives are more easily (i.e.,
    technically and economically) accomplished with small animals like
    chickens and turkeys than they are with relatively large animals like
    hogs and cattle. This and the different timing of the passage of the
    meat and poultry statutes probably account for the differences in the
    statutory approach to humane treatment. Greater regulatory
    specification was needed for livestock to help USDA enforce FMIA
    statutory requirements that amounted to a considerable economic
    investment for the producers that did not already meet them. By the
    time the poultry inspection statutes were passed, appropriate humane
    treatment practices were already established in the industry, and
    Congress accepted them without including them in the legislation.
        FSIS enforces humane slaughter practices in both the meat and
    poultry industry through facilities and equipment approvals and through
    in-plant inspection. Although not required by regulation, the slaughter
    process used by most poultry processors is parallel to that used for
    livestock, i.e., birds are stunned before they are killed. Other
    poultry producers, like meat producers, use ritual slaughter methods
    authorized by the law. Therefore, the Agency does not require
    additional regulations or a new law for the poultry industry to meet
    humane slaughter objectives or to correct an inequitable economic
    advantage for the poultry industry.
        Congress passed up at least three opportunities (in 1958, 1967, and
    1978) for enacting humane slaughter requirements for poultry parallel
    to those for meat. However, the increased interest in animal welfare
    has generated new interest from Congress in animal welfare legislation.
    One bill, H.R. 649, titled the ``Humane Methods of Slaughter Act of
    1993,'' introduced by Congressman Jacobs (D-IN), would provide
    slaughter requirements parallel to those for livestock Specifically,
    the new law would specify that poultry be ``rendered insensible to pain
    by electrical, chemical, or other means that is rapid and effective
    before or immediately after being shackled or otherwise prepared for
    slaughter.''
        USDA has taken a neutral position on the Jacobs bill. It has found
    no reason to oppose this legislation, but, at the same time, has no
    evidence that a new law is necessary to correct inhumane handling
    conditions in the poultry industry.
    III. Opinions
        1. Ignore the issue. The Department can ignore this issue on the
    basis that (a) different regulatory specifications are appropriate for
    different species, (b) USDA is presently meeting its responsibility
    with respect to humane slaughter, (c) FSIS is applying the law
    equitably to meat and poultry, and (d) there is no economic advantage
    accruing to the poultry industry as a result of the way the laws are
    specified.
        2. Support new legislation. Alternatively, USDA could support new
    legislation for humane poultry slaughter that is parallel to that for
    livestock New legislation for poultry would provide a regulatory
    standard which would help FSIS settle disputes if it finds a plant is
    not using industry-accepted standards. New legislation, like H.R. 649,
    would not have a significant economic impact upon the poultry industry
    because most establishments are already using methods required by the
    bill.
                                  use of skin
    I. Issue
        USDA regulations permit the addition of detached skin to poultry
    products at levels ranging from 8 percent for raw boneless turkey
    thighs to 25 percent for cooked chicken rolls. Poultry processors are
    not required to label skin as a separate ingredient unless the amount
    added exceeds natural proportions of the bird species used, as defined
    by USDA regulations.
        Detached skin may not be added to meat food products. This
    restriction is based upon the regulatory definition of ``meat,'' which
    is described as skeletal muscle tissue ``with or without the
    accompanying and overlaying fat, and the portions of bone, skin, sinew,
    nerve, and blood vessels which normally accompany the muscle tissue and
    which are not separated from it in the process of dressing.'' [emphasis
    added]
        It has been suggested that the difference in these regulations
    gives an economic advantage to the poultry industry.
    II. Background
        The difference in the treatment of poultry and livestock skin in
    USDA regulations probably is attributable to the fact that poultry skin
    has customarily been considered to be part of the bird that may be
    eaten, while livestock skin has not customarily been used for food,
    except for specialty products such as ``popped'' pork rinds.
        The regulatory definition of meat actually permits a natural level
    of skin to be left on the carcass, but few processors choose to do so.
    Thus, the interest in detached skin must indicate that the meat
    industry would like to use detached skin a ``disguised fashion,'' as
    the poultry industry does, as a substitute for muscle meat. Therefore,
    judging whether or not there is an inequity requires that we explore
    the two industries' positions within the total context of their
    opportunity to substitute cheaper meat or byproducts for skeletal
    muscle meat, not just for their opportunity to use detached skin.
        Although detached skin may not be added to meat products, attached
    skin and other muscle tissue components are allowed. These include beef
    cheek meat, head meat, and heart meat. Further, products such as
    frankfurters may contain a substantial proportion of meat by-products
    and fat. The amount of fat is not contained in the ingredient
    statement. Conversely, only poultry hearts, gizzards, and livers may be
    added to poultry products. It is thus difficult to contend that the
    difference in regulations with respect to detached skin leaves the meat
    industry without an equal opportunity to substitute cheaper products
    for skeletal muscle meat.
        The issue that FSIS should be considering is whether the use of
    non-skeletal muscle tissue substitutes is adequately communicated to
    the consumer whose expectation is that ``meat'' and ``poultry'' are
    essentially skeletal muscle tissue products.
    III. Options
        1. Maintain status quo. Use of skin is not the central issue.
        2. Require that use of detached skin be shown in the ingredient
    statement of all meat and poultry products.
        3. Initiate a study of whether the consumer has adequate
    information on all products in which cheaper meat and poultry
    components are substituted for skeletal muscle meat.
                      standards of composition or identity
    I. Issue
        Some meat products have a poultry ``counterpart.'' For example,
    chili with beef is paralleled by poultry chili, meat stew by poultry
    stew, and so on. Although these products may be quite similar except
    for their livestock species or poultry content, USDA standards of
    composition or identity \2\ for poultry products may require a
    different percentage of poultry than the same-named meat version
    requires of meat.
    ---------------------------------------------------------------------------
        \2\ Standards of composition and standards of identity are the two
    types of food standards. Food standards are used as labeling mechanisms
    by both the meat and poultry statutes. Food standards are product names
    used to protect products whose makeup and composition has been
    established by industry practice by requiring similar products that
    differ slightly in recipe to use a different name. Standards of
    composition identify the minimum amount of meat or poultry required in
    a product recipe. Standards of identity, on the other hand, set
    specific requirements for a food's make-up: the kind and minimum amount
    of meat or poultry; maximum amount of hit or moisture; and any other
    ingredients allowed. Therefore, one might consider these standards as
    ``content and labeling requirements.''
    ---------------------------------------------------------------------------
        For example, ``beef stew'' must contain at least 25 percent beef
    computed on the weight of fresh meat. Poultry stew, on the other hand,
    must contain 12 percent cooked deboned poultry of the kind used. In
    this example, standards of composition are computed for raw meat (which
    will be reduced in weight by processing) while poultry standards are
    based upon cooked poultry (which has already been reduced in weight by
    processing). Thus, the real difference between these products is much
    less than appears from the percentage alone.
    II. Background
        Both the Federal Meat Inspection Act (FMIA) and the Poultry
    Products Inspection Act (PPIA) permit the Secretary to issue food
    standards to protect markets from products which have standard names
    but have less than the commonly expected ingredients and thus compete
    unfairly with properly labeled foods.
        To accomplish that statutory goal, the Agency bases all of its
    regulatory standards of composition or identity on pre-existing
    industry recipes and consumer expectations. For example, poultry stew
    existed as a standard industry product prior to 1957 when mandatory
    Federal inspection of poultry began. That recipe was adopted by USDA as
    a standard. Beef stews, which have been under Federal inspection since
    1906, have traditionally been formulated in an entirely different
    manner, and they have a different USDA standard.
        The following evidence refutes the assertion that the different
    standards for ``same-named'' items represent an inequitable application
    of the law.
        First, meat and poultry products with identical names are not the
    same foods, and we have no evidence that consumers see them as
    interchangeable. In the marketplace, products tend to compete more
    within their type than across species. For example, a consumer who is
    shopping for chicken stew may compare a national brand with a store
    brand but would not necessarily consider a beef alternative. In any
    case, the standards are each ``industry's'' standards and USDA has no
    authority to reconcile the two standards as an end in itself.
        Second, differences between the standards of composition for meat
    and poultry products are to some extent accounted for by different
    methods of computing percentages. Apparently higher amounts of meat
    vis-a-vis poultry in same-named products would be largely offset by a
    weight reduction of approximately 30 percent as the meat product is
    processed. This natural reduction brings the percentage of meat and
    poultry in like products to a comparable level. Furthermore, red meat
    contains more fat than poultry and more may be needed in a formulation
    to reach an expected protein content.
        Third, although historically USDA has been a gatekeeper at the
    marketplace door, setting product standards of composition that control
    and, in some respects limit competition, the role of food standards has
    been questioned in today's market. Food standards were originally used
    to make simple distinctions in the quality of a product type, for
    example to distinguish preserves from jelly and mayonnaise from salad
    dressing. As the food processing industry has grown, the number of
    products in various food categories has increased enormously, and the
    public has changed its taste for certain ingredients. Established; food
    standards are increasingly looked upon as preserving some markets at
    the expense of desirable innovations and consumer interests, and
    therefore, their future as a viable regulatory tool is in question.
    III. Option
        Maintain status quo. Meat and poultry product standards of
    composition are generally comparable at present with most differences
    accounted for by historical differences in formulation, separate
    methods of computing percentages, and consumer expectations.
                         sanitation--water temperature
    I. Issue
        The meat and poultry regulatory requirements on the use of hot
    water in sanitization differ in that the meat regulations specify how
    hot the water must be, while the poultry regulations do not. Both the
    National Livestock and Meat Board and the American Meat Institute have
    suggested in papers submitted to FSIS that this is economically
    advantageous to the poultry industry. The organizations have not,
    however, submitted data supporting their assertions or explanations of
    a specific inequity.
    II. Background
        The Federal meat inspection-regulations require the use of 180
    deg.F. water or approved chemicals for cleaning floors, walls,
    inspection equipment, and other equipment that have become contaminated
    through contact with diseased carcasses. In addition, butchers and
    others who handle diseased carcasses and parts are required to use
    water heated to 180  deg.F. or approved chemicals for the cleaning of
    knives and implements.
        The poultry products inspection regulations do not prescribe a
    particular temperature for water needed to clean floors, walls,
    inspection equipment, or other equipment that may have become
    contaminated by diseased carcasses. Industry practices would make such
    a requirement difficult to implement. Presently, the poultry industry
    is required to sanitize all evisceration equipment after each bird is
    opened.
    III. Options
        1. Amend the poultry regulations to require use of 180  deg.F.
    water for cleaning equipment and facilities that have contacted
    diseased carcasses.
        2. Make no changes. There is no demonstrable reason to amend
    regulations, with respect to the temperature of water used for surfaces
    that may contact diseased carcasses.
        3. Broaden the issue beyond diseased carcasses--undertake a review
    of the need to specify water temperature requirements for purposes of
    dealing with microbiological contamination.
                       slaughter inspection modernization
    I. Issue
        Current regulations provide for the use of statistical quality
    control procedures known as Finished Product Standards (FPS) for
    inspecting young chickens and turkeys that are inspected using
    slaughter quality control inspection systems. FPS are applied by plant
    employees to determine if the production process is under control, and
    the use of FPS is monitored by FSIS inspectors. The use of FPS in the
    newest inspection processes represents the Agency's intention to
    modernize inspection by (1) focusing on process control rather than
    product compliance, and (2) having plant employees apply the systems
    that control the production process and FSIS inspectors monitor the
    plant's application of those systems.
        FPS allows plants more control over their line speed. The question
    arises whether the meat industry is being unfairly disadvantaged by not
    having FPS procedures available to it.
    II. Background
        FPS have been developed as part of the inspection modernization
    needed to accommodate changes in the poultry industry, which has
    evolved and grown significantly in the last few decades. Vertical
    integration in the poultry industry has resulted in a high degree of
    uniformity among young chickens and made it possible to increase the
    efficiency of production lines. Inspection modernization has,
    therefore, been occurring in some areas of the poultry industry since
    the early 1980's, and along with it, the use of statistical procedures
    to control process.
        Because of the lack of integration in the red meat industry and the
    correspondingly lower degree of uniformity among red meat animals,
    inspection modernization has proceeded at a slower pace than in the
    poultry industry. Even so, the cattle industry and the pork industry
    have developed to the point where in the professional opinion of Agency
    experts more efficient inspection systems that use statistical quality
    control procedures, to control process such as FPS, can be introduced.
    The Agency attempted to do this in 1988 by proposing rules for the
    streamlined Inspection System for Cattle, which included FPS. The
    system had been tested for some years and was found by an independent
    team of experts and the National Academy of Sciences to be technically
    satisfactory. However, the proposal was withdrawn in 1992 in response
    to political pressure, leaving the industry without FPS. (It has been
    alleged that the Government was ``turning inspection over to
    industry.'') In the judgment of Agency experts, however, statistical
    quality control procedures, such as FPS, can be implemented effectively
    in the meat industry and are likely to be a component of future
    inspection systems.
    III. Options
        1. Take no action. There is no feasible way to mandate the use of
    FPS in the livestock industry independent of the Agency's present,
    broader effort to modernize livestock inspection by designating sorting
    and system monitoring responsibilities based on solid scientific data.
        2. The Agency, through HACCP and Agency guidelines, can encourage
    the development and use of FPS by the industry on a voluntary basis.
                          cooking/heating temperatures
    I. Issue
        Generally, FSIS' policy is that products represented as being
    cooked must in fact be cooked to a temperature with associated time
    duration sufficient to destroy pathogenic organisms that may be
    present. The RTI study noted that cooked poultry products must be
    cooked to an internal temperature of 160  deg.F. whereas only a few
    meat food products must be cooked to a specified--generally much lower
    than 160  deg.F. minimum temperature.
    II. Background
        All cooked poultry products must be cooked to an internal
    temperature of 160  deg.F., except for certain partially cooked
    products labeled as such and cured products which must be heated to a
    minimum internal temperature of 155  deg.F. (9 CFR 38.150). Because of
    the widely acknowledged presence of salmonella and other potentially
    harmful bacteria in fresh poultry, the requirement for a minimum
    cooking temperature is generally accepted by the industry, and 160
    deg.F. is an accepted industry standard.
        Unless labeled as ``baked,'' there is no minimum cooking
    temperature for meat food products generally. If ``baked,'' a meat
    product must be cooked to 160  deg.F. unless it is a pork product,
    which must be heated to 170  deg.F. (9 CFR 37.8(b)(10)). Otherwise,
    only the following three meat products have minimum heating temperature
    requirements:
        1. Pork products that may appear to have been cooked must be heated
    (or treated in one of the other specified ways) to destroy trichinae.
        2. Cooked Roast Beef or Corned Beef must be cooked in accord with a
    time-temperature chart, with temperatures permitted as low as 130
    deg.F. for an appropriate duration to destroy salmonella.
        3. Cooked, uncured meat patties must be cooked in accord with a
    time temperature chart, with temperatures permitted as low as 151
    deg.F. for an appropriate duration to kill a variety of pathogenic
    bacteria (e.g. salmonella, E. coli 0157:H7 and Listeria Monocytogenes)
    associated with undercooked or mishandled hamburgers.
        Although there are only three regulations on point, Agency labeling
    guidelines, which supplement the regulations, among other things
    provide that ``ham commodities'' are ``completely cooked'' at 158
    deg.F. Also, a recent Agency policy statement, comparing prescribed
    cooking temperatures at Federally inspected establishments with those
    recommended for retailers/restaurants/institutions and for household
    consumers, generally recommends higher cooking temperatures by
    retailers, etc., and consumers-where product has been handled more and
    there are generally fewer controls to prevent contamination or growth
    of any bacteria that may already be present.
        All the minimum cooking temperatures and time-temperature cooking
    charts were established by notice-and-comment rulemaking on the basis
    of the best data available to the Agency. The Agency is receptive to
    petitions for amending its technical regulations if new data
    demonstrate the current regulations should be changed. The Agency has
    received no such petitions on cooking temperatures.
        There appears to be no basis for asserting that our regulations
    unfairly benefit one industry over the other.
        This issue must be viewed in the context of heightened public
    concern about pathogens in inspected products because of the E. coli
    0157:H7 outbreak from hamburger earlier this year and because of
    lingering suspicions about poultry from the allegations on CBS' 60
    Minutes a few years ago.
    III. Options
        1. Take no action. This would be justified on the basis that these
    are duly promulgated food safety/public health requirements grounded on
    the best available scientific data. The burden is on those who would
    change these requirements to provide data showing that the change
    advocated will improve food safety or provide the same level of public
    health protection if the change is intended to reduce demonstrable
    adverse impacts on the industry.
        2. Undertake a study, in the context of our Pathogen Reduction
    Program, to reassess the scientific data that relates cooking
    temperatures to destruction of pathogenic organisms on all cooked
    product, and recommend regulation changes accordingly. The results of
    such a study would not necessarily affect the balance between
    temperature requirements in the two industries.
                            removal of contamination
    I. Issue
        Meat and poultry carcasses contaminated with ingesta or fecal
    material are considered adulterated and are to be condemned unless,
    under inspectors' supervision, they can be reprocessed to remove the
    contamination. While beef carcasses can only be trimmed, poultry
    carcasses may be trimmed or washed. The beef industry asserts that
    trimming, as applied, is inconsistently imposed, and leads to
    unnecessary loss of product, a problem the poultry industry largely is
    spared.
    II. Background
        The Poultry Products Inspection Act provides for removal of
    contamination (``reprocessing''). The regulations prescribe the methods
    by which poultry carcasses can be reprocessed. Poultry must be removed
    from the line of production and washed or trimmed at an approved
    reprocessing station. To receive approval for a reprocessing station,
    the establishment must submit in writing to FSIS a description of the
    proposed reprocessing station, and the proposed equipment to be
    utilized. FSIS may suspend approval of a reprocessing station if it is
    found that contaminated product is not being properly reprocessed.
        This regulation was promulgated in 1978. Previously, both meat and
    poultry contaminants were removed by trimming alone. The 1978 rule was
    based on research conducted by USDA's Agricultural Research Service and
    the Food Safety and Quality Service, the predecessor of FSIS,
    supporting the industry's contention that poultry could be adequately
    reprocessed using the proposed alternative methods.
        Subsequently, the poultry industry and USDA have been criticized by
    consumer groups and others who contend that washing merely removes
    visible contamination, leaving behind invisible pathogens which still
    pose a food safety risk and contribute to the spread of such bacteria
    to other poultry carcasses later in processing.
        The Federal Meat Inspection Act does not specify how contamination
    must be removed from meat carcasses. The regulations provide that fecal
    material and other visible contaminants be ``. . . removed [from meat]
    in a manner satisfactory to the inspector.'' Agency policy has always
    been to require fecal material to be trimmed from meat carcasses.
        Recently, the meat industry and USDA have been criticized for not
    doing a better job of preventing bacterial contamination of red meat.
    This has led to FSIS' recent imposition of a ``zero'' tolerance for
    visible contaminants on red meat carcasses, more rigorous inspector
    oversight of trimming, and increased industry complaints about waste
    and lack of uniform enforcement.
        The Agency has recently given administrative approval for the use
    of organic acid solutions in ``pre-evisceration carcass sprays.'' These
    sprays are applied after hide removal and before evisceration to help
    reduce the likelihood of bacterial growth. A requirement for
    antimicrobial treatment, such as a spray, also is included in the
    proposed enhanced poultry inspection regulations. Inspection policy has
    been clear that these sprays are not to be used in lieu of trimming
    where fecal/ingestion contamination is suspected or other visible
    contaminants are present.
        Thus, the meat industry clearly loses more product to trimming than
    does the poultry industry. So, to the extent trimming is unnecessary,
    there is a compelling argument to be made for permitting alternatives
    to trimming for red meat carcasses.
        The question is, what is unnecessary trimmings Recent public
    concerns about microbiological contamination of meat and poultry argue
    that any increased flexibility permitted in procedures to remove
    contamination be amply supported by data.
    III. Options
        1. Rescind the current poultry regulations and limit reprocessing
    to trimming. Such action would surely be met with strong resistance by
    the poultry industry. However, those who have criticized the current
    regulations would be pleased.
        2. Amend the meat regulations to permit washing. This could reduce
    some losses borne by the meat industry and be met with a favorable
    response by industry.
        3. Announce the Agency is open to consideration of new methods for
    reprocessing carcasses and that the burden of providing scientific data
    for any changes to current policies is on those advocating such
    changes. The Agency is currently conducting research on appropriate
    methods of removing microbiological contamination. Agency policy on
    removal of contaminants will be influenced by the results of this
    research.
               carcass chilling procedures: moisture limitations
    I. Issue
        The Agency has long considered any weight gain in red meat
    carcasses attributable to added water to be ``economic adulteration''
    proscribed under the FMIA. This includes any water that may be added
    during carcass chilling. Poultry carcasses, on the other hand, are
    expressly permitted to gain as much as eight percent added water as a
    result of chilling by immersion in water.
        The red meat industry asserts this is grossly unfair. One industry
    estimate asserts that this equates to a greater than one billion dollar
    competitive advantage given to poultry over red meat.
    II. Background
        Both meat and poultry carcasses need to be chilled after the
    animals have been slaughtered to prevent growth of pathogenic and other
    bacteria, to which animal proteins are particularly susceptible, and
    degradation of the product.
        The poultry regulations expressly require chilling of poultry
    carcasses to 40  deg.F. within two to eight hours, depending on the
    size of the carcass. Although air chilling is permitted, immersion of
    poultry carcasses in ice and water has long been the industry practice
    in the United States. In promulgating poultry regulations to implement
    the 1958 PPIA, USDA started with the current good manufacturing
    practices in the industry. This included the rapid chilling of
    carcasses by immersion in ``chill tanks'' and accommodation of a
    reasonable amount of water absorption, which is considered unavoidable
    by that chilling process.
        The meat regulations have no express requirements for chilling of
    carcasses. Because of the size of the carcasses and the much larger
    volume of meat to exposed surface, immersion in water is not a
    practical method for chilling red meat carcasses. Air chilling of
    carcasses in large coolers has always been the industry practice.
    Because of the larger volume of meat to surface, it may require up to
    24 hours of refrigeration to get a carcass thoroughly chilled.
    Recently, the industry has developed a method of spraying carcasses
    during chilling to prevent loss of carcass weight due to dehydration.
    This is permitted by the Agency as long as there is no net increase in
    weight.
        In addressing this issue, the Agency must consider two objectives.
    The first is to assure that consumers are not being misled by the
    amount of water in the products they buy. The second is to assure that
    any regulation limiting water is applied equitably to the meat and
    poultry industries.
        The purpose of regulating water absorption in meat and poultry
    products is to avoid allowing the industry to unnecessarily increase
    the weight (and therefore the cost) of the product. What is
    ``reasonable'' water absorption for water-chilled poultry carcasses is
    difficult to define precisely. However, it is clear that the eight
    percent water absorption that is now the norm in the poultry industry
    was not anticipated as ``reasonable'' based on the three to eight
    percent range established in tests of the chilling process some years
    ago. There is evidence that producers have pushed chilling technology
    in the direction of ensuring the maximum allowable water gain instead
    of in the direction of reducing water gain.
        Changing regulations to permit no water gain in poultry would
    probably require significant changes in processing facilities and have
    a major economic impact on the industry and the price of poultry,
    perhaps gaining little for consumers over present regulations. However,
    on the basis of past tests of the water-chilling processing system, it
    is likely that reductions in the average absorption of water could be
    achieved with marginal changes in the process.
        While it is true that the poultry industry, under current
    regulations, has a better opportunity than the meat industry to deceive
    the public by putting unnecessary water in its product, this does not
    necessarily mean that the meat industry should be permitted to have
    more water in its carcasses. To meet its consumer protection
    objectives, the Department must keep added water in fresh meat and
    poultry as low as possible within the constraints of the available
    processing systems. If the processing systems differ, different limits
    on the amount of water are not necessarily inequitable. The meat
    industry does not use water chilling. Allowing no water absorption
    where no water is used or allowing water consonant with the amount used
    appears to be appropriate.
    III. Options
        1. Amend the regulations to further restrict added water in fresh
    poultry. This might be done in incremental stages. The industry would
    not consider this a reasonable alternative in view of their present
    production technologies.
        2. Amend the regulations to require some kind of label declaration
    when fresh poultry contains added water.
        3. Relax inspection requirements to permit some weight gain by red
    meat carcasses if the industry can show additional use of water is
    necessary during chilling.
                                   exemptions
    I. Issue
        Both the Federal Meat Inspection Act (FMIA) and the Poultry
    Products Inspection Act (PPIA) have provisions for various exemptions
    from inplant inspection. In some cases, the statutory exemptions are
    identical; in others they are different.
        The meat inspection regulations contain exemptions from Federal
    inspection for persons who slaughter livestock of their own raising,
    the custom slaughter of such livestock by another person or firm,
    slaughter and processing in any U.S. Territory (Guam, for example) for
    internal distribution and sale, processing operations of types
    traditionally conducted at retail stores and restaurants, meat
    processing at restaurant central kitchens, and the preparation of meat
    pizzas for service in public or private nonprofit institutions.
        Poultry inspection regulations contain the same exemptions from
    Federal inspection specified above plus additional exemptions for
    certain enterprises engaged in intrastate commerce only. Another
    difference in the two regulatory schemes is that poultry regulations
    contain a clear definition of what constitutes a ``poultry product''
    and is therefore subject to inspection. No parallel section exists to
    define an inspectable ``meat food product.''
    II. Background
        The 1906 FMIA included exemptions for farmers who slaughtered
    animals on the farm, for retail butchers, and for retail dealers in
    meat and meat food products. These exemptions were provided to poultry
    processors in 1957 with passage of the first mandatory poultry
    inspection statute. Authority to exempt certain products with a meat
    component was added in 1967 when the Wholesome Meat Act was passed. The
    same product exemption authority was extended to poultry a year later
    with passage of the Wholesome Poultry Products Act. The 1967 and 1968
    laws also exempted the custom slaughter of livestock or poultry and
    added new provisions for retail exemptions.
        In 1985, an exemption for restaurant central kitchens became law
    and in 1991 an exemption for certain pizza processors was passed. The
    last two exemptions are identical in statutory language and were
    implemented equally. However, the Wholesome Poultry Products Act
    contains additional exemptions for poultry processing which were not
    provided to meat processors by the Wholesome Meat Act. For example, the
    poultry statute and USDA regulations:
      --Include slaughter in the list of processing operations which are
            traditional and usual for retail stores and may be conducted at
            those locations without inspection.
      --Exempt the slaughter and processing of poultry by a producer on his
            own premises for intrastate distribution by the producer or
            another party.
      --Provide an exemption for slaughter and processing by a producer or
            other party on his own premises for direct sale to household
            consumers, hotels, restaurants, and similar institutions.
      --Exempt certain small enterprises slaughtering and/or cutting up
            poultry for intrastate commerce.
      --Provide a detailed description of what foods with a poultry
            component may be exempted from definition as a poultry product,
            which has the effect of exempting them from inplant inspection.
        Although the PPIA does not specifically exempt retail poultry
    slaughter, FSIS exemption regulations reflect a determination that the
    slaughter of poultry was, in 1968 when the Wholesome Poultry Products
    Act was passed, a traditional or usual operation conducted by retail
    operators and thus exempt from Federal inspection. Conversely, the
    slaughter of livestock for sale in commerce was not a traditional or
    usual retail operation in 1967 when the Wholesome Meat Act was passed
    and that has not been permitted.
        The next three poultry exemptions cited above are statutory. The
    FMIA contains no parallel authority for these exemptions and none can
    be allowed. Generally speaking, inspection is required unless a
    specific statutory exemption exists. Since the exemptions cited above
    for poultry are mandated by statute, USDA must grant them. Conversely,
    USDA may not grant parallel exemptions for meat operations because the
    FMIA does not sanction them.
        The remaining regulatory difference is that poultry regulations
    define exempt products and the meat regulations do not. Both the PPIA
    and the FMIA provide the Secretary discretionary product exemption
    authority for foods which (1) have only a relatively small proportion
    of meat/poultry or (2) items such as sandwiches which consumers have
    historically not considered to be products of the meat or poultry
    industry. The statutory clauses are virtually identical.
        The lack of meat food product exemption regulations which parallel
    the poultry product regulations is, however, a significant difference.
    Poultry processors may refer to USDA regulations for questions about
    whether a product is or is not subject to inspection based upon the
    percentage of poultry used in formulation. Meat processors must raise
    product exemption questions on a case-by-case basis with the Agency,
    which resolves them based upon policy precedents. In practice, however,
    meat and poultry processors make about the same number of individual
    inquiries concerning inspection or exemption regardless of the
    regulation.
        In 1991, USDA was required by Congress to conduct a study of
    existing meat and poultry product exemptions and of a prospective
    exemption for wholesale meat outlets which conduct ``simple''
    processing. These studies were conducted concurrently under FSIS
    supervision of a contract with the Research Triangle Institute (RTI).
    The RTI study concluded that USDA product exemptions based upon a low
    percentage of meat and poultry had been administered correctly.
    However, the study also found that product exemptions based upon
    consumer perceptions of whether the food was a product of the meat and
    poultry industry (for example, sandwiches) had not been consistently
    granted and that a review of all such exemptions presently in effect
    was warranted. RTI also found that so-called simple processing
    operations such as cut, grind, slice and repackage were not necessarily
    low risk and that a blanket exemption was not appropriate.
    III. Options
        1. Issue ``Meat Food Product'' exemption regulations. USDA has
    statutory authority to resolve the regulatory difference by issuing
    parallel regulations for meat processors. Although this option would
    resolve an administrative disparity, experience shows that it is not
    needed to correct a regulatory equity problem.
        2. The Exemptions Study has been completed and submitted to
    Congress. FSIS is considering further options based upon study
    findings.
                    processed products: moisture limitations
    I. Issue
        Processed products include products such as sausages, roasts or
    cured products prepared from one or more kinds of meat, added water,
    and/or other ingredients. The Federal meat inspection regulations
    restrict the amount of water that can be added to many such processed
    meat products, but the poultry products inspection regulations restrict
    the added water in few comparable poultry products.
        The meat industry suggests that the lack of comparable moisture
    limitations for the poultry industry gives that industry unfair
    economic advantage because the poultry industry profits by adding
    unnecessary water (and therefore weight) to products which compete with
    meat products in which unnecessary water is not allowed.
    II. Background
        Moisture limitation regulations were drafted not only to prevent
    consumers from being cheated by having unnecessary water (and thus
    weight) added to certain standardized meat products, but also to
    protect the industry's market. The Agency accepted the industry
    standards to determine when water was ``deceptive.'' Industry standards
    were designed to prevent degradation of the product by ``unfair''
    competitors and were not necessarily based on the minimum moisture
    technically possible.
        The differences between meat and poultry regulations with added
    water restrictions resulted from the differences in the industry and in
    consumer expectations. The meat products of concern here, which had
    some history of ``economic adulteration,'' generally had industry
    standards for moisture that the Department could use to determine when
    added water was deceptive. The poultry products of concern were mostly
    new products, without industry standards or demonstrable consumer
    expectations and about which no complaints had been made.
        Determining whether the differences in moisture content regulation
    between meat and poultry are appropriate requires consideration of two
    issues: (1) are deceptive practices with respect to added water in
    processed products in both industries being effectively controlled; and
    (2) is the law being applied equitably to both industries.
        The question raised is whether, under this kind of regulation,
    consumer protection is independent of or different from, industry
    standards. USDA meat regulations incorporate industry standards for the
    definition of ``deceptive.'' Thus, it could be concluded that poultry
    industry regulations, if they were promulgated, would likewise adopt
    prevailing industry standards to define ``deceptive.'' However, it
    appears that this issue is moot for poultry since the regulations do
    not limit moisture in processed poultry products at all. Therefore,
    FSIS regulations for poultry support neither the consumer protection
    nor the market protection objectives.
        Without regulations for poultry, it is not possible for the Agency
    to pursue consumer protection objectives, at any level, with respect to
    moisture in processed poultry products. This is not an industry equity
    issue, but an issue of Agency accountability to the consumer.
        Without regulations for poultry, it is also not possible for the
    Agency to protect the market for poultry products. This does not appear
    to be an equity issue between industries. The two inspection laws
    operate to protect product degradation within, not between industries.
    There is, however, a possibility of inequity if a meat product with
    regulatory limits on moisture content competes with a poultry product
    that has no limits. There is no evidence, however, that this was the
    purpose of these restrictions which appear to have had primarily a
    market protection, and only secondarily, a derivative consumer
    protection objective.
        If we take into consideration the empirical evidence of the need
    for consumer protection for processed poultry products, it should be
    noted that there are no complaints about these products from consumers.
    However, most of these products are new, and consumers are not
    necessarily well informed about the ingredients or their composition.
        If we take into consideration the empirical evidence of the need
    for market protection, it should be noted that in recent years, there
    has been increasing criticism of these kinds of regulations that
    protect one part of an industry's market at the expense of another part
    that wants to produce slightly different versions of a product that the
    consumer might want. There is a widespread belief that the role of
    regulators to protect the ``character'' of food products, either as a
    way of protecting industry or consumers, inhibits innovation and
    competition, and has outlived its usefulness.
        In recognizing how the changes in the processing industry have
    affected this kind of regulation, FSIS has adopted new regulatory
    approaches for some meat products. When it became apparent that some
    consumers prefer the increased ``tenderness'' that is achieved in
    products with relatively more water (such as ham), the Agency
    promulgated regulations to permit more than the traditional industry
    limits in these products as long as the added water is shown on the
    label. This approach has allowed the Agency to reconcile the two
    objectives of the moisture limit regulations in meat products. This
    approach would be appropriate for poultry products and would avoid the
    problem of determining what is ``deceptive'' under the dual objectives
    of these regulations.
    III. Options
        1. Promulgate regulations for processed poultry products to
    parallel those applying to the meat industry.
        2. Promulgate regulations requiring any added water in meat and
    poultry products to be shown on the product's label.
                    inspection process for canadian imports
        Question. I asked the question about bringing me through the
    process about Canadian meat coming into the United States. Could you
    please review this entire process for me?
        Answer. It is the job of FSIS to make sure that imported meat and
    poultry is produced under equivalent conditions and meets our
    standards.
    Principles of Import Inspection
        To ensure the safety of imported meat and poultry for American
    consumers, FSIS maintains a complex, comprehensive system of import
    controls. That system involves two major activities.
        The first is oversight to ensure that exporting countries have
    inspection controls equivalent to those of the U.S. This includes
    carcass-by-carcass inspection, which is required of all countries
    exporting to the U.S. Such countries must undergo a rigorous review
    process before they can become eligible to export meat and poultry to
    the U.S. Thereafter, they are reviewed annually by FSIS inspection
    personnel to assure they maintain equivalent standards.
        The second part of our import control process is reinspection on a
    statistical basis, of meat and poultry products as they are presented
    for entry to the U.S. Port-of-entry reinspection is a monitoring
    program to make sure that the foreign country's inspection system is
    working properly. All of these products have already been inspected by
    the approved inspection system in the country of origin.
        A country's overall inspection system must be equivalent to the
    U.S. system. To determine equivalence to U.S. inspection controls, we
    look at whether a country has the legal authority to impose
    requirements equivalent to ours. FSIS examines the organizational
    structure and staffing of the country's inspection program; and
    conducts an on-site review of the country's inspection operations,
    including facilities, equipment, laboratories, training, and individual
    establishments. Equivalent inspection, sanitation, quality, species
    verification, residue and microbiological standards must be codified in
    laws and regulations, and must be operating on a daily basis.
        In 1992, the U.S. conducted an exhaustive review of the Canadian
    inspection system and documented its equivalency, noting, in fact, the
    remarkable similarities between the two inspection systems. These
    similarities provide added confidence in Canada's meat and poultry
    inspection system.
        Part two of the import inspection system, port-of-entry
    reinspection, is a further monitoring of the effectiveness of the
    foreign country's inspection system. As I previously mentioned, meat
    products exported from Canada must first be inspected and passed by the
    Canadian system. Meat products are reinspected on a statistical basis
    at the U.S. port of entry by federal inspectors. Much of this product
    is further processed in the U.S., and subject to additional U.S.
    inspection in domestic plants. This includes products such as ground
    beef and carcasses, which generally are not sold to consumers in that
    form, but are made into other products in the U.S. under inspection.
    Therefore, these types of imported products are subject to more
    inspection than similar domestically produced products. First, it is
    inspected in the country of origin under an inspection system that is
    equivalent to that of the U.S. Next, a USDA import inspector at the
    border reinspects it. Then, it is subject to U.S. inspection when it is
    further processed. Finally, retail products are subject to checks in
    commerce by FSIS compliance officers.
    Inspection of Imported Meat from Canada
        In January 1989, the U.S.-Canada Free Trade Agreement took effect,
    calling for the removal of trade restraints between the two countries.
    The agreement encouraged free commerce in meat and poultry, but there
    were no specific provisions regarding inspection procedures.
        Because of the similarities in our respective inspection systems,
    Canada and the U.S. were committed to extending the same equivalency to
    systems for reinspecting imported meat. Over the years, we have revised
    some of the procedures for inspecting imports from Canada, and that
    inspection process is explained below.
        When a Canadian establishment is ready to ship product to the U.S.
    the plant must file an entry form with FSIS. Until recently, this was
    done through an Import Field office, but now the entry form is sent by
    facsimile to an FSIS import inspector at an official import inspection
    establishment. All of the import inspectors have computers, and the
    inspector enters the shipment information into the Automated Import
    Information System (AIIS), which allows us to track the shipment until
    it enters the U.S., and is presented for import reinspection.
        After the shipment has passed Canadian inspection and is certified
    for export to the U.S., it is transported by truck to the border. All
    Canadian meat shipments must stop at a FSIS border import inspection
    station to receive an assignment. The truck may proceed inland to
    complete the inspection, although almost all inspections occur at the
    border. We have nine main locations along the Canadian border where
    meat exports can enter.
        When the truck arrives at the FSIS import inspection station, the
    inspector goes to the computer and gets the specific reinspection
    assignment for that shipment. Up to this point, no one in Canada or the
    U.S. has any idea what type of reinspection will be assigned to the
    shipment. There are three possible types of inspection assignments.
        First is an ``inspect'' assignment. The computer system is
    programmed to randomly select imported shipments for monitoring. The
    truck will be unloaded at the border inspection facility, with the
    exception of red meat carcasses, and the inspector checks the
    documents, including the export certificate from the Canadian Food
    Inspection Agency to verify labeling, and perform all applicable
    reinspection tasks. Generally, for fresh product, such as carcasses and
    meat cuts, reinspection includes a product examination in which the
    inspector visually checks for defects and contamination. It may also
    include taking a sample to send to the laboratory to check for species
    identification and for residues such as drugs and pesticides. For
    processed product, including ground beef, it may also include checking
    net weight, condition of container, and laboratory analyses for
    species, microbiological contamination and food chemistry. Some
    products, such as ground meat, are subject to microbiological tests for
    E. coli 0157:H7. These products have undergone inspection in the
    Canadian system, which, like the U.S. system, continuously monitors
    slaughter and processing, and conducts the same visual and laboratory
    tests.
        The criteria used to determine whether a shipment meets our
    requirements and passes reinspection is the same for every country that
    exports meat to the U.S., and it is the same standard enforced in U.S.
    plants on domestically slaughtered and processed meat.
        In doing the ``inspect'' reinspection assignment, the inspector
    will randomly choose samples from throughout the shipment. Again,
    procedures are different for carcasses, which will be explained later.
    Inspectors are trained to retrieve random numbers from the computer, or
    another source if the computer is not available. Consequently, every
    container in the shipment has an equal chance of being selected for
    reinspection.
        The number of samples required for reinspection is in accordance
    with statistical procedures. That is, they are sufficient to give us a
    picture of the condition of the entire shipment. If the shipment passes
    reinspection, the documents are stamped, and the truck moves inland.
    Again, much of this product goes to domestic, federally inspected
    plants for further processing, where it is subject to inspection for
    the third time. If the product is going straight to the consumer, it
    must state the country of origin on the label.
        If the examination of the samples results in a rejection, the
    entire shipment is rejected, and the entire shipment must leave the
    U.S. The FSIS inspector enters these results in the computer, and the
    next 15 shipments of this same type of product from the same plant,
    equaling at least 15 times the weight of the rejected shipment, will be
    inspected regardless of where it enters the U.S. This is more
    restrictive for Canada than the other countries approved to export to
    the U.S. For other countries, it is only 10 consecutive lots that must
    pass reinspection. This is called ``intensified inspection'', and it is
    the second type of inspection assignment that a shipment can get at the
    border.
        The third type of assignment that shipments are subject to is the
    ``skip'' assignment. This means that the AIIS system did not select
    this shipment for hands-on reinspection. Overall, FSIS inspects about 1
    out of every 9 or 10 Canadian shipments. However, even for a ``skip''
    assignment, the inspector will have the doors of the truck opened and
    will look at the containers at the back of the truck, check the general
    condition of the product, ensure that the documents match the shipment,
    and verify the labeling. If the inspector notices anything wrong, the
    entire shipment may be unloaded and checked.
        Questions have been raised about reinspection procedures for ground
    beef, especially when it arrives in large containers. These shipments
    are subjected to product examinations. The inspector randomly selects
    samples, and visually examines the product. The AIIS may also assign
    laboratory samples for species identification, chemical residues and E.
    coli 0157:H7.
        Over the years, the Agency has strengthened inspection of all
    imported products significantly. However, there are areas we are
    continuing to improve. For example, we have implemented a modified
    approach for reinspecting Canadian red meat carcasses. This should
    increase everyone's confidence that carcasses are undergoing proper
    scrutiny. In the past, we have not required the unloading of the entire
    shipment of carcasses at the border for selection of samples and
    reinspection as we do for other imported products. However, the entire
    load of carcasses has been later unloaded at the destination plant in
    the U.S. and subject to domestic inspection at that point and during
    further processing. This strategy was tied to basic food safety rules,
    which tell us that the more a product is handled, the greater the
    chance of contamination and temperature abuse, which increases human
    health risks to consumers. Therefore, it was determined more prudent to
    unload and reinspect the entire carcass shipment at its final
    destination.
        Under the modified program, the Canadian Food Inspection Agency's
    meat inspectors were trained to select samples according to U.S.
    requirements, mark those samples, and assure they are loaded at the
    back of the truck. The truck is then sealed with a Canadian Food
    Inspection Agency seal. When the truck reaches the border, and the load
    is an ``inspect'' assignment, the FSIS inspector uses these randomly
    selected samples. Knowing that some people may continue to be concerned
    about having the Canadian inspectors select samples, in March FSIS sent
    two separate teams to several Canadian plants exporting red meat
    carcasses to the U.S., to evaluate the new procedures. No major
    discrepancies were uncovered. The new program also includes a
    verification check at the final destination. USDA inspectors located at
    these USDA inspected plants look at the entire lot, randomly select
    their own samples, and reinspect them. These results are compared with
    the results received at the border, when FSIS import inspectors check
    the samples selected by Canadian inspectors. These comparisons enable
    us to determine if Canadian inspectors are correctly selecting samples.
                 inspection process for u.s. exports to canada
        Question. In addition, could you describe step by step the means by
    which United States meat is inspected as it goes into Canada?
        Answer. For the record, I will provide the brochure, ``How to
    Export Meat and Poultry Products from the United States to Canada'',
    which outlines step by step the process by which meat products are
    exported to Canada. Page 4 describes the Agriculture Agri-Food Canada
    inspector's duties in examining the exported product.
        [The information follows:]

                   [A Quick Reference Guide for the Industry]

       How to Export Meat and Poultry Products From the United States to
                                     Canada
                                i. introduction
        This guide has been developed jointly by Agriculture and Agri-Food
    Canada (AAFC) and the Food Safety and Inspection Service (FSIS) to
    facilitate the movement of meat and poultry products across the Canada/
    United States border. All exported shipments must be presented to an
    AAFC inspector prior to entering commerce into Canada. Failure to
    present export shipments for reinspection can result in penalties that
    may interfere with your business. It is essential that all responsible
    parties (exporter, importer, Customs broker and transportation company)
    are aware of the procedures, including what documents are required, by
    whom and where the inspection takes place.
        The information that you will find here is an overview of the
    export process. The information contained in this guide is subject to
    change without prior notice. A list of phone numbers (addendum #1) and
    examples of required documents are available at the back of this
    reference guide. More detailed procedures can be obtained from AAFC and
    FSIS headquarters, regional offices and import field offices.
                         ii. plant/product eligibility
        All U.S. federally inspected meat and poultry establishments are
    initially recognized as eligible to export to Canada, unless the
    facility has been specifically delisted.
        There may be restrictions on certain types of U.S.D.A. inspected
    and passed meat and poultry products, which are listed in the Export
    Requirements for Canada. The exporter is responsible for ensuring that
    the products destined for export to Canada are produced, stored in, and
    shipped from a USDA/FSIS inspected facility.
        Exporters are advised to check the Eligibility Status of U.S. Meat
    and Poultry Plants Exporting to Canada--Delistment List before
    preparing product for export. The export requirements for Canada and
    plant eligibility lists are available through the Export Requirement
    Library database [To access the system by modem: phone: (202) 501-7608]
    or by request from FSIS, Export Coordination Division (ECD).
                      iii. registration of product labels
        All prepared meat and poultry products and retail package labels
    must be registered in advance by AAFC. Product labels intended for
    retail distribution must be bilingual (French and English.) The labels
    must include the mandatory labelling features:
      --product name,
      --country of origin,
      --net quantity in metric units,
      --list of ingredients, if applicable,
      --name and address of the manufacturer or distributor,
      --U.S.D.A. official inspection legend,
      --storage (handling) instructions, if applicable,
      --grading for beef, if applicable and
      --grading for poultry carcasses, if applicable.
        In addition, these labels must be submitted to FSIS, Food Labelling
    Division for U.S. label approval.
        Applications should be made to AAFC on AGR 1419, Request for
    Registration of Labels, Markings and Containers (addendum #2), with a
    proof of the proposed label attached. For more information on labelling
    requirements and application procedures, call (613) 952-8000, ext. 4685
    or write: Agriculture and Agri-Food Canada, Food Inspection
    Directorate, Process, Formula and Label Registration Unit, 59 Camelot
    Drive, Nepean, Ontario, K1A 0Y9 CANADA.
        Other shipping container labels on non-prepared products do not
    need advanced registration by AAFC, but must include the mandatory
    labelling features listed above. Agriculture and Agri-Food Canada
    inspectors will check labels on both shipping containers and retail-
    size packages.
                          iv. border entry procedures
        A. Prior to shipping consignments of edible meat and poultry
    products:
        1. The U.S. exporter must send the following information by
    facsimile to AAFC, Ottawa [fax number (613)991-3820)]:
      --Facsimile cover sheet, Notification of Intent to Import Meat
            Product Into Canada (addendum #3)
      --FSIS form 9135-3 (Certificate for Export of Meat and Poultry
            Products) and FSIS form 9135-3A (Continuation Sheet), if
            applicable (addendum #4 and #5, respectively.)
        IMPORTANT NOTICE: To avoid duplication of certificate numbers, FSIS
    form 9135-3 will be numbered according to year. The current certificate
    (US-CA-95) will be used until December 31, 1995. At that time, US-CA-96
    will be available through the FSIS inspector at the establishment.
        2. AAFC will review the documents for accuracy and completeness.
    The accepted copy of FSIS form 9135-3 will be stamped ``preverified''
    and returned to the company, along with a AAFC computer generated
    ``Document Report''. If the certificate is not accepted, the company
    will be notified of the reason for refusal. Resubmission must be made
    on a new FSIS form 9135-3.
        B. Once the documents have been preverified, the shipment can
    proceed to the border with the original FSIS form 9135-3 (and 9135-3A,
    if applicable) that is signed by a U.S.D.A. veterinarian, the
    ``preverified'' copy of FSIS form 9135-3 (and 9135-3A, if applicable,)
    the original poultry grading certificate (if applicable) (addendum #6.)
    The company may forward a copy of the ``Document Report'' with the
    shipment to expedite passage through the border crossing. In addition,
    detailed instructions should be issued to the truck driver (addendum
    #7.)
        1. All U.S. meat and poultry shipments must stop at Canada Customs.
    Trucks will then be referred to AAFC inspection at the border. The U.S.
    company has the option of using the services of a Customs broker to
    facilitate the paperwork requirements.
        2. The shipment should cross the border within seven (7) work days
    following preverification of the export certificate. It is the
    exporter's responsibility to notify AAFC by facsimile if the shipment
    is canceled or delayed.
        C. The inspection assignment can be obtained in one or two ways:
        1. At the Border
        The AAFC inspector at the border will validate the shipment
    documents and generate the inspection assignment from the import
    control computer system and the import inspection report form (AGR
    1422) (addendum #8.) Assignments will be for either a skip or full
    inspection.
        (a) Skip Lot.--Following a cursory examination from the rear of the
    vehicle to observe the general condition of the shipment
    (transportation damage, incompatible product, container labels, export
    marks, etc.), the shipment can proceed to the final destination. A copy
    of AGR 1422 and a copy of FSIS form 9135-3 and 9135-3A (if applicable)
    will accompany the driver.
        If the inspector observes a problem with the shipment, the
    inspector will override the computer system assignment. Depending on
    the problem, the shipment will either be refused entry or directed to
    the designated import reinspection facility for full inspection.
        (b) Full Inspection.--The shipment will proceed to the designated
    import reinspection facility for full inspection. A copy of AGR 1422
    and the original FSIS form 9135-3 and 9135-3A (if applicable) must
    accompany the driver.
        If the product passes reinspection, the shipment can proceed to the
    final destination. If the product fails reinspection, product will be
    refused entry.
                                     ______

                     Questions Submitted by Senator Bumpers
        industry costs for haccp implementation in relation to user fees
        Question. Now that HACCP is into the implementation stage, do you
    have any verifiable information about the compliance costs to industry
    and given those costs, especially for smaller firms, do you think it is
    fair to also impose user fees on the industry at this time?
        Answer. HACCP implementation will begin in fiscal year 1998,
    however, pre-HACCP sanitation standard operating procedures, SOPS, were
    implemented in all plants effective January 27, 1997.
        FSIS has developed estimates of the cost for industry to comply
    with a HACCP based system for the Final Regulatory Impact Assessment,
    which is in the final rule. These estimates inferred a reduction in
    implementation and operating costs for smaller establishments. I will
    be glad to provide the information for the record.
        [The information follows:]

        [Clerk's note.--The information does not appear in the hearing
    record but appears in the Federal Register, Vol. 61, No. 144, Thursday,
    July 35, 1996, pp. 38858-38860.]

        The user fee proposal is intended to assure that resources are
    available now and in the future to provide the level of inspection
    necessary to meet the demand for such services and maintain consumer
    confidence, within the balanced Federal budget context.
                   effect of user fees on consumer confidence
        Question. You mention the need to protect consumer confidence. Have
    you made any analysis of public perception of the meat and poultry
    industry paying for in-plant inspection? Do they perceive any conflict-
    of-interest, real or imagined?
        Answer. For over three-quarters of a century, USDA has had the
    authority to charge user fees for overtime and holiday work. In fiscal
    year 1998, we expect to collect nearly $90 million in user fees under
    current law. It is important to note that there is strong confidence in
    the inspection program and the safety of products, regardless of
    whether the cost of inspection is covered by user fees or the
    appropriation. Over the years, there has been no perceived weakness in
    the inspection program associated with the existing user fees, and the
    perception is public acceptance of product for which industry pays an
    inspection user fee.
        Question. In what manner might the implementation of user fees
    affect consumer confidence?
        Answer. The implementation of user fees should improve consumer
    confidence in meat, poultry, and egg products. If industry takes
    responsibility for the cost of inspection, the Administration could
    then fully focus its efforts on developing and implementing necessary
    inspection reforms which would improve consumer confidence in inspected
    products.
                                     ______

                      Questions Submitted by Senator Leahy
    Food Safety and Inspection Service:
        (1) In recent years there have been several incidents of tainted
    meat in the U.S. and abroad which have caused consumers to question the
    safety of the meat supply. To address these concerns, the Holstein
    Association, the dairy industry's largest breed registry, is in the
    process of developing proposals for an inexpensive system to identify
    and track livestock from the farm gate through processing and
    distribution channels to the consumer. Such a system could integrate
    vital herd, handling and human health information to allow rapid
    intervention when needed to prevent distribution of meat tainted with
    food borne pathogens.
        Congress included report language in the fiscal year 1997
    Agriculture Appropriations bill requesting that a National Farm
    Identification Pilot Program for dairy cows be conducted jointly by the
    Food Safety and Inspection Service (FSIS) and the Animal Plant Health
    Inspection Service (APHIS). The program was to be funded out of the
    FSIS account. It is my understanding that the FSIS has recently
    announced that it will be soliciting proposals for this project under a
    competitive bid process in the near future.
        (A) Will that solicitation include a call for proposals for animal
    identification programs?
        Answer. On February 27, 1997, FSIS published in the Commerce
    Business Daily a Request For Proposal 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 non-fed beef project. An animal identification
    element will be encouraged, but not required, in the pork and sheep
    projects.
        (B) In developing that solicitation, did FSIS take into
    consideration Sec. 1434 of the Research title (7USC 3196) that outlines
    factors the Secretary should consider in setting priorities for
    allocating funds for pre-harvest, on farm food safety, or animal well-
    being?
        Answer. FSIS has only contracting authority, and is not covered by
    the provisions under Sec. 1434 of the Research title (7 USC 3196).
        (C) When does FSIS expect to select projects for funding under this
    solicitation?
        Answer. FSIS expects to complete selection of the projects in July
    1997.
        (D) Since the fiscal year 1997 appropriations language directs the
    FSIS and APHIS to work cooperatively in developing an identification
    pilot program and APHIS has expertise in this area, would FSIS be able
    to transfer funds to APHIS to administer such a program, and would you
    support such a transfer?
        Answer. FSIS will administer the animal production food safety
    pilot projects and will transfer funds to APHIS, as needed, if it is to
    our mutual benefit in conducting these projects.
                                     ______

                         Agricultural Marketing Service
                     Questions Submitted by Senator Cochran
                          usda pesticide data program
        Question. Last year, USDA information on the Pesticide Data Program
    provided after the passage of the Food Quality Protection Act and the
    Fiscal Year 1997 Agriculture Appropriations Act indicated that ``the
    most direct impacts from the lack of funding for PDP will be an
    insufficient amount of information to adequately meet the data
    requirements for assessing the diets of infants and children and the
    probable loss of important pesticide uses for minor crop producers due
    to the shortage of data to accurately assess the actual dietary
    exposure.'' What is the main purpose of the Pesticide Data Program--to
    prevent the loss of important pesticide uses for minor crop producers,
    to provide the EPA with data on residue levels, or to assess the actual
    dietary risk posed by pesticides, particularly to children and infants?
        Answer. In 1991 consumers and producers were alarmed by findings of
    alar on apples, cyanide on imported grapes, and other food
    contamination issues. The inability of the Department to respond
    analytically to these concerns indicated the need to develop
    comprehensive data bases regarding chemical use on agricultural crops,
    subsequent residues in foods, and food consumption. In response to
    consumer and producer concerns over pesticide residues in food, the
    Department initiated a multi-agency effort in 1991 to collect data to
    provide a more realistic assessment of pesticide levels in the food
    supply and to reassure consumers.
        The establishment of the Pesticide Data Program (PDP) within AMS
    gave AMS a critical role in this initiative. PDP has created a
    statically reliable data base on pesticide residues in food as close to
    the consumer as possible. The National Agricultural Statistics Service
    (NASS) was assigned the responsibility of conducting pesticide use
    surveys. The Human Nutrition Information Service, now part of the
    Agricultural Research Service (ARS), and the Economic Research Service
    were assigned responsibilities for analyzing pesticide use and residue
    data to determine the economic impact of alternative pesticide uses and
    to estimate dietary exposure to residues.
        As stated in our 1991 budget, the twofold goal for PDP is to
    develop a comprehensive data base on pesticide residues to help ensure
    the safety of the American food supply and to communicate this food
    safety information to consumers in the U.S. and to our international
    trading partners. In order to achieve this goal, we work closely with
    Environmental Protection Agency (EPA), the Food and Drug Administration
    (FDA), and the States to ensure that data collected meets multiple data
    needs. Each user of this data contributes to the understanding of the
    impact of pesticide residues in our food supply. By having access to
    AMS pesticide residue data, EPA has been able to more accurately
    determine exposure and dietary risk to the consumer, which facilitates
    the approval of safer pesticides of interest to agriculture.
    Information collected by AMS has assisted FDA by pinpointing areas
    where closer surveillance may be required as a follow-up to apparent
    violation identified by PDP. In addition, producers can assure
    consumers of the actual levels of pesticide residues in their food.
        Since the program's inception we have had to change some facets of
    the program to respond to changing food safety concerns. For instance,
    we expanded the types of commodities tested under PDP to include
    processed products, dairy products, and grain to address pesticide
    residue data needs outlined in the National Academy of Science report
    on ``Pesticides in Diets of Infants and Children.'' With the passage of
    the Food Quality Protection Act of 1996, PDP data will play a more
    critical role in the Government's risk assessment process used to
    evaluate pesticides in the re-registration of pesticides. This Act
    directs the Secretary to improve collection of pesticide residue data,
    especially those consumed by infants and children. As the program
    continues, you can be assured that other changes will have to be made
    to ensure that PDP responds more effectively to current food safety
    issues and gives consumers and producers confidence that the food
    supply is safe.
        Question. Why should this be a USDA rather than an EPA Program?
        Answer. USDA already has the staff, liaison, infrastructure, and
    computerized database to effectively manage Program activities. EPA
    authority requiring the use of contracts in lieu of cooperative
    agreements restricts the purchase of new instrumentation, which in the
    end will restrict PDP's ability to adapt new technology to meet the
    challenges of the future.
        As I stated earlier, PDP data meets a twofold goal of helping
    ensure the safety of the American food supply and communicating that
    food safety information to consumers and producers. This broad goal is
    best achieved by AMS, since we are in a better position to identify the
    data requirements of PDP's multiple users. Each of these users play a
    critical role in ensuring the safety of the food supply. PDP data
    coupled with food consumption data permits EPA to conduct more accurate
    risk assessments. FDA utilizes PDP data to assist them in monitoring
    compliance with their regulations. Furthermore, PDP data coupled with
    NASS pesticide use data can lead to improved farm management practices,
    such as implementation of integrated pest management practices. There
    have been several commodities where crop rotation, drift, and other
    technical issues will have to be studied to better understand PDP's
    data--particularly when residues are detected in commodities on which
    the pesticides are not registered for use. Also, PDP is being used by
    the Foreign Agricultural Service and the State of California to support
    the export of U.S. commodities in a competitive global market. AMS will
    submit for the record a letter from the Administrator of the Foreign
    Agricultural Service attesting to the use of PDP data to develop trade
    relations with Pacific Rim countries and a letter describing how the
    Department of Food and Agriculture in California has used PDP data.
        Question. What have been the results of the Pesticide Program Data
    since its creation in 1991?
        Answer. PDP uses state-of-the-art equipment that can detect
    residues in the parts per billion. We find detectable residues in 60 to
    70 percent of the test samples. However, for many commodity/pesticide
    combinations, the highest concentrations detected are a small fraction
    of the currently established tolerances. Over the years, 1.5 to 4
    percent of the samples tested contained violative residues; the vast
    majority are for pesticides having no tolerance on that particular
    commodity. These data help the Department dispel the notion that
    pesticide residues are pervasive and at dangerous levels. It also helps
    maintain food safety confidence to domestic and foreign consumers. I
    will provide for the Committee copies of the Annual Data Summaries for
    1991 through 1994. The 1995 Summary will be published in May 1997.
    Dietary risk assessments and decisions for re-registration are
    evaluated on an individual pesticide and commodity combination basis.
    Over the past 5 years, data have been collected for about 1,000
    pesticide/commodity combinations.
        Question. Does the EPA use data other than that from the Pesticide
    Data Program for its risk assessment process and for the re-
    registration and review of pesticides? In other words, is the Pesticide
    Data Program EPA's only source of this data?
        Answer. PDP is not the only source of pesticide residue data used
    by EPA. However, over the years EPA has become more reliant on PDP data
    and today PDP is a critical data source for EPA's risk assessments
    evaluations. For some pesticide/commodity combinations, PDP data is the
    only information available to EPA. Data from sources other than PDP
    include regulatory, enforcement-based programs. The shortcomings of
    these regulatory programs for risk assessment purposes include:
    sampling is usually not statistically reliable, laboratory analyses are
    not performed at the low detection levels required by PDP protocols--
    rather they focus on residue concentrations near the established
    tolerances, sample preparation prior to analysis does not necessarily
    emulate consumer practices, residue detections usually are not
    confirmed, EPA's Good Laboratory Practices requirements for data
    quality are not required, and evaluation of laboratory competence
    through proficiency testing programs is limited. To our knowledge,
    there are no other programs in the world that can produce data for
    dietary risk assessment in the format provided by PDP that fulfills the
    requirements of the Food Quality Protection Act of 1996.
        Question. Which Food Quality Protection Act mandates are fulfilled
    only by the continuation of the Pesticide Data Program?
        Answer. Title III, Sec. 301 (c) of the Acts states: ``The Secretary
    of Agriculture shall ensure that the residue data collection activities
    conducted by the Department of Agriculture in cooperation with the
    Environmental Protection Agency and the Department of Health and Human
    Services, provide for the improved data collection of pesticide
    residues, including guidelines for the use of comparable analytical and
    standardized reporting methods, and the increased sampling of foods
    most likely consumed by infants and children.'' PDP, as a result of
    this provision of the Act, will have a more significant role in
    providing data needed to evaluate cumulative exposures to pesticide
    residues with a common toxicological effect and to create a
    statistically reliable database on endocrine disruptors with the minute
    detection levels needed to assess dietary risk. No other program in the
    United States or other countries can generate data of the quality
    provided by PDP to meet the stringent risk assessments required by the
    Act.
        Question. How many fruit and vegetable crops are being sampled
    under this program?
        Answer. I have attached a copy of a chronological list of 27
    commodities which have been included in the Program since its
    inception. The 11 fruit and vegetable commodities in the 1997 program
    are as follows: (1) fresh commodities--pears, potatoes--aldicarb
    testing only, spinach, sweet potatoes, tomatoes, and winter squash; (2)
    processed commodities--apple and orange juice, canned and frozen green
    beans, canned peaches, and frozen winter squash--alternating with fresh
    winter squash. In total, there are 14 commodities in the 1997 program,
    with no more than 13 being sampled at any time, if wheat, soybeans, and
    milk are included.
        Question. How many States are participating in the program? What is
    the cost-sharing arrangement in each of these states? Please indicate
    staffing, equipment, and other related program costs being supported
    through federal versus state funding?
        Answer. There are 10 States participating in the 1997 Pesticide
    Data Program (PDP) for fiscal year 1997. All States received funding
    for PDP operations through contracts issued by the Environmental
    Protection Agency. There are no State cost-sharing funds. The
    participating States and their proposed funding allocations are:
    California--$2,430,000; Colorado--$85,000; Florida--$1,060,000;
    Maryland--$75,000; Michigan--$1,090,000; New York--$1,730,000; Ohio--
    $640,000; Texas--$1,020,000; Washington--$660,000; and Wisconsin--
    $80,000. An additional $100,000 is still unobligated until the contract
    cost proposals are finalized in April. There are no equipment costs for
    the States under these contracts; however, the contracts are supporting
    all state staffing costs.
        Question. What arrangements have been made with the EPA for fiscal
    year 1997 to continue USDA pesticide data collection activities?
        Answer. On February 25, 1997, an Interagency agreement was signed
    between the Agricultural Marketing Service (AMS) and EPA for
    $1,251,000, to continue pesticide data collection activities. These
    funds will be shared among the USDA agencies participating in the
    Pesticide Data Program. AMS will receive $891,000; National
    Agricultural Statistics Service--$90,000; Grain Inspection, Packers and
    Stockyards Administration--$250,000; and the Agricultural Research
    Service--$20,000.
                       federal state market news service
        Question. For fiscal year 1998, increased funding of $1.1 million
    was provided when the Committee became aware of the fact that the
    agency was facing a massive withdrawal of state support for its
    cooperative federal-state market news program. Would you please give us
    an update on this situation, in terms of the number of states which
    have cut or completely eliminated funding for their market news
    programs and the impact this has had on your programs, on the
    agricultural industry, and on related industrial sectors.
        Answer. The States that reduced their market news programs include
    Alabama, Kansas, Mississippi, Virginia, Texas, Kentucky, Wyoming, Iowa,
    Illinois, and Florida. States where programs were eliminated included
    California, New York, Washington, Ohio, Arizona, and Maine. To assume
    the responsibilities of the major state participants, AMS had to add a
    number of new reporters to its staff to ensure that the coverage of
    these critical commodities continue. We also undertook a business
    process reengineering effort that identified a number of initiatives
    relating to automation, customer service and workplace improvement. AMS
    also plans to create a Customer Service Center in Fresno, California.
    The continued coverage of the critical markets by AMS benefits the
    various industries, the consumer, and the states, as the market
    information they need continues to be included in the nationwide
    system. AMS has assumed coverage of these markets with the additional
    funding received in fiscal year 1997. The broader responsibility
    assumed by federal market news staff has ensured that important market
    coverage continues and reports are being issued on time.
        Question. Has the $1.1 million been sufficient to enable the
    Federal program to fill critical gaps as state programs decline?
        Answer. Yes, that amount has been sufficient to fill critical gaps.
        Question. Are additional funds requested for fiscal year 1998 to
    address this situation? If not, why?
        Answer. No, the level funds received in the fiscal year 1997
    appropriation will be sufficient for this purpose in fiscal year 1998.
                        market competition/concentration
        Question. What activities are being funded with the $400,000
    provided for fiscal year 1997 to carry out the recommendations of the
    Agricultural Concentration Committee?
        Answer. The following initiatives for fiscal year 1997 were funded:
        1. AMS developed a National Carcass Premium and Discount Report to
    provide the premiums and discounts paid for slaughter steers and
    heifers. This report reflects premiums and discounts relative to
    quality, cutability, and weight of carcasses that the packer is
    offering for the current week.
        2. The weekly Forward Contract Slaughter Cattle Summary Report,
    developed by AMS, provides the volume of contract and formula priced
    cattle committed to packers for delivery in a specified month. The
    information is collected from cooperating feedlots in Texas, Oklahoma,
    Kansas, Colorado, Nebraska, and Wyoming. Price levels based on the
    Chicago Mercantile Exchange (CME) are included for cattle contracted on
    the CME. Cattle feeders can evaluate demand based on the volume of
    cattle committed to packers.
        3. The AMS reporting of boxed beef is being expanded by including
    data of boxed beef sale commitments covering the upcoming 15 business
    days, rather than the upcoming 10 business days.
        4. The Regional Beef Quality and Yield Report began in early
    February. The reporting of beef grading results on a regional basis
    will provide better geographic detail than the current national report
    allows.
        5. AMS is finalizing a daily report for import and export volume
    data for livestock crossing the borders between the United States and
    Canada and the United States and Mexico. The report is a cooperative
    effort between AMS and the Animal and Plant Health Inspection Service.
        6. AMS initiated a new report, ``The International Meat Review,''
    in January 1997. The objective of this biweekly report is to briefly
    illustrate the supply and demand factors which influence the export
    trade of U.S. beef, pork, and lamb meat products, as well as the meat
    imports from other countries.
        7. Reporter positions, as well as support positions, have been
    added in strategic marketing areas in South Dakota, North Dakota,
    Nebraska, and Illinois to provide a broader coverage of market
    information and a more in-depth look at marketing activity.
        Question. Out of the additional $10 million released by the
    Secretary from the Fund for Rural America for research, extension, and
    education to counter concentration, food safety, nutrition, and
    gleaning, what amount will be allocated to counter concentration and
    what specific activities will be funded?
        Answer. These funds are being managed by the Department's Research,
    Education and Economics mission area. We understand that the
    Department's Cooperative State Research, Education, and Extension
    Service is currently accepting grant applications from colleges,
    universities, laboratories, and research foundations. The $10 million
    will be distributed among the four initiative areas--livestock
    concentration, food safety, disease prevention, and gleaning.
        Question. Increased funding is requested for fiscal year 1998 to
    carry out the recommendations of the Advisory Committee on
    Concentration: $500,000 for the Agricultural Marketing Service (AMS) to
    expand its reporting of livestock and poultry markets; and $2.3 million
    for the Grain Inspection, Packers, and Stockyards Administration
    (GIPSA) to address packer competition and industry structure and
    poultry compliance. Please summarize the need for these additional
    funds and what activities will be carried out.
        Answer. Producers need timely, accurate, and precise information to
    successfully compete in today's global market. There is concern in the
    industry about the lack of market information, especially for small and
    medium-sized farm and ranch operations. Lack of transparency of the
    markets is cited in the advisory committee's recommendations and fairer
    competition for all participants is needed. To meet the needs of the
    industry, AMS will need to expand and develop strategic areas of market
    information and keep pace with changing technology and market
    structures.
        The following activities will be carried out with fiscal 1998
    funding:
        1. The Secretary's Advisory Committee cited the need for a value-
    based matrix report to be developed for the cattle industry. This
    report would provide the economic indicators to help guide producers in
    supplying products that meet consumer demands. AMS will use the
    increased funds to work with all industry segments to develop this
    report.
        2. Expansion of auction and direct market coverage of daily
    trading, focusing on the shifts in marketing patterns, would provide
    more market information for all market participants. Reporters would be
    added in strategic locations throughout the major trading areas of the
    country (Texas, Oklahoma, Kansas, Colorado, Iowa, Wyoming, and the
    Pacific Northwest) to help provide the basic market coverage that is
    needed.
        3. Staff would be added and new communications technologies adapted
    to provide for additional cross checking of reported market
    transactions for cattle and hogs. Additional travel in expanding
    contacts, especially from the production segment, would be implemented.
        4. Expanded reporting of trimmed beef products on a daily and
    weekly basis to provide greater coverage of beef marketing will be
    implemented. The meat industry has moved to more processed product
    marketing and away from commodity products.
        5. AMS will continue to develop and implement import and export
    volume data reports for livestock crossing the borders of the United
    States and Canada and the United States and Mexico. These reports will
    include information on volume of cattle, hogs, sheep, goats, and
    horses, as well as destination for imports.
        6. AMS will complete the development of marketing information
    reports for import of meat items. These reports will include
    information for beef, lamb, and pork.
        7. AMS will strengthen and expand reports to reflect formula and
    contract specifications for cattle.
        8. AMS will expand producer-generated direct hog reports to provide
    vital cross checks in the marketing of hogs. The recent changes that
    have occurred in the marketing of hogs, primarily of marketing on a
    carcass value-based concept, has necessitated the need for more
    producer input of data relative to marketing specifics.
        9. Pork reports would be revised to more fully reflect further
    processed product rather than commodity product, and to provide greater
    coverage of pork trading. Additional reports would be developed to
    reflect cutout data for further processed product and provide the
    industry with a more accurate reflection of product value.
        10. The American Sheep Industry (ASI) is discontinuing publication
    of their marketing bulletin. This publication included several AMS
    market news sheep and lamb reports. AMS will develop a weekly
    publication that will meet the needs of the sheep and lamb industry.
        Question. Please provide for the record, by fiscal year, the funds
    provided for fiscal year 1997 and proposed for fiscal year 1998 to
    carry out each of the recommendations of the Committee on Concentration
    and/or to address agricultural market concentration of livestock
    pricing. What additional funding will be required in future fiscal
    years to carry out the Committee's recommendations?
        Answer.

       Fiscal Year 1997 Funding for Concentration/Livestock Pricing Issues

                            [Total Funding $400,000]

    National Carcass Premium and Discount Report..................   $25,000
    Forward Contract Slaughter Cattle Summary Report..............    40,000
    Expansion of boxed beef reporting.............................    10,000
    Regional Beef Quality and Yield Report........................    10,000
    Import and Export volume data reports.........................    20,000
    International Meat Review development.........................    20,000
    Reporter and support staff expansion..........................   275,000
                        --------------------------------------------------------------
                        ____________________________________________________

          Total...................................................   400,000

       Fiscal Year 1998 Funding for Concentration/Livestock Pricing Issues

                            [Total Funding $500,000]

    Slaughter Cattle Matrix Report................................   $50,000
    Expansion of Auction & Direct Market Coverage.................   100,000
    Addition of staff and support to expand cross checking of
        reported market transactions..............................   200,000
    Expanded reporting of trimmed beef products...................    20,000
    Final development of import and export reports for livestock
        border crossings..........................................     5,000
    Final implementation of meat import reports...................     5,000
    Reports to reflect formula and contract specifications for
        cattle transactions.......................................    50,000
    Expansion of producer-generated direct hog reports............    50,000
    Reports to reflect further processed pork product trading.....    10,000
    Development of lamb and wool reports to help replace loss of
        ASI information...........................................    10,000
                        --------------------------------------------------------------
                        ____________________________________________________

          Total...................................................   500,000

        The only additional funding that will be required to carry out the
    Committee's recommendations is for maintenance purposes and any
    additional request for services to resolve concentration and price
    discovery issues.
                        fish and fish product inspection
        Question. The Fiscal Year 1997 Agriculture Appropriations Act made
    permanent a provision that domestic fish and fish products produced in
    compliance with food safety standards accepted by the Food and Drug
    Administration be deemed to have met any inspection requirements of
    USDA or other Federal agencies for any Federal commodity purchase
    program. The USDA opposed this provision. Why?
        Answer. USDA opposed the initial legislation because it restricted
    our ability as purchasing agents to ensure the quality of foods
    purchased by USDA. We rely on regulatory agencies such as Food and Drug
    Administration and USDA Food Safety and Inspection Service to ensure
    the safety of products distributed in food assistance programs. When
    products are purchased by competitive bid, a determination must be made
    as to whether a product meets minimum quality requirements described in
    the contract specifications; such as grade or quality characteristics,
    fat content, domestic product, and so forth. The initial legislation
    was subsequently changed to allow end item lot inspection to establish
    a reasonable degree of certainty that fish and fish products purchased
    meet all quality requirements. USDA modified existing purchasing
    specifications to implement the end item lot inspection.
                         organic certification program
        Question. The fiscal year 1998 budget proposes an increase of
    $505,000 to continue implementation of the Organic Certification
    Program. How much is being allocated to the Organic Certification
    Program for fiscal year 1997?
        Answer. AMS is allocating $490,000 from its Marketing Services
    account for the Organic Certification Program in fiscal year 1997.
        Question. Why has there been a delay in publishing the final rule
    for the Organic Certification Program? Last year, you reported to this
    Committee that you expected the rule to be published in 1996. Now you
    indicate that it will be published in late 1997.
        Answer. Implementing the National Organic Certification Program has
    proven to be far more complex and time consuming than had been
    anticipated. USDA first received an appropriation for the program in
    fiscal year 1994 and only then was able to establish a staff to develop
    the proposed rule and work with the National Organic Standards Board,
    or NOSB. The NOSB provided the Secretary with program recommendations
    and reviewed materials to be included in the proposed rule as the
    national list of allowable materials. At its September 1996 meeting,
    the NOSB completed its review of the list of materials proposed for
    inclusion in the organic rule. We anticipate that the proposed rule for
    national standards for organic products will be published during the
    late spring of this year.
        Question. The prepared testimony indicates that consistent with the
    National Organic Standards Act, the Department will seek to recover the
    cost of the program through user fees that will be deposited into the
    Treasury. With respect to this user fee proposal, why would these fees
    be deposited into the Treasury rather than being credited to the
    appropriations account so that the fee collections would be available
    to cover the costs of the program?
        Answer. The Department's Office of General Counsel has concluded
    there is insufficient statutory authority to credit fees collected to
    the appropriations account. Legislation would be required for AMS to
    retain user fees.
                                     ______

                     Questions Submitted by Senator Bumpers
                               organic standards
        Question. We still hear a lot of criticism from farmers due to the
    delay in implementing Organic Standards as required by law. Can you
    give us your best estimate on the amount of economic value that has
    been lost to the organic industry due to the failure to implement
    standards by the statutory deadline?
        Answer. Our early economic analysis determined that the organic
    industry has grown by 22 percent each of the last six years. We
    estimate that the implementation of national organic standards will
    allow the industry to continue grow as fast, or faster, for several
    more years. Interestingly, the process of developing National Organic
    Standards Board recommendations and writing the proposed rule seems to
    have had an energizing effect on the organic industry. The twelve
    Standards Board meetings and the four USDA livestock hearings have
    provided a public forum for producers, processors and certifying agents
    to come together to share ideas about solutions to common problems and
    to arrive at a mutual understanding about organic standards. These
    dialogues alone have created a greater cohesion and identification of
    common concerns within the organic industry.
                          pesticide data program (pdp)
        Question. Last year we faced a problem in conference in which the
    House insisted this program should be funded through EPA rather than
    USDA.
        What problems did this cause for the implementation of the program?
        Answer. Cooperation between AMS and EPA has been excellent.
    However, with two agencies involved in providing direction to the
    States, extraordinary efforts have been made to assure that the
    communication process works. Although PDP operations were restarted
    within a week after the issuance of EPA letter contracts to the States
    on November 26, 1996, all is not ideal. The 3-month hiatus from
    September through November 1996 resulted in data shortages affecting
    calculations of national residue estimates for calendar year 1996.
        Presently, the Program is operating under staffing shortages within
    USDA because of the fiscal year 1997 funding delays posed by the
    Congressionally mandated shift of funds from USDA to EPA. In addition,
    uncertainty as to whether EPA would be allowed by Congress to transfer
    funds to USDA to pay for in-house operations caused some staff re-
    allocations, transfers and disruptions within USDA, early in the year.
    Although restaffing efforts are underway, USDA is proceeding cautiously
    until continued program funding for fiscal year 1998 is obtained. Some
    States also lost staff for these same reasons.
        The current staff, with full support from EPA staff, has made
    extraordinary efforts to maintain the monthly sampling plans for 1997,
    prepare the 1995 Calendar Year Data Summary for publication in June
    1997, and conduct an Executive Steering Committee and Federal/State
    planning meetings in February 1997. Also, two new States were fully
    integrated into PDP's sampling system: Wisconsin began sampling all
    commodities and Maryland (which replaced North Carolina) entered the
    Program representing the mid-Atlantic region.
        There have been program delivery impediments which we would like to
    share with you. Due to EPA statutory limitations, it was necessary to
    use contracts to fund the States in this program. Using EPA contract
    authority instead of AMS' cooperative agreements provided a very rigid
    operating structure. In the past, AMS' cooperative agreements were
    issued early in the fiscal year and provided greater flexibility to
    address changing priorities for sampling and testing by allowing us to
    reallocate program resources later in the fiscal year. EPA contracts
    have not been finalized to date, thus providing only 50 percent of the
    funds under a letter contract, pending finalization of these contracts.
    The States are continuing to conduct full-scale efforts. Finalization
    of the contracts is anticipated in June. Also, under EPA contracts,
    there is no authority to purchase or replace laboratory
    instrumentation, which is necessary to adopt more efficient
    technologies for use in PDP.
        Question. Has USDA reached an agreement with EPA on funding for PDP
    for fiscal year 1997?
        Answer. On February 25, 1997, an interagency agreement was signed
    between the AMS and EPA for $1,251,000 to continue pesticide data
    collection activities. These funds will be shared among the USDA
    agencies participating in PDP. AMS will receive $891,000; National
    Agricultural Statistics Service, $90,000; Grain Inspection, Packers and
    Stockyards Administration, $250,000; and Agricultural Research Service,
    $20,000.
        Question. How does EPA use the information gathered by PDP?
        Answer. PDP data is a primary source of information for EPA's
    reregistration and special review of pesticides in their dietary risk
    assessment process. PDP is also essential in the implementation of the
    Food Quality Protection Act of 1996, which includes provisions
    emphasizing children's health in pesticide tolerance setting. PDP data
    for pesticide residues in foods highly consumed by infants and children
    will be used to assess dietary risk based on the new risk assessment
    standards stated in the Act. There have been 15 reregistration
    activities using PDP's data: benomyl, captan, chlorothalonil,
    chlorpropham, DCPA, dicofol, ethion, fenamiphos, iprodione, mevinphos,
    quintozene, permethrin, propargite, thiabendazole, and trifluralin.
    PDP's data were also used in four special reviews: 2,4-D, diazinon,
    disulfoton, and methyl parathion; and in a pilot study concerning
    aldicarb in potatoes. In addition to these uses, AMS routinely supplies
    EPA with PDP data on a case-by-case basis.
        Question. How does USDA use this information?
        Answer. USDA's Foreign Agricultural Service (FAS) uses PDP data to
    resolve potential trade issues and to provide an advantage to American
    products over those of our competitors in an expanding global market,
    especially the Pacific Rim countries. Attached is a letter signed by
    the FAS Administrator explaining the importance of PDP in fulfilling a
    critical USDA mission. Similar use of PDP's data has been made by
    Departments of Agriculture in the participating States, such as
    California, as well as to address issues of concern within a State,
    such as Michigan did to allay fears of possible chlordane contamination
    of milk.
        PDP residue data are becoming an important tool in characterizing
    Good Agricultural Practices issues which will impact USDA's integrated
    pest management activities--particularly with regard to minor crops
    such as fruits and vegetables. Some of the issues for commodities
    involve pesticide residues resulting from crop rotation, spray drift,
    and detection of residues in crops for which there is no registered use
    for a pesticide. AMS and other USDA agencies are studying these issues
    and their importance in marketing U.S. commodities.
        PDP data are used by the Economic Research Service (ERS) to assess
    economic and production practices related to pest management, the
    Nation's food supply, and consumers. ERS also used PDP data to assess
    economic implications of alternative pest control practices.
                                     ______

                      Question Submitted by Senator Leahy
                         organic certification program
        Question. I authored the Organic Food Production Act which was
    included in the 1990 Farm Bill. The Act was a comprehensive piece of
    legislation aimed at establishing National Organic Standards for
    labeling organic and setting up a National Accreditation Program to
    certify organic producers and handlers. In 1992, the Secretary of
    Agriculture appointed the National Organic Standards Board to develop
    information and provide guidance to USDA in developing draft organic
    rules. The Board sent its recommendation to USDA almost two years ago,
    but we are still awaiting the final release of the draft rules. Does
    the Department plan to finalize the draft organic rules soon and send
    them to OMB for final clearance? If so, is there a specific time frame
    or date when this will happen?
        Answer. We anticipate that the proposed rule for national standards
    for organic products will be published during the late spring of this
    year.
                                     ______

                   Animal and Plant Health Inspection Service
                     Questions Submitted by Senator Cochran
                          aphis salaries and expenses
        Question. The budget proposes APHIS staffing reductions affecting
    certain areas as part of the Administration's personnel streamlining
    effort.
        Please provide the staff year reductions this budget proposes,
    where these reductions will occur (in Washington or at the state level)
    and what impact these reductions will have on the following APHIS
    activities:
      --Pest and Disease Exclusion Activities
      --Plant and Animal Health Monitoring Activities
      --Pest and Disease Management Activities
      --Animal Care Activities
      --Scientific and Technical Services Activities
      --Veterinary Diagnostics Program
        Answer. The President's budget includes a reduction of $5,480,000
    and 349 staff years for APHIS. APHIS will attempt to minimize the staff
    year reduction impact in the field. Some staff years may be eliminated
    through attrition in anticipation of the consolidation of APHIS'
    regional offices. The following table shows the fiscal and staff year
    impact of these reductions by the activities you have indicated:

                                                                  Staff year
            Activity                                               reduction
    Pest and disease exclusion........................................   -91
    Plant and animal health monitoring................................   -14
    Pest and disease management.......................................  -185
    Animal care.......................................................    -5
    Scientific and technical services \1\.............................   -39
    Others............................................................   -15
                            -----------------------------------------------------------------
                            ________________________________________________
          Total.......................................................  -349

    \1\ Includes a reduction of 9 staff years attributed to the veterinary
    diagnostics program.
    ---------------------------------------------------------------------------
                  agricultural quarantine inspection personnel
        Question. The budget request increases the agricultural quarantine
    inspection user fees program (AQI) by $2.8 million from the fiscal year
    1997 level of $98 million. How many additional inspectors were hired in
    fiscal year 1996 and how many do you anticipate hiring in fiscal year
    1997? Will this increase provide the sufficient number of inspectors
    needed? How many do you anticipate are needed for fiscal year 1998?
        Answer. In fiscal year 1996, 201 inspectors were hired late in the
    fiscal year. We anticipate hiring 42 additional inspectors in fiscal
    year 1997. These hires along with normal attrition will allow us to
    increase estimated staff years in 1997 to 2,140.
        These hiring, however, will provide the sufficient number of
    inspectors only for the immediate future. For example, a major new
    international terminal will open at JFK International Airport in May or
    June 1998, for which at least 15 additional AQI officers will be
    required.
        Based on optimum staffing models, we predict that 82 additional
    inspectors will be needed in fiscal year 1998. While the staff years
    assigned to the AQI user fee program are being reduced in fiscal year
    1998, the actual number in inspectors will increase. This is because of
    the streamlining efforts that will reduce administrative positions in
    the field and at headquarters that are also assigned to the AQI user
    fee program. In addition, we plan to reprioritize certain activities,
    realign shift coverages, and evaluate commodity risks to shift some
    existing resources to cover emerging needs.
        Question. An increase of $1.2 million is requested for the
    appropriated AQI program. The program was funded at a level of $26.5
    million in fiscal year 1997. How many staff years will be devoted to
    conduct predeparture inspections in Hawaii and preclearance inspections
    in Canada and Mexico?
        Answer.

    ------------------------------------------------------------------------
                                                          Fiscal year--
                       Location                    -------------------------
                                                        1997         1998
    ------------------------------------------------------------------------
    Hawaii........................................        138.6        158.6
    Canada........................................          4.1          5.1
    Mexico........................................           27           27
    ------------------------------------------------------------------------

        Question. This Subcommittee provided an additional $700,000 to
    support the addition of 21 full-time inspection positions to supplement
    the resources for agriculture quarantine inspection at Hawaii's direct
    departure and interline airports. Was this directive fulfilled?
        Answer. The conference reduced the increase to $500,000. This
    amount supports 14 positions, which we have filled.
        Question. What activities has the Department engaged in to test and
    evaluate new inspection technologies and other methods and hiring
    arrangements for conducting preclearance and arriving baggage
    inspections? Why hasn't the study requested by the Committee been
    delivered?
        Answer. APHIS has made many improvements to enhance our inspection
    capabilities and achieve significant savings.
        We have X-ray machines in place at major international airports and
    X-ray scanning machines at all foreign-arrival and predeparture sites
    and continue to expand their use as a screening tool. In recent months,
    we have reviewed new, highly sophisticated X-ray technology to enhance
    detection by allowing baggage to be viewed from several different
    angles rather than the one provided by current machines. We will
    evaluate new technology for cost effectiveness.
        We are introducing the use of pest risk assessment to better
    concentrate our resources on high-risk activities. At the same time, we
    have increased the number of computers available for data collection.
    The data are essential for risk assessments and performance
    measurements.
        We have developed computerized staffing guidelines based on the
    type and level of inspection performed. We are testing these guidelines
    now. While we anticipate that some fine tuning may be necessary, we
    believe these guidelines will ultimately help us to realize some
    significant cost savings while maintaining the desired level of
    coverage and agricultural protection.
        The Federal Aviation Administration and APHIS are researching an
    automated baggage inspection system. The system is undergoing extensive
    tests and has yielded promising results, particularly in the area of
    tomographic imaging. In a recent test, the analysis software
    consistently identified objects imbedded in a Styrofoam cylinder. We
    have contracted for the advancement of analysis algorithms; the
    development of a unique radio frequency tag and an applicator for
    attaching the tag to bags; and a method to decrease the requirements
    for the tomographic reconstruction hardware. We anticipate completion
    of the prototype sometime during fiscal year 1998 and will test the
    system in Puerto Rico.
        We have revised our organizational structure to establish a 10 to
    one employee to supervisor ratio. This will result in significant
    savings not only in Hawaii, but nationwide. In addition, we are
    examining policies overtime to ensure that APHIS maximizes human and
    fiscal resources. We have hired technicians and temporary personnel
    rather than higher graded officers to save costs. Using wide scale
    video conferencing saves costs and increases training opportunities for
    our personnel.
        The study, requested by the Committee, will be delivered during the
    week of March 24. We apologize for the delay.
        Question. Which new and expanded facilities will you provide with
    inspection officers? What additional resources will be required in
    future years to fully staff these and existing facilities?
        Answer.

                             [Dollars in thousands]
    ------------------------------------------------------------------------
                       Location                     Staff-years  Funding \1\
    ------------------------------------------------------------------------
    New Facilities:
        Brownsville, TX (Los Tomates Bridge)......            4         $312
        Eagle Pass, TX (Eagle Pass 2 Bridge)......            3          129
        Tecate, CA................................            2          145
        Andrade, CA...............................            1           98
        Lukeville, AZ.............................            1           98
    Expanded Facilities:
        Santa Teresa, NM (El Paso Work unit)......            1           29
        Bismarck, ND (Pembina Station and Portal
         Station).................................            1           29
        Blaine, WA................................            1          106
    Existing Facilities:
        Brownsville, TX...........................            1           29
        El Paso, TX...............................            3          110
        Pharr, TX.................................          1.5           43
        Laredo, TX................................            6          208
    ------------------------------------------------------------------------
    \1\ Includes salary, benefits, and non-salary costs.

        Question. The budget says the Agency will strive to increase the
    number of facilities covered, peak periods, extended hours of coverage,
    and increases in the number of passengers. What is the Agency's goal
    for each of these areas?
        Answer. APHIS' goal is to cover all foreign passenger traffic
    facilities as effectively and efficiently as possible during peak
    periods, and extended hours within available resources. We will
    evaluate peak period traffic in conjunction with risk assessment survey
    data to determine the best utilization of staff resources. Hours of
    coverage will be expanded only if traffic volume and associated risk
    rises beyond that experienced during existing hours of coverage. APHIS
    will deal with increases in passenger traffic by conducting additional
    inspections and improving our targeting efficiency ration (a measure of
    officers' effectiveness selecting the highest-risk travelers and
    intercepting prohibited materials, pests, and diseases).
                   sterile screwworm fly production facility
        Question. Is the facility in Panama, which the Agency plans to use
    for the production of sterile screwworm flies, a new building which
    will be constructed or a building needing renovation?
        Answer. The production facility in Panama will be a new one,
    designed and built on a site made available by the Government of
    Panama. A sugar mill previously occupied the site. A warehouse
    building, used by the sugar mill, is still in good condition and was
    incorporated into an existing master plan to store supplies and
    materials. Other buildings on the site will be razed.
        Question. Your budget states that $6 million from prior balances
    will be used for the architectural and engineering work and an
    environmental study for this facility. From which balances will this
    money come and why did these balances accrue?
        Answer. Recent Appropriations Acts have granted APHIS authority to
    carry over up to 10 percent of the annual screwworm appropriation, to
    remain available until expended. At the beginning of fiscal year 1997,
    APHIS had $3.7 million available from prior years in the screwworm
    program. These funds were accumulated gradually from program savings
    over the past three years. For example, at one point sterile fly
    production at the existing facility in Mexico could not keep up with
    planned dispersal objectives for technical reasons. As a result,
    dispersal and shipping costs were lower. In fiscal year 1995, the
    program achieved savings from devaluation of the Mexican peso. Further,
    in fiscal year 1996, the program planned to erect a chilled fly center
    and establish a surveillance program in Panama. These activities were
    delayed, so funds were carried forward to fiscal year 1997, and are
    expected to carry forward into fiscal year 1998.
        Question. What are the future year costs of this facility?
        Answer. We expect annual lease costs of about $14 million for 12
    years.
        Question. What other affected nations will be contributing to the
    architectural and engineering work and the future costs of the
    facility? What costs will the United States and each of the nations
    involved contribute?
        Answer. The entire project will be funded jointly by the United
    States and Panama through a joint Panama-US Screwworm Commission.
        Panama will be contributing approximately $800,000 to the
    architectural and engineering work and is expected to contribute 10
    percent of the construction and operating costs of the facility. The
    United States will contribute the balance of the architectural and
    engineering work, estimated to be $5 million and 90 percent of the
    construction and operating costs of the facility. Panama also
    contributed the land and $11 million of infrastructure costs for the
    facility and screwworm eradication.
        If other countries, or groups of countries, in the region detect
    screwworms at levels that pose a risk to domestic and export markets,
    they may be able to purchase flies from the Panama facility at levels
    sufficient to conduct control programs. If this should occur, the
    Panama-U.S. Commission will take steps to ensure sufficient supplies
    for the primary objective of barrier maintenance at the Darien Gap.
    Through collaboration among the Panama-U.S. Commission and nearby
    countries, the integrity of the barrier can be maintained.
                                  karnal bunt
        The President's request for the pest detection program is an
    increase of $4.5 million over the fiscal year 1997 appropriated level
    of $4.2 million. It also states that the increase would primarily go to
    the Karnal bunt (KB) program.
        Question. I understand that $500,000 will be used to fund
    cooperative agreements to examine eradication strategies for Karnal
    bunt and other probable infestations. Of the other $4 million
    requested, how much of this money will be spent on Karnal bunt? What
    activities will be funded with this money?
        Answer. We expect to spend most of the $4 million on Karnal Bunt
    (KB). This program increase supports enhanced domestic pest and disease
    surveys, expanded pest information data bases that will be shared with
    the States and industry, and the ability to scientifically verify
    disease and pest free areas or zones.
        The primary focus will be for pest detection surveys to enable
    APHIS to ensure that the $10 billion international wheat market remains
    open. Accurate survey data provides assurance to trading partners that
    KB is not present in U.S. wheat producing areas. Survey technology
    developed through pest detection initiatives allows the wheat seed
    industry to fully adopt preventive practices for keeping the U.S. wheat
    crop KB free. The increase will support follow up surveys in the
    previously infected areas and any continuing regulatory activity
    required.
        These same program components, including enhanced domestic program
    infrastructure, quick and continuous detection survey capability and
    technology transfer to the States and industry will easily incorporate
    other agricultural trade significant to pests and diseases. Pest
    detection will provide the much needed scientific backbone required for
    expanding U.S. agriculture exports.
        Question. If the total $4.5 million will not be used entirely on
    Karnal bunt, then what other activities will it be spent on?
        Answer. The KB experience shows that we must strengthen our
    domestic infrastructure to detect and quickly react to plant pests and
    diseases. $500,000 of the increase will be used to investigate
    alternative control and eradication strategies for KB and other
    potential infestations.
        Question. Which countries have not accepted the U.S.'s exported
    wheat from regulated areas even though they test negative for Karnal
    bunt?
        Answer. Approximately 60 countries have not accepted U.S. wheat
    from regulated areas, even if grain from these areas has tested
    negative for KB. But of these countries, only Peru and Venezuela have
    been asked to accept negative-tested wheat from regulated areas.
        Question. If one suspect spore is found in a state, has that
    state's wheat been refused for export until it tests negative?
        Answer. We have yet to experience such a case.
                                regionalization
        Question. The testimony indicates that APHIS has proposed a rule
    setting up the Regionalization framework. What is this?
        Answer. APHIS published a proposed rule on April 18, 1996,
    establishing new criteria for allowing or excluding importations of
    animals and animal products based on Regionalization of animal diseases
    and scientific risk assessments. The proposed criteria for animal
    disease Regionalization establish requirements for importing ruminants
    and swine, and products of ruminants and swine, from foreign
    ``regions'' based on levels of risk. Under the proposed rule, a
    ``region'' can be a country, part of a country, or a group of countries
    combined into a single trading block. The proposed requirements would
    replace current import regulations that are based on APHIS declaring
    individual countries free of specific diseases. The establishment of
    risk-based regional import requirements is consistent with our
    obligations under the North American Free Trade Agreement and the
    General Agreement on Tariffs and Trade.
                                  karnal bunt
        Question. Would this process be used for Karnal bunt?
        Answer. We have convinced many other countries to essentially take
    a Regionalization approach to our wheat exports. Our National Survey
    enables us to identify where KB is present and to provide assurance to
    all trade partners that KB is not present in major wheat-producing
    areas of the United States.
        Question. How will the Southeast be treated under this framework?
        Answer. The Southeast will be treated the same as any other region
    with no bunted kernels. On March 17, 1997, we announced that we were no
    longer considering taking further regulatory action in the Southeast.
    We made this decision because no bunted kernels had been found in any
    samples in that region. We will soon publish a standard for determining
    the presence of KB that will apply to all parts of the country.
    Establishing this standard will ensure that all U.S. wheat producers
    and handlers are treated equitably regarding KB and that U.S. wheat has
    the necessary certification to remain competitive in global markets.
    These actions were consistent with USDA's objective to protect the U.S.
    wheat industry while limiting restrictions to areas where KB disease
    occurs.
        Question. Is the Department promulgating rules for compensation for
    1996 and 1997 for Karnal bunt in Arizona? If so, when?
        Answer. Yes. We are promulgating several rules for compensation for
    1996 and 1997 for KB in Arizona. We have drafted the final rule of the
    1995-96 crop season compensation docket. This rule would extend
    compensation eligibility to handlers of wheat that tests negative for
    KB and participants in the National Survey who have positive finds.
        We expect the final rule of the 1995-96 crop season compensation
    docket to be published by mid-April. Also, we expect the proposed rules
    for the 1996-97 crop season compensation docket and the 1995-96 seed
    and straw compensation to be published by early May. It is our
    intention to publish the proposed rules with a 15-day comment period.
    We anticipate that the final rules would be published in late May.
        Question. What types of research on Karnal bunt is USDA involved
    in? Please list by agency all research that affects Karnal bunt.
        Answer. Although APHIS does not conduct research, the Agriculture
    Research Service (ARS) is spending an estimated $370,000 in fiscal year
    1997 for KB research at Ft. Detrick in Frederick, Maryland. This
    research, which is being conducted under strict quarantine conditions,
    involves pathogenicity tests which are designed to distinguish between
    KB and the ryegrass smut. ARS also hopes to determine if ryegrass
    spores are capable of infecting wheat and causing KB. Additional
    greenhouse testing is planned to determine if various cultivated and
    wild grasses are susceptible to KB and to the smut found on ryegrass.
    The Economic Research Service is conducting economic analyses at the
    request of the Office of the Chief Economist. These analyses consist of
    an evaluation of the price and trade impacts for U.S. wheat of KB and
    an evaluation of the economic losses associated with KB for the wheat
    seed industry. In fiscal year 1998, APHIS will provide ARS with
    $500,000 for the review of USDA's phytosanitary policy. Specifically,
    ARS will analyze the potential for pest outbreaks in the U.S. during
    the next 5 years, the impacts and risks associated with control
    measures other than total eradication, and whether total reliance on
    phytosanitary control is a reasonable long term policy.
        Question. Is there a test which can differentiate between Karnal
    bunt spores and other spores?
        Answer. There is a test which can differentiate between KB and all
    other smuts except ryegrass smut. A smut disease of ryegrass has spores
    similar in size and morphology to KB. Current DNA testing does not
    distinguish between the two diseases. This discovery has complicated
    identification of KB, particularly in areas such as the Southeast,
    where it is common to plant wheat in combination with various forage
    grasses, including ryegrass. ARS is conducting pathogenicity tests to
    distinguish between KB and the ryegrass smut. We expect these tests to
    be completed by April.
        Question. APHIS has stated that the quarantine imposed on Arizona
    due to the discovery of Karnal bunt in March 1996 was mishandled and
    was an over-reaction. Since the European Community has less restrictive
    requirements for phytosanitary certificates, can Arizona assume that
    APHIS will relax its requirements similar to that of our foreign
    trading partner's requirements?
        Answer. APHIS has never made that statement. Furthermore, the U.S.
    wheat industry has stated that USDA actions were entirely appropriate
    and consistent with the urgency of the problem. Now that a year has
    passed since the original detection in Arizona, we are discussing with
    our State counterparts and affected industries the need to shift our
    attention on KB from a quarantine perspective to a grain quality issue.
    This shift would signify our belief that KB does not cause significant
    yield loss. We are currently moving in this direction by proposing to
    ease restrictions based on new information about the distribution and
    risk of spread of KB. This would include relaxing our requirements on
    Arizona for wheat export. Under this proposal, which is currently being
    reviewed by the Office of Management and Budget, we would establish
    regulated boundaries based on the presence of bunted kernels and take
    regulatory action on grain movement based on the presence of
    teliospores. The European Union will accept U.S. wheat if no KB
    symptoms have been observed at the field and if samples taken before
    shipment are found to be free of KB.
                             animal damage control
        The President's fiscal year 1998 request is $23.7 million for the
    animal damage control operations activities, a decrease of $3.25
    million from the fiscal year 1997 level of $26.9 million.
        Question. What activities including the States/cooperators will be
    affected by this decrease?
        Answer. Technical assistance and control work to prevent and reduce
    damage caused by wildlife, primarily to agricultural and natural
    resources, would be reduced. The States most greatly affected by the
    reduction unless there were increased cooperator funding would be
    Arkansas, Connecticut, Delaware, Iowa, Minnesota, Pennsylvania, and
    Rhode Island, which provide little or no cooperator funding. Animal
    damage control staffing would be reduced by 72. Wolf control work in
    Minnesota would cease unless cooperator funding were forthcoming.
    Additional impacts to affected States in the Eastern region include
    likely reductions in the following activities: protection of crops from
    blackbirds, and problems related to nuisance gulls, Canada goose, and
    vultures; livestock protection and general technical assistance for
    nuisance wildlife; assistance with deer problems to property, beaver
    control activities, and reduced support of the technical assistance
    hotline for rabies in Vermont.
        In the Western region, impacts to affected States would likely
    include reduced: aerial predator control; training at airports relating
    to wildlife air strike hazards; and activities to protect threatened
    and endangered species.
        Question. Please provide a list of the states that will be affected
    by the policy change that all states must provide 50 percent of the
    cost of all programs beginning in fiscal year 1998.
        Answer. The following is a list of States in which Federal animal
    damage control contributions exceeded cooperator contributions in
    fiscal year 1996. Because contributed amounts can vary somewhat each
    year, this list is subject to change as new data for fiscal year 1997
    becomes available.

    ------------------------------------------------------------------------
                                                    Fiscal year 1996--
                      State                  -------------------------------
                                               Appropriated     Cooperative
    ------------------------------------------------------------------------
    Alabama.................................        $159,900         $31,963
    Arizona.................................         448,799         265,791
    Arkansas................................         258,890  ..............
    Colorado................................         790,480         240,854
    Connecticut.............................           9,370  ..............
    Delaware................................          10,580  ..............
    District of Columbia....................           4,761  ..............
    Florida.................................         151,950          78,743
    Idaho...................................         936,144         411,400
    Indiana.................................          96,700          21,513
    Iowa....................................          68,960           4,361
    Kansas..................................          75,000          33,804
    Louisiana...............................         361,600         221,520
    Maine...................................         135,700          45,320
    Maryland................................          90,459          71,885
    Massachusetts...........................          75,897          36,450
    Michigan................................          97,800          28,855
    Minnesota...............................         242,500              96
    Missouri................................         103,440          54,063
    Montana.................................         973,500         547,194
    Nebraska................................         393,874         332,556
    Nevada..................................         814,872         619,852
    New Hampshire...........................         175,306          68,549
    New Mexico..............................       1,242,585       1,098,776
    New York................................         119,634         115,898
    North Dakota............................         772,052         331,948
    Ohio....................................         148,900          70,000
    Oregon..................................         974,440         724,621
    Pennsylvania............................          79,178  ..............
    Rhode Island............................           8,433  ..............
    Utah....................................         996,992         840,175
    Vermont.................................          61,594          39,710
    Wyoming.................................       1,006,781         471,136
                                             -------------------------------
          Total.............................      11,887,071       6,807,033
    ------------------------------------------------------------------------

        Question. How would the proposed 50 percent cost-share requirement
    be implemented?
        Answer. Under this proposal, APHIS would provide no more than 50
    percent of total Federal and cooperative program costs in any State.
    Based on the most current Federal/cooperative contribution data
    available, Federal contributions would be provided on a limited basis
    from neighboring States, in States where the cooperative contribution
    is little or nothing. However, limited technical assistance would
    continue to be available on a limited basis.
        Question. Was funding provided for cattail management and blackbird
    control efforts in North and South Dakota and Louisiana as directed in
    the fiscal year 1997 Senate Committee Report? How much? Is this
    included in your fiscal year 1998 baseline? Please provide a brief
    explanation of APHIS' accomplishments in this area.
        Answer. Cattail management activities are ongoing in North Dakota.
    APHIS expects to treat about 4,500 acres during fiscal year 1997.
    Blackbird control activities are ongoing in North and South Dakota. In
    Louisiana, blackbird control activities are taking place in Evangeline,
    Vermillion, Acadia, Allen Calcasieu, Cameron, Jeff Davis, and St.
    Landry Parishes.
        During fiscal year 1997, APHIS will spend approximately $100,000
    towards cattail management in North Dakota, and approximately $368,000
    towards blackbird control in North and South Dakota. An additional
    $150,000 is expected to be spent in Louisiana during fiscal year 1997,
    toward blackbird control. Funding for cattail management in North
    Dakota, and blackbird control in North and South Dakota and Louisiana
    is included within the fiscal year 1998 budget request at approximately
    the same levels as fiscal year 1997.
        During fiscal year 1996, 5,757 acres of cattails in North Dakota
    were treated with an EPA-approved herbicide. This reduces the amount of
    blackbird roosting and nesting habitat by controlling cattails. By
    making the habitat unattractive, blackbirds are forced to seek suitable
    roosting and nesting sites away from sunflower fields. Pyrotechnic
    devices were also provided to producers in areas where blackbird damage
    to sunflowers was severe. In Louisiana, APHIS was assisted by the
    Louisiana Rice Growers Association, the Louisiana Department of
    Agriculture, and Louisiana State University, with contributions of
    supplies, equipment, and staffing, to control blackbirds in rice-
    producing areas throughout the State.
        Question. The Senate report for the fiscal year 1997 Agriculture
    Appropriations Act included an additional $125,000 for the beaver
    damage control in Mississippi. Please provide a brief explanation of
    APHIS' accomplishments in this area. Is funding included in the budget
    to continue this work?
        Answer. APHIS' 21 beaver control specialists provide assistance
    throughout the State of Mississippi, including the Delta National
    Forest. Cooperative funding for the beaver control program in
    Mississippi will total approximately $763,000 during fiscal year 1997.
    Recent accomplishments include 1,863 projects in which the following
    resources were protected: timber, crops, turf and ornamental plants,
    dams and levies, irrigation systems, and roads and bridges.
        APHIS will spend a total of approximately $275,000 toward beaver
    damage control assistance in Mississippi during fiscal year 1997,
    including the Congressionally directed $125,000. The fiscal year 1998
    budget request includes funding for beaver control assistance at
    approximately the same level as fiscal year 1997.
        Question. The Senate report for the Fiscal Year 1997 Agriculture
    Appropriations Act maintained funding for the cooperative agreement
    with the Hawaiian Sugar Planters Association for rodent control in
    sugarcane and macadamia nut crops. Please provide a brief explanation
    of APHIS' accomplishments in this area. Is funding included in the
    budget to continue this work?
        Answer. APHIS has established a field office and developed improved
    methods of using rodenticide baits for controlling damage in macadamia
    nut orchards. Introduced rats that have maintained high populations in
    orchards and a variety of other habitats have caused the damage.
    Studies of rat movements using radio-telemetry and fluorescent dyes
    established that placement of bait in trees resulted in increased bait
    acceptance and specifically targeted the animals feeding on the growing
    macadamia nuts.
        During fiscal year 1997, APHIS will spend approximately $240,000
    towards rodent control in sugarcane and macadamia nuts, and anticipates
    providing a similar level of support in fiscal year 1998.
        Question. The Senate report for the Fiscal Year 1997 Agriculture
    Appropriations Act included funding to continue depredation efforts on
    fish-eating birds and other species which cause damage to the
    commercial fish industry in the mid-South. Please provide a brief
    explanation of APHIS' accomplishments in this area. Is funding included
    in the budget to continue this work?
        Answer. We continue to reduce fish-eating bird damage to the
    aquaculture industry. APHIS has assigned three wildlife biologists in
    Florida, Mississippi, and Alabama to provide assistance and equipment
    to aquaculture producers. These include catfish farmers in Alabama,
    tropical fish and catfish farmers in Florida, and bait fish and catfish
    farmers in Arkansas. APHIS is expanding activities by providing
    additional assistance to catfish and crawfish farmers in Louisiana and
    trout farmers in Pennsylvania.
        The fiscal year 1998 budget includes funding to continue
    aquaculture assistance activities at approximately the same level as
    will be provided during fiscal year 1997.
        Question. The Senate report for the Fiscal Year 1997 Agriculture
    Appropriations Act continued funding at the fiscal year 1996 level for
    the Jack H. Berryman Institute of Wildlife Damage Management in Utah
    and the Monell Field Station in Pennsylvania. Please provide a brief
    explanation of APHIS' accomplishments in these areas.
        Answer. The Jack H. Berryman Institute works to improve and resolve
    human/wildlife conflicts through education, outreach, and research.
    Research efforts at the Institute have been directed at a number of
    problems, including bird/aircraft strikes, deer/automobile collisions,
    bird depredation at aquaculture facilities, predation of ground nesting
    birds, predator control to protect livestock, and deer damage to
    agricultural crops. During 1996, the Institute added 13 new research
    studies to accompany 57 on-going studies.
        The Institute also supports the work of 17 faculty members who
    teach 7 different wildlife damage management classes. Also, the
    Institute supports the work of 33 graduate students.
        Outreach efforts conducted by the Institute include conducting
    public attitude surveys regarding wildlife and wildlife damage and the
    development and dissemination of wildlife damage management literature.
        The Institute continues to develop wildlife damage management
    professionals. Since the inception of the Institute, 22 students have
    obtained graduate degrees. At least 6 graduates have been employed by
    APHIS, and several others by the International Association of Fish and
    Wildlife Agencies, the U.S. Fish and Wildlife Service, and the National
    Biological Survey.
        Research conducted at Monell has provided a foundation from which
    the National Wildlife Research Center has been able to pursue
    additional specialized research specific to the needs of the animal
    damage control program. A recent example was the development of an
    effective grape flavored taste aversion substance called methyl
    anthranilate. It is now labeled for use as a bird repellent in water
    and on turf areas.
        Question. Is funding included in the budget to continue this work?
        Answer. APHIS provides $35,000 per year in support of the Jack H.
    Berryman Institute, and approximately $212,000 per year for an academic
    development program at Utah State University. APHIS continues to spend
    about $80,000 annually to support the Monell Research Field Station in
    Philadelphia, Pennsylvania. APHIS has included funding in the fiscal
    year 1998 budget request for all of these efforts at about the current
    level.
        Question. The Senate report for the Fiscal Year 1997 Agriculture
    Appropriations Act directed the Department to maintain the animal
    damage control office in Vermont. Please provide a brief explanation of
    APHIS' accomplishments in these areas. Is funding included in the
    budget to maintain this office?
        Answer. APHIS continues to maintain the animal damage control
    office in Vermont. Through this office, APHIS employees serve in an
    advisory capacity on rabies task forces to help plan rabies management
    efforts. This office also offers a cooperatively established toll-free
    rabies information hotline to address public concerns regarding the
    northward spread of the mid-Atlantic strain of raccoon rabies. APHIS,
    in cooperation with the Vermont Departments of Fish and Wildlife,
    Health, and Agriculture, responded to nearly 3,400 phone calls
    regarding rabies in Vermont in fiscal year 1996.
        As Vermont is one of the States in which Federal contributions
    exceed those of cooperators, support for animal damage control efforts
    in Vermont would be reduced as a result of the requested decrease in
    funding for fiscal year 1998 unless additional cooperator funding is
    forthcoming. The Vermont office would be maintained to provide
    continued advice on task forces for rabies management efforts, but the
    toll-free rabies hotline would be discontinued without more cooperator
    support.
                        brucellosis eradication program
        Question. The fiscal year 1998 budget request for the Brucellosis
    Eradication Program is $19.9 million. This program is being decreased
    by $1.7 million from the fiscal year 1997 level of $21.7 million. The
    Agency's goal is to eradicate brucellosis by the end of the calendar
    year 1998. What activities will APHIS carry out in the Greater
    Yellowstone Area? How much money is designated for these activities?
        Answer. APHIS will continue to work with and assist the National
    Park Service and the State of Montana with the implementation of the
    Interim Bison Management Plan and with brucellosis management actions
    in the long-term bison management plan when it is finalized. The Agency
    will provide full-time veterinarians and part-time personnel to assist
    with liaison, planning, bison capture, testing, sampling, and research
    activities. APHIS will also provide regional and national staff
    assistance and advice to the Greater Yellowstone Interagency
    Brucellosis Committee and other ongoing efforts concerning brucellosis
    in the Yellowstone Area, including environmental impact statements and
    environmental assessments.
        Additionally, the Agency will continue to provide resources for
    several ongoing brucellosis research projects including an interagency
    research project to evaluate the transmission of brucellosis in bison
    within Yellowstone National Park (YNP) and a research project to study
    the safety and efficacy of RB51 Brucella vaccine on pregnant YNP bison.
    The Agency will also fund new research proposals designed to gather
    information which would supplement current brucellosis eradication
    procedures for use by bison managers in YNP.
        In fiscal year 1998, APHIS has agreed to provide bison handling
    facilities to the State of Montana for the capture and testing of bison
    migrating from the Park. The Agency has also offered assistance to the
    State of Wyoming to monitor the commingling of elk and cattle and to
    provide brucellosis vaccine to local livestock producers.
        At the fiscal year 1998 funding level of $19.9 million, APHIS will
    provide $400,000 toward brucellosis control, monitoring, and
    eradication activities in the Greater Yellowstone Area and $300,000 for
    several brucellosis research projects in bison and elk.
        Question. The Secretary of Interior announced that the herds in
    Yellowstone should be vaccinated. Will APHIS assist in this activity?
        Answer. Yes. APHIS has offered assistance in any brucellosis
    eradication activities, including vaccination, neutering, testing or
    other surveillance activities, which are undertaken in Yellowstone
    National Park, Grand Teton Nation Park, the National Elk refuge, or
    Wyoming elk feedgrounds.
        Question. Once the Agency has completed the eradication of
    brucellosis, will you need appropriated funds to carry out some sort of
    maintenance program?
        Answer. Yes. Surveillance activities need to continue for
    approximately five years after brucellosis is eradicated in the United
    States to ensure that no foci of infection have gone undetected. A
    reduced level of appropriated funds would be required for these
    surveillance activities.
        Question. It was reported that a group in Montana claimed that USDA
    promised the state of Montana would not lose its brucellosis-free
    status if bison are allowed to roam in the state. Does this claim hold
    any truth?
        Answer. To maintain the Brucellosis Class-Free status the State
    must comply with the conditions of the interim bison management
    agreement which requires that the State of Montana and the National
    Park Service prevent the movement of bison from YNP and the Brucellosis
    Management Areas (BMA's). The BMA's were established to reduce the
    number of migrating bison being killed. Additionally, the State of
    Montana must maintain an active brucellosis surveillance program and
    detect no source of the disease in the State to remain in the
    Brucellosis Class-Free category.
                                golden nematode
        Question. Is there a need to expand the golden nematode quarantine
    and survey program in the Northeast?
        Answer. No, there is not. The current quarantine area encompasses
    all areas in the Northeast that are infested with or have been exposed
    to golden nematode.
        Question. If so, why is the program decreased in fiscal year 1998
    by $9 million?
        Answer. The decrease we are proposing for fiscal year 1998 amounts
    to only $9,000 and will not affect the level of program delivery. This
    decrease is comprised of a $14,000 decrease for streamlining and a
    $5,000 increase for pay costs.
                            mediterranean fruit fly
        Question. APHIS announced in the Federal Register on September 10,
    1996 that the Mediterranean fruit fly has been eradicated in the areas
    in California and that the quarantine restrictions are no longer
    needed. Is the decrease proposed in the fiscal year 1998 for the fruit
    fly exclusion and detection activities due to this announcement?
        Answer. No, it is not. The decrease proposed is for the program's
    share of the reduction in Federal employment costs. This decrease is
    comprised of a $320,000 decrease for streamlining and a $129,000
    increase for pay costs.
                                  boll weevil
        In the Fiscal Year 1997 Agriculture Appropriations Act, a boll
    weevil eradication loan program was initiated at a program level of $35
    million. The fiscal year 1998 budget proposed to terminate this loan
    program. The Secretary must promulgate regulations for the fiscal year
    1997 loan program, but has not yet done so.
        Question. The thought was that a loan program would be a less
    costly way to increase funding for boll weevil eradication. Does the
    Department not share this view. Why?
        Answer. The program regulations are being developed by the Farm
    Service Agency and they are under review. Since the program is
    controversial in some regions due to possible environmental impacts,
    the Farm Service Agency is currently working with APHIS to develop an
    environmental assessment to address these concerns. The proposed
    regulation is expected to be published, for comment, in the near
    future. Once the comments have been addressed, the implementing
    regulation will be published.
        The President's budget requests $6.45 million for the Boll Weevil
    Eradication Program. This is a decrease of $9.8 million from the fiscal
    year 1997 appropriated level of $16.2 million. Several areas of
    Mississippi, Louisiana, Arkansas, and Texas which have not previously
    participated in the eradication program will be entering into the
    program next year.
        Question. How many new acres do these areas encompass?
        Answer. Areas that will begin program operations in August 1997
    include: 450,000 acres in the hill section of Mississippi; 125,000
    acres in the Red River Valley of West Louisiana; 6,000 acres in
    southwest Arkansas; and 136,000 acres in the St. Lawrence area of west
    Texas. Areas that will begin program operations in fiscal year 1998
    include: 200,000 acres in southwest Tennessee; 260,000 acres in the
    south delta of Mississippi; possibly 25,000 acres in New Mexico; and
    possibly two areas in Texas and Oklahoma totaling 1.06 million acres.
        Question. Will your budget request support the initial startup
    costs in all these states adequately?
        Answer. Yes, it will. Although we will be providing less funding in
    fiscal year 1998, the States will offset our reduced contribution by
    contributing a greater portion in fiscal year 1998, as they had agreed
    to in each State's referenda. Therefore, our budget request would
    adequately support initial startup costs when combined with an
    increased share from the States.
                            buildings and facilities
        Question. The budget request includes a decrease of $3.2 million
    for a one-time construction project provided in fiscal year 1996. Which
    project are you speaking of and why are these funds not required?
        Answer. The $3.2 million provided in fiscal year 1997 is for APHIS'
    share of the Plum Island Animal Disease Center modernization project,
    which is an ongoing project with ARS. In the past, the Appropriation
    Committees have asked us to justify all construction projects. Even
    though this was a project in fiscal year 1997, we justified it again
    for fiscal year 1998. In fiscal year 1998, we have requested another
    $3.2 million, along with $5.0 million requested by ARS, to fund APHIS'
    share of the ongoing modernization project at Plum Island Animal
    Disease Center. Funds will be used to upgrade electrical and structural
    deficiencies and to address safety and environmental issues.
                                horse protection
        In the Senate report accompanying the fiscal year 1997 agriculture
    appropriations bill, the Committee directed the Department to provide
    more effective use of funds for the enforcement of the Horse Protection
    Act, to establish programs and policies for conducting horse show
    inspections and other related enforcement activities to USDA-certified
    horse industry organizations.
        Question. Please provide a brief explanation of APHIS'
    accomplishments in these areas. Is funding included in the budget to
    continue this work?
        Answer. We have drafted a strategic enforcement plan. This plan
    places increased regulatory authority and enforcement responsibilities
    on USDA-certified organizations. We developed the plan with the advice
    and equine expertise from both APHIS veterinarians and horse industry
    organizations.
        We are now finalizing the plan. We revised the draft to incorporate
    information gathered from all sectors of the horse industry, as well as
    three public forums held in 1996. Federal Register comments, and write-
    in campaigns. Departmental review should be complete in March 1997.
    After making any necessary revisions, we will make the plan available
    to the horse industry to seek a final consensus. The proposed budget
    will allow us to continue in this effort.
                        national poultry improvement act
        Question. The fiscal year 1997 Agriculture Appropriations Senate
    report directed the Department to enhance the fiscal year 1997 funding
    for the National Poultry Improvement Program which is funded in the
    ``Animal health monitoring and surveillance'' account. Please provide a
    brief explanation of APHIS' accomplishments in this area. Is funding
    included in the budget to continue this work?
        Answer. To enhance the National Poultry Improvement Plan (NPIP),
    APHIS increased the NPIP funding allocation from $240,000 to $260,000
    in fiscal year 1997. APHIS plans to use the additional funds to hire an
    epidemiologist who will spend 50 percent of their time on the NPIP
    program and 50 percent on activities related to general poultry
    diseases.
        Yes, $260,000 is included in the fiscal year 1998 budget as part of
    the Animal Health Monitoring and Surveillance line item.
                                 noxious weeds
        The fiscal year 1997 Agriculture Appropriations Senate report
    directed the Department to include funding at the fiscal year 1995
    level to continue its work on the eradication of goatsrue in Utah, to
    continue its efforts to control tropical soda apple in the Southeast,
    and to work with the Hawaii Department of Agriculture to secure
    environmentally safe controls for alien weed pests.
        Question. Please provide a brief explanation of APHIS'
    accomplishments in these areas. Is funding included in the budget to
    continue this work?
        Answer. In fiscal year 1997, we transferred $100,000 to Utah State
    University, to conduct eradication activities in Cache County, Utah.
    Currently, we have a 5-year plan with the State of Utah to conduct
    post-eradication surveys to verify eradication. During this process, we
    provide technical expertise to the State. We have included $30,000 in
    our fiscal year 1998 budget for this work.
        To address outbreaks of Tropical Soda Apple (TSA) in the Southeast,
    we are concentrating on education, survey, and management of incipient
    infestations. In fiscal year 1996, we conducted surveys on properties
    in most States that have received cattle, bahiagrass, or composted
    manure from infested sites in Florida. As a result of these surveys, we
    have confirmed outbreaks in Alabama, Georgia, Mississippi, North
    Carolina, Pennsylvania, South Carolina, Tennessee, and Puerto Rico. In
    all instances, the confirmed infestations have either been eradicated
    or are under intensive management for eradication. We have included
    approximately $100,000 in our fiscal year 1998 budget to continue this
    work.
        Regarding alien weed pests, we are cooperating with the U.S. Forest
    Service, and several agencies from the Interior Department to bolster
    our protection of managed and natural ecosystems in Hawaii from
    introduced invasive plants. To deal with this issue, we are training
    our personnel as well as State personnel in Hawaii. Also, we are
    working with the State to establish a Hawaii Weed Team. This Team will
    cooperate to enhance effectiveness in preventing and controlling weeds
    in Hawaii. In addition, we are working with State officials to create a
    Hawaii Weed Detection and Reporting Network, which would include plant
    collectors, botanists, and weed scientists. This Network will ensure
    that the Hawaii Weed Team learns about new infestations so early
    actions can be taken when eradication is still feasible. We have
    included approximately $30,000 in our fiscal year 1998 budget for this
    work.
                              eradication of kudzu
        Kudzu is a big problem in Mississippi. It is a nuisance because it
    takes over any vegetation in its path. Foresters find this weed to be
    extremely difficult to control with the current land management
    practices available to them.
        APHIS has never been involved in any activities which would
    eradicate this weed. Kudzu is not listed (an official process that
    involves scientific review and publication in the Federal Register) as
    a noxious weed. The Federal Noxious Weed Act of 1974, 7 U.S.C. 2801-13,
    defines a noxious weed in part as a ``plant which is of foreign origin,
    is new to or not widely prevalent in the United States, and can
    directly or indirectly injure crops.'' This Act provides APHIS'
    authority to eradicate or control noxious weeds.
        Question. Is the definition of a noxious weed the only impediment
    that stops APHIS from getting involved in ways to eradicate Kudzu?
        Answer. The definition is one impediment. Kudzu is widespread
    occupying five million acres in the eastern United States. Another
    major impediment is the large cost of a kudzu control program.
        Question. What is the estimated cost of eradicating Kudzu if the
    law was changed?
        Answer. In practical terms, kudzu is well beyond the point of being
    eradicated totally from the United States. There is technology
    available to control kudzu and eliminate it from individual sites,
    however, an APHIS-directed program would have to be a massive, multi-
    year effort. If we became involved in a cooperative control effort with
    State agencies, Federal land management agencies, and private land
    owners, control costs would be a minimum of $160 per acre, spread over
    three years. If we assume that 5 million acres are infested, the total
    cost of chemical control would be $800 million. This estimate does not
    include costs associated with research, detection, delimiting, and
    appraisal surveys (before and after), monitoring, clean up treatments,
    and re-vegetation efforts.
                                     ______

                    Questions Submitted by Senator McConnell
               commercial transportation of equine for slaughter
        Question. During last years appropriation hearing I asked the
    Secretary for his cooperation and assistance in implementing Title IX--
    Miscellaneous, Subtitle A--Commercial Transportation of Equine for
    Slaughter. I was informed that a determination could be made, however,
    it would be difficult to enforce this regulation without additional
    funding to support inspection personnel and related costs. Please
    provide the Committee and myself the status of implementing the
    Commercial Transportation of Equine for Slaughter?
        Answer. To date, the Commercial Transportation of Equine for
    Slaughter statute has not been implemented.
        Question. Has the Department issued any guidelines/regulations? If
    not, when?
        Answer. No guidelines or regulations have been issued. An
    interagency working group was formed to assess the feasibility of
    implementing this program and to determine program resource
    requirements. The group concluded that effective implementation of the
    program would require conducting preliminary research, producing an
    educational publication and video, and hiring a veterinary medical
    officer(s) and program assistants. It is not yet known when the
    Department will issue guidelines or regulations.
        Question. Last year the Secretary said it would be difficult to
    enforce this regulation without additional funding, what can be done to
    enforce this provision without additional funds?
        Answer. No enforcement activities can be conducted at the current
    funding level.
        Question. If additional funds are needed did you request funds? If
    not, why?
        Answer. Because of budget constraints, the Administration was not
    able to request additional funds for the commercial transportation of
    slaughter horses program.
        Question. How much is needed to enforce this provision?
        Answer. It is estimated that $411,000 would be required to
    establish the Commercial Transport of Slaughter Horses program.
        Question. Please provide a breakdown of how these funds would be
    spent?
        Answer.

                Commercial Transport of Slaughter Horses Program

                                                                     Dollars
            Cost category                                             (est.)
    Salaries and Benefits.........................................  $245,000
    Travel........................................................    31,000
    Transportation of Things......................................    17,000
    Printing......................................................     8,000
    Cooperative Agreements........................................    34,000
    Supplies and Materials........................................     6,000
    Equipment.....................................................    70,000
                        --------------------------------------------------------------
                        ____________________________________________________

          Total...................................................   411,000
                                     ______

                      Questions Submitted by Senator Burns
                                  brucellosis
        Question. Quickly, I would like to state that I have been a strong
    proponent of the Animal and Plant Health Inspection Service. I have
    never had a problem coming into this country and proceeding through the
    protocols necessary to make sure that all the animals and plants in
    this country are protected. I would also like to commend you for the
    approach you are taking to make sure we have a clean and healthy bison
    herd in Yellowstone National Park.
        I would like to start off by asking how many herds in America today
    are infected by Brucellosis? How many 10 years ago?
        Answer. Of the estimated 1.2 million cattle herds in the United
    States, 26 are currently affected by brucellosis and under quarantine.
    Ten years ago, at the end of fiscal year 1987, there were 3,160
    affected herds under quarantine.
        Question. Does the reduction in funding adequately accept the risk
    as we continue to see it coming out of Yellowstone National Park?
        Answer. The fiscal year 1998 President's Budget does include
    adequate funding for the brucellosis program, specifically for
    activities in the Greater Yellowstone Area (GYA). This funding will
    allow APHIS to continue to support research to develop alternative
    brucellosis vaccines for bison and elk and to study the transmission of
    brucellosis from wildlife to domestic livestock. In addition, funds
    will support a wildlife veterinarian in Montana to serve as a liaison
    among the involved government agencies.
        APHIS is committed to working cooperatively with the involved
    government agencies to address the most critical issues. These include
    eliminating brucellosis in the GYA, providing additional suitable bison
    winter range outside the park, and coordinating these activities in
    such a way to encompass the interests of the stakeholders.
        Question. Could you provide the committee with the brief on the
    current work being done on research for an effective vaccine for bison
    and also for elk as a treatment against Brucellosis?
        Answer. To date, APHIS has committed more than $3 million toward
    brucellosis research in the GYA. A new vaccine, RB51, has recently been
    approved for use in cattle. Researchers are also testing this vaccine
    on bison calves, male bisons, pregnant bison, and elk to determine its
    safety and effectiveness. Specific examples of research on RB51 include
    a vaccination field study on bison yearlings in South Dakota, a
    vaccination safety and efficacy study on pregnant bison in Idaho, a
    vaccination safety study in male bison, vaccination safety field trials
    in bison calves, and a controlled study on the immune response of elk
    to the vaccine. Tests of the RB51 vaccine look promising. Before RB51
    can be approved for use in bison and/or elk, the vaccine must pass
    additional safety and efficacy trials. This process may take up to 2
    years.
        Question. Mr. Medley, I appreciate your willingness to work with
    the state of Montana in protecting their Brucellosis free status, but
    in all reality what does your document mean to Montana and Wyoming when
    we have other states either that have with been imposing or threatening
    to impose sanctions on our states?
        Answer. Most Federal requirements are relieved when States, such as
    Montana and Wyoming, attain Class Free status. Traditionally, State
    import requirements for brucellosis have paralleled the Federal
    interstate movement requirements. However, the States surrounding the
    GYA are in a unique situation. Their cattle are free of brucellosis,
    but a perception exists that their cattle may have been exposed to
    brucellosis infected bison from Yellowstone National Park. Several
    States have deemed it necessary to protect their cattle by imposing or
    threatening to impose additional import requirements, which are
    scientifically-based, on the surrounding States. Fortunately, most
    States believe that the class statuses of these States have not been
    compromised.
        APHIS can minimize the concerns of the importing States by working
    with the National Park Service to properly handle the Yellowstone bison
    leaving the Park to prevent their exposure to the brucellosis free
    cattle in the States surrounding the Park. In addition, APHIS can work
    to minimize the imposition of State import requirements that interfere
    unnecessarily with interstate commerce. It is not unrealistic, however,
    to believe that some States may continue to impose testing requirements
    on cattle from around Yellowstone until brucellosis has been eradicated
    from the bison in the Park.
                             animal damage control
        Question. Wolves have been introduced in Idaho, and Montana and are
    showing up in parts of Wyoming. With the increased wolf numbers, what
    impacts does the wolf presence in a given area have on the ADC program
    and it's ability to respond to other predation problems?
        Answer. Gray wolves began naturally moving back into northwestern
    Montana from Canada in the mid-1980's. This naturally occurring
    population of wolves is increasing and now occupies northern Idaho as
    well as northwestern Montana, and consists of about 70 adults and
    yearlings and possibly 30 pups. To speed wolf recovery in the region,
    the U.S. Fish and Wildlife Service (FWS) captured 29 wolves in Canada
    in 1995 and 37 wolves in 1996. They released them into Yellowstone
    National Park and central Idaho. This group of wolves is considered a
    nonessential experimental population and it is increasing as well.
    Introduced wolves have successfully bred and are raising pups.
        As evidenced by the increase in their numbers, both naturally
    occurring and reintroduced gray wolves can thrive in many areas of
    Idaho, Montana, and Wyoming. They sometimes frequent areas of human
    activity and some seem to select the same type of habitat that some
    people prefer, such as areas of interspersed forest and open areas
    typical of ranching communities in western Montana. Most of the wolves
    have not come into direct conflict with people, but some have killed
    livestock. An increase in these conflicts is expected as the wolf
    population increases.
        ADC plays an important role in wolf recovery. This includes
    verification of wolf livestock predation, capturing depredating wolves,
    mediating conflicts between agencies and resource owners, and
    disseminating information to the livestock community and the general
    public. Wolf recovery and reintroduction in Idaho and Montana have
    caused restrictions on the use of traditional methods of control where
    wolves may exist. This results in more costly control methods such as
    aerial operations, to ensure ADC activities minimally impact wolves.
    Also, the presence of wolves creates additional workload, causing
    delays in ADC response time to requests for all predator control
    assistance in wolf recovery areas.
        Question. Is the U.S. Fish and Wildlife Service contributing any
    research efforts on funding to address capturing methodologies that the
    USDA, APHIS, Animal Damage Control program could use that would
    minimize impacts that wolf recovery will have on other aspects of the
    ADC program?
        Answer. APHIS does not receive funding from the FWS for research
    related to wildlife capturing methodology, nor is the Agency aware of
    other FWS involvement in such research.
        Question. Plans to release Mexican wolves in New Mexico and Arizona
    next year are underway. Has the U.S. Fish and Wildlife Service given
    consideration to the impacts that the presence of wolves will have on
    the routine activities of the USDA, APHIS, Animal Damage Control
    program uses to reduce coyote damage to livestock? What ADC tools will
    be restricted? What is the increased cost to APHIS/ADC with a
    limitation on these tools? What the cumulative impacts to the livestock
    industry in terms of increase predation by predators other than wolves
    and increased management cost?
        Answer. In the final ADC Environmental Impact Statement (EIS) for
    reintroduction of the Mexican Wolf within its historic range in the
    Southwestern United States, the FWS indicates that wolf reintroduction
    will primarily impact cattle resources in the area with potential
    losses to wolves ranging from 0 to 34 individual animals. FWS is
    uncertain but theorizes that populations of coyotes and mountain lions
    could also be displaced, which could result in temporary higher
    concentrations of these animals in some areas. The FWS will restrict
    the use of the M-44, neck snares, and foothold traps in the wolf
    recovery areas of Arizona and New Mexico. The final EIS also indicates
    that these restrictions will likely reduce ADC effectiveness in
    controlling other predators in the area unless ADC commits additional
    resources.
        The FWS plans to issue a final rule for the proposed establishment
    of a nonessential experimental population of the Mexican Gray Wolf in
    Arizona and New Mexico before wolves are released in these areas. The
    final rule, which is expected to be published in the Federal Register
    about the first week in June 1997, will specify the circumstances under
    which control or management intervention of wolves can occur, and the
    methodologies which can be employed. Over the next 9 months, the FWS
    will develop detailed management plans and agreements to define its
    working relationship with cooperating agencies.
        Under current management plans for wolf recovery in the Northern
    Rocky Mountain States, the use of traditional methods of control
    including M-44's, foothold traps, and snares would be restricted or
    forbidden in known wolf population areas.
        Current management plan restrictions require more time consuming or
    more expensive control approaches such as aerial control, to ensure
    that ADC activities do not significantly impact wolf recovery efforts.
    Based on the impact of wolf management activities on ADC livestock
    protection efforts in Montana, APHIS estimates that increased costs
    currently amount to about $85,000 per year. If similar programs were to
    be introduced in Arizona and New Mexico, initial impacts could be
    expected to be approximately the same in each State, with increases in
    proportion to increases in wolf populations.
        A study would be required to determine the impact of increased
    predation to the livestock industry. However, an increase in predation
    can be expected as workloads increase due to expanding wolf
    populations. Because of increased workload, ADC response time to
    requests for assistance, which involve traditional livestock protection
    activities, is increasingly delayed.
        Restrictions on the use of traditional control tools are resulting
    in the use of more expensive control techniques such as aerial control.
    Also, a need for additional employees as wolf populations increase will
    most likely cause increased costs to both APHIS and cooperators.
        Question. This fiscal year Congress appropriated $100,000 to ADC
    for wolf damage control, and the U.S. Fish and Wildlife Service agreed
    to provide ADC an additional $100,000 for this same purpose. How are
    these funds being spent, and are they adequate to respond to wolf
    damage complaints? Is this amount adequate for future problems as the
    wolf population grows?
        Answer. Funds are used for verification of wolf livestock
    predation, capturing depredating wolves, mediating conflicts between
    agencies and resource owners, and disseminating information to the
    livestock community and the general public. The new interagency
    agreement between FWS and APHIS commits a total of $200,000 per year
    toward efforts in dealing with wolf predation on livestock in Idaho,
    Montana, and Wyoming. APHIS currently estimates these efforts to cost
    approximately $215,000 in fiscal year 1997.
        In addition to a projected reprioritizing of approximately $15,000
    in fiscal year 1997 for wolf management efforts, APHIS is projecting
    the need to reprioritize approximately $58,000 in fiscal year 1998,
    beyond the $200,000 per year currently committed in the APHIS/FWS
    interagency agreement for work in Idaho, Montana, and Wyoming. With
    expected reintroductions of the Mexican wolf in the near future, APHIS
    may need to expand efforts to include the States of New Mexico and
    Arizona. Total efforts including the additional States could cost
    $730,000 in fiscal year 1999, and $1,162,000 in fiscal year 2000.
                                  karnal bunt
        Question. Could you provide this committee with the current status
    of Karnal Bunt in the United States?
        Answer. Currently, Karnal Bunt is confined to small areas in
    Arizona and California. We are now regulating four counties in Arizona
    and parts of two counties in California due to the presence of the
    disease. Our National Survey has demonstrated that the disease is
    apparently not present in detectable levels in other production areas.
    As a precautionary measure, though, we are also regulating small areas
    in New Mexico and Texas because infected seed was planted in these
    areas. Bunted kernels have never been collected from fields in these
    two States. These regulations are necessary to control the movement of
    infected grain and seed. For several years before the detection of
    Karnal Bunt in Arizona in March 1996, we had been conducting Karnal
    Bunt surveys as part of our Cooperative Agricultural Pest Survey
    program. The data gathered through these surveys has enabled us to
    continue certifying wheat for export even after the 1996 detection. To
    date through our National Survey, we have tested over 15,000 grain
    samples representing all wheat-producing areas in the United States.
    Based on these tests, we have not been able to confirm the presence of
    Karnal Bunt in any areas of the U.S. other than those where we knew the
    disease to be present.
        In addition, we will co-host an international symposium in August
    with Mexico and Canada through the auspices of the North American Plant
    Protection Organization to gain consensus on Karnal Bunt's disease
    threat status. Our goal is to provide all countries with the
    opportunity to review all available data and create rational and
    objective standards for the international movement of grains affected
    by various smut diseases. Also, we will seek to determine if there is
    international support for minimizing regulatory actions on Karnal Bunt.
        Question. How does this reflect upon our ability to export our
    product overseas to markets we have had long standing trade
    arrangements with?
        Answer. Our wheat exports have not been significantly affected
    because Karnal Bunt has not reached the major wheat-producing areas of
    the United States. We are still able to certify most wheat for export
    by demonstrating that it is not coming from areas where Karnal Bunt is
    known to be present or areas at risk because of Karnal Bunt. Also, we
    can certify that over 90 percent of U.S. wheat originates in areas
    where Karnal Bunt is not known to be present; we have seen a relatively
    normal movement of wheat exports since the beginning of our program.
    The export of speciality wheat from the regulated areas in Arizona and
    California has been affected, but this is an extremely small portion of
    total U.S. exports. Because virtually all trade partners will accept
    wheat from areas where Karnal Bunt is not known to be present, the
    presence of the disease in regulated areas of the southwest will not
    materially affect wheat exports in the future.
        Question. On the research end of the problem, could you provide me
    with the current status of providing a certificate to Montana State
    University, College of Agriculture, to allow them to hold in quarantine
    a portion of wheat infected with KB to do research on, under an
    agreement between Montana State university and the Agricultural
    Research Service?
        Answer. In April, we provided a permit to Montana State University
    (MSU) to conduct specified laboratory research on Karnal Bunt under
    certain safeguards. These safeguards were agreed upon by MSU
    scientists, the Montana State Department of Agriculture, the Montana
    State Plant Health Director, and the Agricultural Research Service. The
    permit does not allow MSU to hold in quarantine any wheat infected with
    Karnal Bunt since they do not have a certified quarantine facility.
        Question. Along this same line of thought, Montana State has
    requested on several occasions the assistance of a quarantine facility
    expert to review the plans and blueprints of a research lab in Bozeman,
    Montana. However, they continue to be bounced around in the process.
    Many times they are told the plans look good, but no real assessment
    can be made until the construction is complete. This sounds like
    sending good money after bad. Could you look into this situation and
    see what you can do to assist Montana State university in completion of
    the plans for the development of a research lab?
        Answer. On February 15, the Davidson Kuhr Architects Company
    submitted drawings for a proposed quarantine facility at MSU to our
    National Plant Germplasm Quarantine Center in Beltsville, Maryland. We
    requested a written specification proposal from MSU to outline how
    safeguards that are included in our draft guidelines would be
    incorporated into their plans. MSU advised us that they would contact
    the architect to provide this additional documentation. On May 14, we
    contacted the architect company and confirmed that MSU had asked for a
    proposal for our review and evaluation. The architect then informed us
    that he will submit the proposal by early June. When we receive the
    proposal, it will take approximately two weeks for review. Once the
    architect corrects any deficiencies we may find, we will approve the
    proposal and construction may begin. We will conduct another evaluation
    once the facility has been completed and will continue providing the
    architect with any assistance he may need. This facility is needed to
    properly contain the Karnal Bunt organism.
                                     ______

                     Questions Submitted by Senator Bumpers
                                  boll weevil
        Question. Your budget for fiscal year 1998 includes a decrease in
    spending for boll weevil eradication. You state fewer funds are needed
    due to the fact that the weevil has been eradicated in many areas. In
    those areas where the weevil has been eradicated, how do profit margins
    for cotton farmers compare to farmers in states where the weevil is
    still present? Rather than reducing funds, did you consider maintaining
    level funding and concentrating more on the remaining areas of
    infestation.
        Answer. The current profit margin for cotton farmers in weevil-free
    areas, such as Georgia, is roughly $200 per acre. In contrast, the
    current profit margin for cotton farmers in moderately infested areas
    of the mid-South, including southern Arkansas, is roughly only $100 per
    acre. This disparity in profit margins is primarily due to reduced
    costs of pest control and increased yields for farmers in weevil-free
    areas.
        In the earlier stages of the eradication program, growers assumed a
    higher risk of program failure in participating. Therefore, APHIS had
    to contribute significant financial resources to mitigate that risk.
    But as the number of eradicated acres has increased, the growers' risk
    of participating has decreased as we have effectively demonstrated the
    program's benefits. We consider it reasonable, as we try to reduce
    Federal expenditures to help balance the budget, to ask growers to pay
    a larger share of program costs.
        Question. You further state that APHIS will pursue policies in
    which beneficiaries should contribute more to overall program funding
    through user fees or cooperative contributions. Last year, this
    subcommittee created a loan program through the Farm Service Agency to
    enable cotton farmers to engage in boll weevil eradication efforts to
    supplement direct funding from APHIS. In this way, farmers were putting
    more of their own money up front. Still, for some reason, the budget
    request for fiscal year 1998 would terminate that loan program. Don't
    you think that loan program was consistent with your aim of increased
    farmer contributions? Did you coordinate your boll weevil program with
    FSA?
        Answer. Under the grant program, producers were not responsible for
    repayment. But under the loan program, producers now bear a larger
    share of the responsibility and costs and are responsible for repaying
    the loan. We believe that the loan program is a great benefit to the
    boll weevil eradication effort. Unfortunately, the regulations to
    operate the program were not in place prior to FSA's fiscal year 1998
    budget request. Therefore, the request did not include any provision
    for the program.
        We helped them prepare the environmental documentation for the loan
    program and we have acted as a liaison between FSA and cotton growers
    foundations. These regulations were published in the Federal Register
    on May 16, 1997
                             animal damage control
        Question. The budget reduces the funding for ADC and goes further
    to require that no more than 50 percent of federal funds be used for
    ADC programs in any state. This could be problematic for states, such
    as Arkansas, where ADC programs have been used to control migratory
    species, such as blackbirds, rather than indigenous species, such as
    beaver, coyote, or other ``localized'' problem animals. It appears that
    Arkansas' ADC office will be closed under your proposal simply because
    it has concentrated its resources on federal migratory pest species
    instead of setting up a government subsidized pest control agency to
    compete with state agencies and private sector companies. Please
    explain your understanding of the separation of clear federal duties in
    the area of wildlife management and those duties that are the clear
    responsibility of State Wildlife Agencies and include a statement on
    migratory versus non-migratory species problems. Do you consider
    cooperatively financed ADC operations to be in direct competition with
    the private wildlife control industry? Does APHIS have any requirement
    or mechanism for Regional, Administrative, or Washington office to
    obtain cooperative funding?
        Answer. APHIS has a responsibility to provide leadership and
    assistance to the States, local governments, and private individuals in
    managing damage caused by the Nation's wildlife. The Animal Damage
    Control Act, as amended, authorizes the Secretary of Agriculture to
    conduct activities and to enter into agreements with States, local
    jurisdictions, individuals, and public and private agencies,
    organizations, and institutions in the control of nuisance mammals and
    birds and those mammal and bird species that are reservoirs for
    zoonotic disease. The U. S. Fish and Wildlife Service is the regulatory
    Federal Agency primarily responsible for the conservation of migratory
    birds, threatened and endangered species, certain marine mammals, and
    sport fishes. Specific responsibilities of State wildlife agencies
    vary, but generally include regulatory authority to conserve and
    protect migratory and non-migratory wildlife, and species of special
    concern.
        APHIS is specifically authorized to provide wildlife damage
    management assistance to these and other governmental agencies as well
    as private organizations and individuals. Such wildlife damage
    assistance is planned and implemented in coordination with the FWS and
    State wildlife management agencies to ensure regulatory compliance and
    environmental soundness. APHIS also coordinates wildlife damage
    management program efforts and negotiates related cooperative
    agreements in multiple states to enable more effective, cooperative,
    and cohesive programs.
        The ADC program works closely with the pest control industry to
    ensure that competition with private enterprise does not occur. Where
    private resources exist, ADC personnel routinely refer people seeking
    assistance to local pest control or nuisance wildlife operators. APHIS
    personnel provide technical assistance, training, and instructional
    sessions in the use of various methods, both lethal and nonlethal to
    members of the pest control industry. APHIS works closely with industry
    in maintaining pesticide registrations, data gathering, addressing
    research needs, and also in providing assistance to industry members in
    obtaining the required migratory bird depredation permits.
    Additionally, APHIS has developed a training and certification program
    allowing pest control operators and others access to the avicide
    Compound DRC-1339 and the tranquilizer Alpha-Chloralose. Formerly,
    these chemicals were authorized for APHIS use only, but now may be used
    by the pest control operators when under the supervision of APHIS
    personnel.
        APHIS has mechanisms in place to establish cooperatively funded
    agreements at the regional, administrative, or Washington office levels
    for ADC. Cooperative relationships have been established with various
    organizations and governmental agencies at regional and national
    levels, to identify and attain additional funding resources. This
    includes the aviation industry, the Federal Aviation Administration and
    the Department of Defense. Nevertheless, most ADC cooperative funding
    agreements are negotiated at the State level to provide effective and
    responsive service to cooperators. In regard to requirements for
    cooperative funding, ADC has maintained a policy for the past several
    years in which all new cooperative agreements must meet a minimum 50/50
    percent cost ratio.
                               imported fire ant
        The University of Arkansas at Monticello, through APHIS, has been
    working with land owners in Arkansas and scientists at the University
    of Florida on methods to control the fire ant. They have been able to
    document real costs of the fire ant in terms of economic losses and I
    understand the techniques they have developed are of keen interest to
    local land owners and that their efforts in conjunction with the
    University of Florida may hold real promise through possible
    introductions of natural predator species they found in Argentina.
        Question. Could you comment on your perception of the problems
    posed by the fire ant and the work conducted at and through the
    University of Arkansas at Monticello?
        Answer. The imported fire ant (IFA) has spread through the most of
    its range in the Southeast and Central United States. It is currently
    established in the following regulated States: Alabama, Arkansas,
    Florida, Georgia, Louisiana, Mississippi, North Carolina, Oklahoma,
    Puerto Rico, South Carolina, Tennessee, and Texas. The threat posed by
    the IFA is especially significant since this pest lacks natural enemies
    and there are no effective, efficient, and environmentally acceptable
    control agents available for large scale application on agricultural
    land. Until the Environmental Protection Agency registers an acceptable
    control product, we cannot conduct any area-wide control activities.
    For APHIS to cooperate in control treatments, we would need to conduct
    a new environmental impact statement, which would require $1 to $1.5
    million and 1.5 to 2 years to complete. We have completed a preliminary
    environmental assessment, which demonstrated a strong case for no
    action with current technology. Still, we are continuing to assist the
    States in preventing the spread of IFA to the Western United States. We
    will also help States maintain domestic markets for nursery products.
    In addition, we will continue to evaluate the efficacy of regulatory
    treatments for preventing further artificial spread of the IFA.
        For the last several years, we have contributed $200,000 per year
    to the University of Arkansas at Monticello through a cooperative
    agreement to conduct research on IFA's. The three areas funded by this
    agreement are a self-supporting community abatement program, an
    economic impact assessment, and an ARS biological control project. Of
    the $200,000 provided to the University, $76,000 is devoted to the
    abatement program, $100,000 is devoted to the economic impact
    assessment; and $24,000 is devoted to the biological control project.
        For the abatement program, the University conducted several
    demonstrations of control programs in public areas to help area
    residents better manage fire ants using existing control methods. This
    project has developed plans that other communities can use to initiate
    their own abatement programs. Also, the project produced and
    distributed several videos and manuscripts. These public information
    tools are designed to describe the theory and practice of using
    community-wide programs to minimize control expenses and reinfestation
    rates and to inform individual landowners about temporary IFA control
    methods.
        The economic assessment analyzed the effect of fire ants on
    agriculture and the general public. It concluded that IFA's cause $1.1
    billion annually in agricultural damage, harm to public health and
    welfare, and equipment problems. It also indicated that economic
    impacts are especially severe where human activity is frequent. In
    addition, it showed that pesticides alone will not provide a long-term
    solution to the problem because of IFA's rapid recolonization and
    colony growth rates. Therefore, the focus for IFA control is turning to
    non-pesticide strategies, such as biological controls.
        Currently, the University is contributing to an ARS biological
    control project to find effective control agents for IFA in South
    America. When imported into the United States, these enemies could
    reduce populations to manageable levels similar to those found in most
    of South America. So far, this project has identified three different
    organisms for potential impact on IFA in the United States, including a
    parasitic fly that attacks only IFA, a protozoa disease that weakens
    the ants and eventually kills the colonies, and another parasitic ant
    that attaches itself to the IFA queen and causes a debilitating drain
    on the colony. When sufficient testing is completed, APHIS' role would
    be to mass produce and distribute the biological control agents. None
    of the identified organisms by themselves will be enough to eradicate
    IFA from the United States because the pest is so widespread, but we
    hope that the use of one or a combination of these methods will enable
    native ants to compete effectively with the IFA and manage its
    population, as well as reduce its economic and public health impact on
    the U.S. public.
                                     ______

                      Questions Submitted by Senator Kohl
                             animal damage control
        Question. I understand that USDA is seeking a 50/50 cost-share
    funding arrangement for the Animal Damage Control cooperative programs
    for fiscal year 1998. Do you have any accounting to show how much of
    the field operations cooperators have funded in the past few years, by
    state and region?
        Answer. The following table contains the amount of federal
    appropriated funds and cooperator contributed funds allocated by State
    for fiscal year 1994, fiscal year 1995 and fiscal year 1996. These
    funds are used for efforts such as resolution of wildlife conflicts at
    airports, the rabies control project in Texas and other human health
    and safety issues, as well as for the protection of endangered species
    and public and private property.
        [The information follows:]

    ----------------------------------------------------------------------------------------------------------------
                                       Fiscal year 1996            Fiscal year 1995            Fiscal year 1994
                State            -----------------------------------------------------------------------------------
                                     Approp.        Coop.        Approp.        Coop.        Approp.        Coop.
    ----------------------------------------------------------------------------------------------------------------
    AL..........................      $159,900       $31,963      $163,000       $57,465      $108,000       $82,454
    AK..........................        45,000       680,459        50,000       217,986        42,257       312,996
    AZ..........................       448,799       265,791       434,384       267,774       437,239       262,517
    AR..........................       258,890  ............       259,690  ............       249,690  ............
    CA..........................     1,414,915     2,264,991     1,526,097     2,290,753     1,517,736     2,047,100
    CO..........................       790,480       240,854       765,524       167,633       770,090       256,545
    CT..........................         9,370  ............        14,992  ............        14,720  ............
    DE..........................        10,580  ............        10,580  ............        10,000  ............
    DC..........................         4,761  ............        10,580  ............        10,000  ............
    FL..........................       151,950        78,743       155,200        44,150        93,500        32,877
    GA..........................       103,800       109,477       103,800       103,398        96,000       109,665
    HI..........................       100,000       670,262        95,000       600,732        84,050       655,712
    ID..........................       936,144       411,400       905,819       406,106       906,380       359,101
    IL..........................       117,050       326,137       117,050       320,447       117,050       103,687
    IN..........................        96,700        21,513       104,387        10,363        91,000        11,205
    IA..........................        68,960         4,361        54,235         2,197        51,884           543
    KS..........................        75,000        33,804        75,000         1,126        71,327  ............
    KY..........................        81,600       126,212       118,663       199,752        80,000        82,155
    LA..........................       361,600       221,520       362,400       137,820       352,400        99,758
    ME..........................       135,700        45,320       135,700        96,980       133,500        90,238
    MD..........................        90,459        71,885        84,640        40,446        80,000        41,370
    MA..........................        75,897        36,450        73,086        16,000        71,760        29,558
    MI..........................        97,800        28,855       105,487         8,876        96,000         8,424
    MN..........................       242,500            96       246,500            30       242,500         2,579
    MS..........................       567,700       849,499       527,800       654,052       472,800       364,651
    MO..........................       103,440        54,063       133,539        41,103       133,416        19,783
    MT..........................       973,500       547,194       987,759       538,474       993,981       538,512
    NE..........................       393,874       332,556       372,174       245,502       372,351       223,300
    NV..........................       814,872       619,852       791,172       586,071       796,987       633,775
    NH..........................       175,306        68,549       186,900        62,135       172,050        57,257
    NJ..........................       109,340       208,182       105,784       428,990        98,600       240,904
    NM..........................     1,242,585     1,098,776     1,175,550     1,218,389     1,184,525       919,100
    NY..........................       119,634       115,898       119,634        28,823       131,000        31,621
    NC..........................       185,850       575,420       135,850       305,579       126,500       209,437
    ND..........................       772,052       331,948       748,721       387,746       752,031       311,606
    OH..........................       148,900        70,000       148,900        47,037       146,000        44,859
    OK..........................       789,852       927,322       766,152       800,186       751,355       716,042
    OR..........................       974,440       724,621       943,788       737,608       951,323       713,003
    PA..........................        79,178  ............        83,116  ............        71,400  ............
    RI..........................         8,433  ............         5,622  ............         5,520  ............
    SC..........................       163,611       269,778       113,611       245,648       104,000       210,000
    SD..........................       300,000       786,136       300,000       830,839       300,000       827,248
    TN..........................       244,800       280,701       223,111       336,162       240,000       378,232
    TX..........................     2,290,752     5,564,171     2,287,820     5,205,424     2,312,245     5,210,498
    UT..........................       996,992       840,175       962,067       764,823       979,841       707,445
    VT..........................        61,594        39,710        50,000        30,566        60,450        40,718
    VA..........................       168,400       179,034       222,210       124,386       161,500        97,245
    WA/Guam.....................       588,637     2,230,392       566,183     2,064,108       520,233     1,321,090
    WV..........................        89,700       120,582        97,387        93,156        88,000        90,928
    WI..........................       525,500       951,596       525,500       904,144       518,000       855,865
    WY..........................     1,006,781       471,136       971,317       427,924       978,576       584,461
                                 -----------------------------------------------------------------------------------
          Total.................    19,773,578    23,927,384    19,523,481    22,098,909    19,149,767    19,936,064
    ----------------------------------------------------------------------------------------------------------------

        Question. It is my understanding that in some states, such as
    Wisconsin, the cooperators have actually funded more than 50 percent of
    the ADC field operation costs. Does your budget request for ADC reflect
    the increased federal funding that will be needed in states like
    Wisconsin, if USDA-ADC were to commit to funding a full 50 percent of
    the ADC field operation costs?
        Answer. The fiscal year 1998 budget request proposes that APHIS
    provide no more than 50 percent of the total cooperative animal damage
    control operations costs in each State. As Wisconsin is one of the
    States in which cooperative funding exceeds federal contributions,
    APHIS would make no adjustment to the amount of federal contributions
    in this State.
                                     ______

                      Questions Submitted by Senator Leahy
                          vermont inspection stations
        In 1996 APHIS indicated its intention to close the Animal
    Inspection Station in Derby Line, one of two animal inspection stations
    in Vermont. This closure would have disrupted established routes of
    livestock trade with Canada for a minimal savings to the agency since
    the Derby Line office does not have its own full time staff. To
    compound the problem, the other inspection station in Highgate, where
    APHIS planned to consolidate its operation, is in the midst of a major
    upgrade resulting in significant construction activity at the site. The
    fiscal year 1997 Agriculture Appropriations bill included language
    requiring APHIS to continue operation of the Derby Line inspection
    station.
        Question. What is the current operating status of the Derby Line
    animal inspection facility? What are the Department's most recent plans
    for the future of the Derby Line and Highgate stations? (Please include
    budget and time-line information.)
        Answer. At this time, APHIS continues to operate the Derby Line
    animal inspection facility for livestock inspection services. The
    Committee directed that the Derby June Facility remain open until work
    at the Highgate is complete. We intend to comply with the report
    language.
        We plan to close the Derby Line livestock inspection facility on
    September 1, 1997. The new livestock inspection facility, currently
    under construction at Highgate should be completed by July 1997. On
    September 1, 1997, complete and full time livestock inspection services
    will be offered at Highgate. Operating one full-time livestock
    inspection facility at Highgate will provide users with dependable
    access to livestock inspection services during normal business hours.
    The Department will save about $35,000 annually through decreased
    rental and operating costs.
                            asian long-horned beetle
        The recently discovered Asian long-horned beetle infestations in
    Brooklyn and Amityville, New York have created a great deal of concern
    in Vermont and other Northeastern states. Some reports indicate that
    other areas may have been exposed to the beetle through shipment of
    logs to other parts of New York and Montreal. Given that the beetle has
    no natural enemies and attacks mostly Norway and sugar maples, I am
    greatly concerned that the spread of this insect into forested areas of
    New York, Vermont and Massachusetts could threaten the important maple
    sugar and fall foliage industries of the Northeast. The sugar maple is
    one of the most valuable trees in New England. The sap produces maple
    syrup; the wood is highly prized for furniture, paneling and wood
    flooring; and the leaves provide an important attraction for tourists
    in the autumn. It is my understanding that the Animal and Plant Health
    Inspection Service (APHIS) has been working with the New York
    Department of Agriculture and Markets to develop and implement an
    eradication plan.
        Question. What activities has APHIS undertaken to eliminate the
    beetle and what activities are planned under the fiscal year 1998
    budget?
        Answer. In October 1996, we released $694,000 from our contingency
    fund to conduct an Asian long-horned beetle (ALB) eradication program.
    We are working with the USDA Forest Service and officials of State,
    county, and city agencies in New York State (NYS). The program consists
    primarily of tree removal, but it also includes detection and
    delimiting surveys and intensified extension/education efforts in NYS.
    Tree removal is nearing completion and the program will have removed
    all known infected trees by April 1, 1997. This will eliminate the next
    generation of ALB. Our role in tree removal involves oversight to
    assure that the trees are properly handled, processed, and disposed. If
    we discover additional infestations, eradication activities will
    continue beyond April 1. Surveys will be conducted annually for two
    years beginning in May 1997 in Long Island and Manhattan. Also, we will
    conduct intensive surveys annually for five years within the regulated
    areas (the Greenpoint area in Brooklyn and Amityville, Long Island). No
    ALB activities are included in our fiscal year 1998 budget since this
    problem surfaced after we submitted our budget. However, we must
    consider using miscellaneous plant pest funds or using contingency
    funds to continue the program in fiscal year 1998.
        Question. What changes may be necessary in inspection practices to
    insure that another Asian long-horned beetle infestation does not
    occur?
        Answer. To identify risks and prevent future introductions of ALB,
    we have published and distributed Pest Alerts and other bulletins to
    our inspectors. For example, on October 11, 1996 and again on March 14,
    1997, we distributed a pest alert on ALB and its establishment in New
    York. This alert informed our inspectors about actions we can take and
    are taking at ports-of-entry to prevent additional introductions of the
    ALB and related pests. In addition, we recently distributed a Port
    Alert to our inspectors to inform them of potential pathways for the
    ALB and its relatives to help prevent further introductions like that
    on Long Island, New York. Until recently, our inspectors did not
    identify longhorned beetle larvae from Asia to genus Anoplophora. They
    now are able to recognize these larvae as being ALB larvae and can more
    accurately track cargo pathways that may introduce ALB. Also through
    these alerts, we continually advise our inspectors of policy changes
    regarding criteria for inspections and interceptions and provide
    information on the APHIS World Wide Web home page that would help them
    prevent future introductions. The log and lumber regulations that took
    effect in August 1995 and post-date the introduction of the Asian long-
    horned beetle (ALB) prohibit the importation of untreated fresh (green)
    lumber pallets. Untreated lumber is more likely to harbor the ALB that
    treated lumber or older, used lumber. In the meantime, we have
    intensified our efforts to monitor cargo from the Far East, the ALB's
    region of origin. The combination of these mitigation measures should
    provide adequate assurance that another ALB infestation does not occur.
        Question. What steps has APHIS taken to identify potential exposure
    risks from other non-native pests that could be transported into
    eastern ports, and what steps is the agency taking to prevent that from
    happening?
        Answer. Besides the ALB Pest Alerts and our enforcement of the log
    and lumber regulations, we began redefining several aspects of our
    entire plant pest and disease exclusion program in fiscal year 1996.
    This new focus has enabled us to concentrate on risk evaluation, new
    monitoring techniques, and continuous reviews of our practices. For
    example, we greatly expanded our commodity smuggling interdiction
    program in fiscal year 1996. This program, which is designed to prevent
    the smuggling of prohibited Oriental agricultural products, is now
    being conducted nationwide. Through our AQI results monitoring program,
    which we have initiated at almost all ports of entry nationwide, we
    evaluate the effectiveness of our inspections regarding plant pest and
    disease interceptions. Our statistical sampling and analysis enables us
    to predict how effective we are at preventing the introduction of
    harmful agricultural plant pests and diseases. In addition, we are
    continuing to enhance technology through the development of enhanced x-
    ray systems, photographic imaging, and the dissemination of actionable
    interceptions and improved automation capability. Also, we have
    instituted uniform staffing guidelines at all ports-of-entry nationwide
    and have evaluated assigned shift coverages to ensure that our
    inspectors are always available during peak activity, when there is the
    greatest risk of an introduction.
                             animal damage control
        The President's fiscal year 1998 budget request for the Animal
    Damage Control program represents a $3.2 million decrease in funding.
    The Department proposes to provide no more than 50 percent of the total
    program support for each State. In Vermont, the Rabies Hotline program
    has consistently provided an important service to Vermont farmers at
    relatively small cost.
        Question. How will this program be affected by this funding
    decrease to the Animal Damage Control program? What other programs in
    Vermont may be affected by this new policy?
        Answer. As Vermont currently is one of the States in which Federal
    contributions exceed those of cooperators Federal funding for animal
    damage control efforts in Vermont could be reduced as a result of the
    budget request. However, the 50 percent requirement applies to total
    State funds, not to individual projects, which allows states some
    flexibility. The Vermont office would be maintained to provide
    continued advice on task forces for rabies management efforts, but the
    toll-free rabies hotline would be discontinued unless cooperator
    funding were increased to support it.
                                     ______

                      Question Submitted by Senator Boxer
                                 hass avocados
        Question. In your announcement regarding the publication of the
    final rule allowing the importation of fresh Hass avocados into the
    Northeastern United States, you stressed that it is important to
    understand that the rule provides only an opportunity for Michoacan
    producers to qualify to export their product.
        It is my understanding that no imports will be authorized until
    APHIS-supervised surveys prove that each orchard meets the pest status
    requirements specified in the rule before being certified for export.
        In order to address my long standing concerns about the
    phytosanitary risks of importing Mexican avocados, I make the following
    requests: (1) Before Mexican orchards are certified for export, you
    provide representatives of the California Avocado Commission full
    access to all pest survey data; (2) You provide California avocado
    growers with an opportunity to review and comment on the protocol that
    is being prepared by APHIS to implement the rule; (3) APHIS provide the
    Committee with a monthly status report on the implementation of the
    rule, including an assessment of the pest survey findings, and the
    orchard certification process.
        Answer. The pest survey data that ensures freedom of pests of
    certified orchards and municipalities can be made available to anyone,
    including the California Avocado Commission, prior to the shipping
    season. The work plan is the protocol that will be used to implement
    the rule. The work plan includes each party's responsibilities.
    Interested parties will be provided an opportunity to comment on the
    proposed protocol that is being prepared to implement the rule through
    meetings being planned for early spring with the United States North
    American Plant Protection Organization Industry Advisory Group. We will
    be glad to work with your office to establish a reasonable way of
    providing information on survey findings.
                                     ______

            Grain Inspection, Packers and Stockyards Administration
                     Questions Submitted by Senator Cochran
                        market competition/concentration
        Question. What activities are being funded with the $400,000
    provided for fiscal year 1997 to carry out the recommendations of the
    Agricultural Concentration Committee?
        Answer. Two specific projects were added to our fiscal year 1997
    operating plans as a result of the additional $400,000 received to
    carry out recommendations of the Agricultural Concentration Committee:
      --An investigation of the lamb slaughter industry, which will include
            an extensive examination of slaughter lamb procurement
            practices, with an emphasis on evaluating competition and
            contracting arrangements.
      --Followup analysis on the effects of captive supplies. Specifically,
            additional economic and statistical analyses will be conducted
            on the effects of forward contracting, packer feeding, and
            marketing agreement/formula pricing arrangements using data
            from the Kansas 1995 and the current Texas Feeder Cattle
            Procurement investigations.
        Question. Out of the additional $10 million released by the
    Secretary from the Fund for Rural America for research, extension, and
    education to counter concentration, food safety, nutrition, and
    gleaning, what amount will be allocated to counter concentration and
    what specific activities will be funded?
        Answer. Grain Inspection, Packers and Stockyards Administration
    (GIPSA) has submitted three research projects for consideration,
    dealing with certain areas such as: Economic Analysis of Poultry
    Integration; Vertical Coordination in Hog Production and Marketing; and
    Line-of-Business Reporting.
        Question. Increased funding is requested for fiscal year 1998 to
    carry out the recommendations of the Advisory Committee on
    Concentration--$500,000 for the Agricultural Marketing Service (AMS) to
    expand its reporting of livestock and poultry markets; and $2.3 million
    for the Grain Inspection, Packers and Stockyards Administration (GIPSA)
    to address packer competition and industry structure and poultry
    compliance. Please summarize the need for these additional funds and
    what activities will be carried out.
        Answer. The additional funds requested for fiscal year 1998 are
    needed for GIPSA to more aggressively pursue anticompetitive practices
    related to industry concentration. We have increased the frequency of
    anticompetitive investigations during the past two years. But this has
    come at the direct expense of programs designed to protect individual
    producers from unfair practices and provide financial protection. The
    additional funds will be used to recruit and integrate more economic,
    statistical, and legal expertise into investigative units that will
    conduct investigations involving anticompetitive practices, but not at
    the expense of our other vital enforcement responsibilities. In fiscal
    year 1998 we will conduct major anticompetitive practice investigations
    and detailed analyses in the slaughter steer and heifer, slaughter hog
    and slaughter cow industries and develop detailed evidence where
    incidences of anticompetitive practices are disclosed. Additional
    personnel with economic, statistical, and legal expertise will be
    critical to completing this work.
        The additional funds requested for poultry compliance are necessary
    if the Agency is to initiate and perform more in-depth compliance
    investigations, rather than respond to complaints as they are received,
    as is the case today. These additional funds would allow the Agency to
    increase the number and expand the scope of compliance investigations,
    while at the same time continue investigating the increasing number of
    complaints being received from poultry growers.
        Note: The Agricultural Marketing Service (AMS) response is shown
    under AMS.
        Question. Please provide for the record, by fiscal year, the funds
    provided for fiscal year 1997 and proposed for fiscal year 1998 to
    carry out each of the recommendations of the Committee on Concentration
    and/or to address agricultural market concentration or livestock
    pricing. What additional funding will be required in future fiscal
    years to carry out the Committee's recommendations?
        Answer. The Committee on Concentration proposed 55 recommendations.
    GIPSA's additional funding request focuses on four specific
    recommendations as follows:

    ------------------------------------------------------------------------
                                                         Fiscal year--
                                                 ---------------------------
                                                      1997          1998
    ------------------------------------------------------------------------
    1. Antitrust enforcement of current
     regulations under the Packers and
     Stockyards (P&S) Act should be stepped up..      $100,000    $1,000,000
    2. Section 202 of the P&S Act, which deals
     with unfair trade practices, should be
     enforced to the letter of the law..........  ............     1,000,000
    3. Congress should appropriate sufficient
     resources to allow aggressive pursuit of
     violations of the P&S Act and address
     problems in their incipi-  ency............  ............       300,000
    4. GIPSA should investigate lamb supply
     contracts for their impact on markets and
     market access for participants without a
     supply contract............................       300,000  ............
                                                 ---------------------------
          Total.................................       400,000     2,300,000
    ------------------------------------------------------------------------

                                  dealer trust
        Question. The Administration again proposes legislation to amend
    the Packers and Stockyards Act to provide for a statutory ``dealer
    trust.'' The explanatory notes indicate that this legislative proposal,
    if adopted, would provide one-time start-up costs of $3 million to
    convert to license fee status. Would this be a mandatory direct funding
    requirement or an increased appropriations requirement, and how does
    the Administration propose to offset this additional one-time cost?
        Answer. If the Packers and Stockyards Act is amended to provide for
    a statutory ``dealer trust'' no start-up funding is requested by the
    Agency, since such a ``trust'' would only be triggered when a dealer
    failed to pay for livestock purchases.
        The explanatory notes referring to the $3 million one-time start-up
    cost refer to the proposed license fee legislation rather than the
    dealer trust. There will be start-up costs associated with implementing
    the proposed license fees. The principal costs will be the funds needed
    to maintain ongoing operations during a transition period that will be
    required to promulgate the necessary implementing regulations and begin
    collecting the license fees. It would also fund the leave liability
    accumulated under the appropriated program. Without appropriated
    funding, these costs would become an immediate liability to the users.
    This would be a one-time increase in appropriations.
                                     ______

                      Questions Submitted by Senator Burns
                              livestock marketing
        Question. Jim, I would like to thank you for taking time out of
    your busy schedule several times during the past year to come out to
    Montana and discuss what it is your agency is doing to protect the
    individual livestock producer in today's market. I know you have made
    an impact and have developed some good friendships that will go a long
    way in developing confidence in GIPSA and the work you are doing.
        Mr. Baker, talking real numbers and real dollars could you please
    explain what it is that you need to do to make sure that there is
    confidence by the producers in the next round of marketing in the
    livestock market?
        Answer. GIPSA has requested an increase of $1,595,000 for packer
    competition and industry structure issues for fiscal year 1998. The
    additional funds are needed for GIPSA to more aggressively pursue
    anticompetitive practices related to industry concentration. We have
    increased the frequency of anticompetitive investigations during the
    past two years. But this has come at the direct expense of programs
    designed to protect individual producers from unfair practices and
    provide financial protection. The additional funds will be used to
    recruit and integrate more economic, statistical, and legal expertise
    into investigative units that will conduct investigations involving
    anticompetitive practices. In fiscal year 1998 we will conduct major
    investigations of anticompetitive practices and detailed analyses in
    the slaughter steer and heifer, slaughter hog and slaughter cow
    industries and develop detailed evidence where incidences of
    anticompetitive practices are disclosed. Additional personnel with
    economic, statistical, and legal expertise will be critical to
    completing this work.
        Question. Could you provide the committee with a brief overview of
    the actions that have been completed in the past year to make sure that
    the packers are not taking advantage of the marketplace on livestock?
    What is it that this committee and Congress can do to assist you in the
    completion of this task?
        Answer. During fiscal year 1996, GIPSA concentrated resources on
    providing financial protection and promoting fair business practices
    and a competitive marketing environment for livestock, meat, and
    poultry. The Agency conducted over 2,000 investigations, disclosing
    over 800 violations of the P&S Act. Formal actions were requested in 84
    cases and 62 administrative or justice complaints were issued in order
    to bring firms into compliance with the P&S Act. Administrative
    decisions and orders were issued in 49 cases during fiscal year 1996;
    however, most violations were corrected on a voluntary basis with
    several resulting in livestock and poultry producers receiving
    additional funds for the sale of their product. In addition, four major
    investigations are currently underway dealing with cattle procurement
    in the Texas Panhandle; slaughter hog procurement in the central United
    States; poultry settlements in several states; and lamb procurement.
    Providing the additional funds that we need is the best action that the
    committee and Congress can do to assist us.
        The Packers and Stockyards Programs budget for fiscal year 1998
    proposes $14.8 million, which includes increases of $225,000 to allow
    GIPSA to establish electronic filing procedures for reports; $1,595,000
    for activities in the packer competition and industry structure areas;
    and $750,000 for poultry compliance activities. These funds are
    essential for the Agency to meet its responsibility of fostering fair
    and open competition, and guard against deceptive and fraudulent
    practices that affect the livestock, meat, and poultry industries.
                                 canadian grain
        Question. Mr. Baker, we are beginning to hear rumblings in northern
    Montana border towns about the amount of feed grain that is being
    imported into Montana grain bins that are not of a quality that is
    equal to that which is being marketed by Montana producers. This same
    wheat then is being mixed and sold as Montana quality grain, and yet
    carries a large amount of substandard Canadian grain in that same load.
    Would you like to comment on this and if you are not prepared would you
    please take some time to look into this and find out what the situation
    is and report back to me and the committee?
        Answer. Under the current NAFTA agreement and the U.S. Grain
    Standards Act, grain is allowed to move freely between Canada and the
    U.S. with official inspection occurring only at the buyer/seller's
    request. Canadian grain entering a U.S. grain elevator is not required
    to be identified or binned separately from U.S. grain. Further, the
    U.S. Grain Standards Act prohibits the blending of dockage and foreign
    material to grain but does not prohibit the blending of different
    qualities of grain. Consequently, any grain shipped from Montana
    elevators is graded based on its kind, class, quality, and condition as
    it relates to the official grain standards. The origin of the grain is
    not relevant to the inspection process when assessing quality.

                              Subcommittee Recess

        Senator Cochran. This concludes today's hearing. Our next
    hearing will be on Tuesday, March 11, in this room, 124, of the
    Dirksen Senate Office Building at 10 a.m. We will hear at that
    time from Department witnesses on the requests for food and
    nutrition programs. Until then, the committee stands in recess.
        [Whereupon, at 11:52 a.m., Tuesday, March 4, the
    subcommittee was recessed, to reconvene at 10:05 a.m., Tuesday,
    March 11.]

    AGRICULTURE, RURAL DEVELOPMENT, AND RELATED AGENCIES APPROPRIATIONS FOR
                                FISCAL YEAR 1998

                                  ----------

                            TUESDAY, MARCH 11, 1997

                                           U.S. Senate,
               Subcommittee of the Committee on Appropriations,
                                                        Washington, DC.
        The subcommittee met at 10:05 a.m., in room SD-124, Dirksen
    Senate Office Building, Hon. Thad Cochran (chairman) presiding.
        Present: Senators Cochran, Bumpers, and Leahy

                           DEPARTMENT OF AGRICULTURE

    STATEMENT OF MARY ANN KEEFFE, ACTING UNDER SECRETARY,
                FOOD, NUTRITION, AND CONSUMER SERVICES
    ACCOMPANIED BY:
            DENNIS KAPLAN, DEPUTY DIRECTOR, OFFICE OF BUDGET AND PROGRAM
                ANALYSIS, DEPARTMENT OF AGRICULTURE
            YVETTE JACKSON, DEPUTY ADMINISTRATOR, FOOD STAMP PROGRAM

                           Food and Consumer Service

    STATEMENT OF WILLIAM E. LUDWIG, ADMINISTRATOR
    ACCOMPANIED BY GEORGE A. BRALEY, ASSOCIATE ADMINISTRATOR

                   Center for Nutrition Policy and Promotion

    STATEMENT OF EILEEN KENNEDY, EXECUTIVE DIRECTOR

                                Opening Remarks

        Senator Cochran. The meeting of the Agriculture
    Appropriations Subcommittee will please come to order.
        Today we are continuing our review of the President's
    budget request for Agriculture, Rural Development, and Related
    Agencies. This morning we will specifically review the request
    for programs and activities of the Department of Agriculture's
    Food and Consumer Service.
        Our witnesses this morning include Mary Ann Keeffe, who is
    Acting Under Secretary for Food, Nutrition, and Consumer
    Services.
        We also have with us the Administrator of the Food and
    Consumer Service, William Ludwig; George Braley, Associate
    Administrator, Food and Consumer Service; and Dennis Kaplan,
    Budget Officer with the Department of Agriculture's Office of
    Budget and Program Analysis.
        We welcome you, Ms. Keeffe, and invite you to proceed to
    make whatever comments or remarks you choose regarding this
    budget request. You may proceed.

                          Statement of Mary Ann Keeffe

        Ms. Keeffe. Thank you very much, Mr. Chairman. It is my
    pleasure to be here this morning before the committee. As you
    know, in my role as the Acting Under Secretary for Food,
    Nutrition, and Consumer Services, I have responsibility for the
    Nation's food assistance programs.
        In addition to those that you mentioned, Mr. Chairman, also
    accompanying me today is Ms. Yvette S. Jackson, the Deputy
    Administrator for the Food Stamp Program.
        Senator Cochran. Ms. Jackson, we welcome you, and thank you
    for your being here.
        Ms. Keeffe. Mr. Chairman, I am speaking to you at a time of
    historic change in the manner in which Government operates.
    This administration came into office 4 years ago with a number
    of goals for our nutrition programs.

                              Children's Nutrition

        These goals included improving the nutrition and health of
    children by updating the nutrition standards of the School
    Lunch and Breakfast Programs, making benefits available for all
    who qualify and wish to participate in the Special Supplemental
    Nutrition Program for Women, Infants, and Children, reinventing
    Government by working in partnership with the States to
    increase program efficiency and reduce abuse, implementing
    antifraud legislation to increase Food Stamp Program integrity,
    and ending welfare as we know it by replacing it with a system
    that offers hope, demands responsibility, and rewards work. We
    have been quite successful in meeting these goals.
        Our 16 nutrition assistance programs, which include the
    Food Stamp Program, Child Nutrition, WIC, Commodity Programs,
    Nutrition Education and Training, and our Center for Nutrition
    Policy and Promotion, work individually and in concert with one
    another to alleviate food insecurity, promote healthier diets
    for children and low-income adults, and improve nutritional
    knowledge among all Americans.
        Taken together, these programs provide a vitally important
    nutrition safety net for Americans.
        Mr. Chairman, in recognition of your committee's level of
    interest in our budget request for this year, I would like to
    explain briefly the request in a couple of areas.
        For the Special Supplemental Nutrition Program for Women,
    Infants, and Children, the President's budget includes both a
    supplemental request in fiscal year 1997 to maintain
    participation at current levels and for fiscal year 1998,
    adequate funds to meet the goal of fully funding the WIC
    Program.

                                WIC Supplemental

        The fiscal year 1997 $100 million supplemental request is
    needed to avoid a dramatic reduction in participation this
    year. We estimate that the current fiscal year 1997
    appropriation will support average monthly participation of 7.2
    million persons.
        Participation was well over 7.4 million at the end of last
    year and has remained at approximately that level through the
    first quarter of fiscal year 1997. This implies that, in the
    absence of additional funds, participation will have to fall to
    about 7 million by September of this year, which would mean a
    reduction of over 400,000 mothers and children.
        Our budget request assumes that unspent funds of
    approximately $100 million will be carried over from fiscal
    year 1997 to fiscal year 1998.

                                 WIC Carryover

        We believe that a structural carryover of this level, which
    is about 2.5 percent, does not suggest poor program management,
    but is inherent to the prudent management of the WIC Program.
        The fiscal year 1998 request of $4.1 billion would allow us
    to achieve our longstanding bipartisan goal of fully funding
    the WIC Program at 7.5 million participants. This represents a
    modest expansion from the current participation level of 7.4 to
    7.5 million by the yearend fiscal 1998. While the economy has
    improved in the years since this goal was first established,
    this funding target is still well below the current estimated
    WIC-eligible population of 9.2 million persons.
        The WIC Program has sought and achieved high participation
    rates; and we believe it is critical to preserve these
    achievements. The fiscal year 1998 request is $378 million
    above the current fiscal 1997 level. However, only a small
    fraction of those funds, about $30 million, are for increased
    participation.
        The majority of the increase reflects the inflation-
    adjusted level needed to support the current 7.4 million
    participants. And the request also includes a $100 million
    contingency fund, which would be used only if food costs are
    significantly higher than expected.
        I would also like to mention that both the fiscal year 1998
    request and the supplemental include appropriations language
    that would provide USDA greater discretion in distributing
    funds among States. This discretion is needed to minimize
    participation disruptions this year and to ensure that States
    are funded at levels consistent with their needs as the program
    enters a period of greater funding stability.
        Mr. Chairman, I thank you and the members of this
    subcommittee for your continued support of these important
    programs. With your support, we have had remarkable success in
    alleviating hunger and promoting healthier diets. We have made
    dramatic changes.
        Mr. Chairman, I, along with the Administrator, Mr. Ludwig,
    and the Director of the Center for Nutrition Policy and
    Promotion, have submitted detailed testimony for the record.
        My colleagues and I will be happy to answer any questions.

                              Prepared Statements

        Senator Cochran. Thank you very much, Ms. Keeffe. Your
    statements will be included in the record in full. And we thank
    you for your cooperation and assistance to our committee.
        [The statements follow:]
                     Prepared Statement of Mary Ann Keeffe
        Mr. Chairman, Members of the Subcommittee, it is my pleasure to
    appear before you to discuss the President's fiscal year 1998 Budget
    Request for USDA's Food and Nutrition Programs. As you know, I am the
    acting Under Secretary for Food, Nutrition, and Consumer Services
    (FNCS), responsible for the Nation's domestic food assistance programs
    which provide access to a more nutritious diet for persons with low
    incomes and which encourage better eating choices among the Nation's
    children and their families. These programs include the anchor programs
    of Food Stamps, Child Nutrition and the Supplemental Nutrition Program
    for Women, Infants and Children (WIC). I am accompanied by William
    Ludwig, the Administrator of the Food and Consumer Service, George
    Braley, the Associate Administrator of the Food and Consumer Service,
    and Dennis Kaplan from the Department's Office of Budget and Program
    Analysis.
        I am speaking to you at a time of historic change in the manner in
    which government operates. This Administration came into office four
    years ago with a number of goals for our nutrition programs. Those
    goals included improving the nutrition and health of children by
    reforming the 50 year old School Lunch and School Breakfast Programs
    and making benefits from the Special Supplemental Nutrition Program for
    Women, Infants, and Children (WIC) available for all who qualify and
    wish to participate. We also set about reinventing government by
    working in partnership with the States to increase program efficiency
    and reduce abuse. We implemented anti-fraud legislation to increase
    Food Stamp Program integrity. We ended welfare as we know it by
    replacing it with a system that offers hope, demands responsibility and
    rewards work. We have been quite successful in meeting these goals and
    in fulfilling our dual missions of supporting the agriculture economy
    and providing the nutrition safety net for low income Americans.
        The mission of these programs is to improve the nutritional well-
    being of children and low-income families by helping them to make
    healthful food choices and provide access to nutritious foods for the
    people who need it. Our Nutrition Assistance Programs work both
    individually and in concert with one another to alleviate food
    insecurity and promote healthier diets for children and low-income
    adults and improve nutritional knowledge among all Americans. Taken
    together, these programs provide a nutrition safety net for low-income
    Americans. During the last four years FCS, together with this
    subcommittee, has made dramatic changes to these programs and achieved
    great results. Let me take a few moments to share some of our many
    accomplishments.
                               food stamp program
        The Food Stamp Program, the cornerstone of our Nutrition Assistance
    Programs expands and contracts with human need. In March 1994, the
    program served a historic number of low-income persons, 28 million in
    fact. Since then primarily due to economic improvements, it has
    contracted and is reaching over 10 million families--24 million people.
        However, when the President signed into law the Personal
    Responsibility and Work Opportunity Reconciliation Act of 1996, he
    stated that some provisions must be readdressed in the future because
    they led to unwarranted harm to some families.
        Our food stamp legislative proposals included in the President's
    fiscal year 1998 Budget address those concerns within the fiscal
    constraints of balancing the budget by fiscal year 2002. The proposals
    will increase the vehicle fair market value exclusion for fiscal year
    1998 and begin indexing in fiscal year 1999. The proposals will impose
    a new tough but fair work requirement and disqualification penalty on
    those unemployed adults with no children who can work but refuse work;
    eliminate ineligibility of unemployed adults with no children who are
    willing to work but cannot find work and are not offered work
    opportunities by the private sector or the States because of high
    unemployment or lack of jobs in the area; provide additional funding to
    States to increase the availability of employment and training
    opportunities for unemployed adults with no children; and expand the
    State option for using food stamp benefits as a wage supplement to
    include participation by unemployed adults with no children.
    Additionally, we propose some changes limited to fiscal year 1997 for
    implementing the ban on food stamp receipt by current legal immigrant
    participants. Such changes will provide an extended opportunity for
    legal immigrants who are current food stamp participants to pursue and
    attain citizenship. By fiscal year 2002, our proposals will eliminate
    the cap on the excess shelter expense deduction to help families with
    children and high shelter expenses, and index the standard deduction.
        Early in the Clinton Administration, we established six key
    principles for reforming the program: ensure economic responsiveness,
    provide for nutrition security, improve program integrity, modernize
    benefit delivery, expand State flexibility, and promote personal
    responsibility. These six principles formed the framework of not only
    administrative actions we have taken but also the major legislation
    proposed by the Administration in 1995 and 1996 that ultimately led to
    reform. They continue to guide our actions today.
        Ensuring economic responsiveness and providing for nutrition
    security, our first two principles, are the aspects of the Food Stamp
    Program that distinguishes it from other Federal assistance programs.
    Welfare Reform assured the continued ability of the program to expand
    automatically to meet increased need when the economy is in recession
    and contract when the economy is growing. Food stamp benefits will
    continue to flow to eligible families in communities that face rising
    unemployment and poverty, cushioning the harsher effects of economic
    recession and stimulating weakening economies. Caseload reduction over
    the past 2\1/2\ years demonstrates this important aspect of the Food
    Stamp Program. For 30 years, the Food Stamp Program has been our pledge
    to ``safeguard the health and well-being of the Nation's population by
    raising levels of nutrition among low-income households.'' Fulfilling
    this pledge means more than providing food. It means providing
    nutrition information and education, which is critical to improving the
    quality of diets, improving health, and reducing health care costs.
        In our continuing effort to improve the health of all Americans
    through better knowledge of good nutrition, we have encouraged States
    to develop nutrition education and promotion programs, matching the
    money spent as part of the administrative cost of operating the
    program. In fiscal year 1996, 38 States had approved Food Stamp
    Nutrition Education Plans; up from just a handful of States 3 years
    ago. The Federal share of funding for these plans was $20 million.
    Program Integrity
        Improving program integrity is our third principle. Two years ago,
    we proposed a comprehensive 13-point, anti-fraud legislative program
    for food stamps that attacked retailer trafficking, strengthened
    reauthorization controls, and allowed for stiffer penalties. Congress
    adopted, in some form, all of the Administration's proposals. Welfare
    reform legislation also included several provisions directed toward
    recipients who violate program regulations. These provisions include
    doubled penalties, expanded claims collections procedures, and
    prohibitions against households receiving increased food stamp benefits
    in response to lower income because they are being penalized for
    failure to comply with the rules of welfare programs.
        At the same time, we have reduced food stamp error rates. We have
    worked hard with the States and for the last two years error rates have
    fallen. The reduced error rates have prevented the loss of nearly $350
    million in erroneous payments in just two years, and we will continue
    with this work.
        We are aggressively and unceasingly fighting food stamp fraud.
    Fraud in the Food Stamp Program or any program cannot and will not be
    tolerated. We have a responsibility to ensure that food stamp benefits
    are issued properly and accurately and are used for purchasing food.
    Preventing fraud is critical to ensure program integrity and to ensure
    that the program gets food to people who need it.
        We are increasing our ability to visit food stores in person, by
    using the fiscal year 1997 appropriation of $4.2 million to contract
    with vendors to procure documented observations of new applicant stores
    as well as those requesting to continue to participate in the program.
    This information is being used by our field offices to confirm
    applicant-supplied information, particularly that the store is in the
    business of selling an ample variety of staple food for home
    preparation and consumption.
        We have coupled these achievements with our ongoing food stamp
    investigative efforts to ensure recipient access to food stores while
    limiting the program's vulnerability to fraud, especially trafficking.
        The use of intensive ``sweeps'' of many vendors has helped us
    identify the problem stores; and, just as important, it gets the
    message out to the public and to retailers that those who commit fraud
    will be caught. In the past calendar year we have conducted two such
    operations, ``Trident'' and ``Five Points''. With FCS investigative
    resources alone, 734 stores were caught violating, 201 of which were
    caught trafficking. These operations took a combined total of 6 weeks.
    The media coverage will help provide a deterrent to other retailers
    from violating program rules. Also, the dollar amount of violation
    activity addressed through these operations was significant. The
    violating stores redeemed $50 million in food stamp benefits the
    previous year.
        We have continued to expand the Federal Tax Refund Offset Program
    (FTROP) to a total of 43 States and have added a Federal salary offset
    component. FTROP began as a pilot in 1992. Since that time, we have
    collected more than $110 million which is returned to the Treasury. We
    expect this program to continue to grow until all States are
    participating.
        We are modernizing benefit delivery, our fourth principle. Today,
    every State is planning for Electronic Benefit Transfer (EBT)
    implementation. We have progressed from just six operational sites in
    1993 to eighteen today. By the end of this month, eight States will
    have Statewide systems. Approximately, 16 percent of all food stamp
    issuance now occurs through EBT. By the end of fiscal year 1998 we
    anticipate that about 40 States, representing 55 percent of all food
    stamp assistance, will have EBT in operation.
        Expanding State flexibility, our fifth principle, is important
    because being responsive to the needs of our State partners helps
    assure their continued effective administration of the Food Stamp
    Program. The Administration's proposed food stamp reform legislation
    included provisions striking non-essential proscriptive, statutory
    requirements governing States' administrative practices. The proposed
    legislation also included authority for States to operate Simplified
    Food Stamp Programs for their welfare caseload. These legislative
    proposals, which were included in welfare reform legislation, were the
    second half of an earlier and on-going effort to review regulatory
    requirements and wipe unnecessary ones from the books.
        Our sixth principle is promoting personal responsibility. The
    Administration proposed strong penalties for noncompliance with the
    program's work requirements and State options to require individuals to
    cooperate with the Child Support Enforcement program and to meet their
    obligations to support their children. These improvements were included
    in welfare reform.
        As you can see Mr. Chairman, we have worked hard to reform the Food
    Stamp Program by retaining the National nutritional safety net, by
    establishing strong working partnerships with States, by improving
    program integrity, by expanding EBT, and by promoting personal
    responsibility.
                            child nutrition programs
        The Administration has identified the Child Nutrition Programs as
    critical to fulfilling our national health responsibility. Through the
    National School Lunch Program, the School Breakfast Program, the Summer
    Food Service Program, the Child and Adult Care Food Program, and the
    Special Milk Program, FCS assists State and local governments in
    providing meals to children in a wide range of settings, including
    public and private schools, child care centers and homes, and summer
    recreation programs.
        The Administration's fiscal year 1998 budget request seeks reduced
    funding for the Child and Adult Care Food Program (CACFP) when compared
    to prior year requests. The primary reason for this change is the
    method of making reimbursement payments to family day care homes
    contained in Public Law 104-193, the welfare reform legislation enacted
    on August 22, 1996. Public Law 104-193 replaced the former single
    payment rate method with a two-tiered reimbursement structure for
    family day care home reimbursement payments. As provided for in the
    statute, this new payment structure will be implemented effective July
    1, 1997. The budget has been restructured accordingly.
        As you know, we have taken a major step toward meeting our health
    responsibility through implementing the first full-scale reform of the
    National School Lunch Program in fifty years. USDA research showed that
    school meals--and children's diets overall--are too high in fat,
    saturated fat and sodium. This finding is extremely significant in
    light of scientific research that establishes the link between these
    dietary excesses and chronic diseases. We know that obesity, high
    cholesterol and high blood pressure are diet-related conditions that
    often begin in childhood. When we began the School Meals Initiative for
    Healthy Children, studies told us that 9 out of 10 children ate too
    much fat, too much saturated fat and 30 percent of children ate less
    than one serving of fruit a day. The effects on their future and on
    society would be devastating if we did not take action. Diet is
    associated with 5 out of the 10 leading causes of death in this
    country, including heart disease, and some cancers. Nutrition-related
    diseases cost society an estimated $250 billion a year in medical care
    and lost productivity.
        The School Meals Initiative for Healthy Children updates the
    nutrition standards for school meals to be consistent with the Dietary
    Guidelines for Americans. This historic accomplishment means less fat,
    less sodium--and more balance--in children's diets. It means a
    potential improvement in children's health which will potentially have
    a substantial impact on health care costs and years of life. Estimates
    of value from similar dietary improvements for adults range from $4
    billion to over $26 billion over 20 years due to improved life
    expectancy and reduction in early deaths.
        Let me emphasize, however, that we did not simply mandate change on
    the school lunch plate and then walk away. We took several important
    steps to support schools, families, and communities in achieving the
    goal of healthier diets for our Nation's children. The Department
    dramatically improved the quality and availability of USDA commodities
    provided to local school districts. For example, reduced-fat peanut
    butter and cheese were made available to schools, enabling children to
    still enjoy food they like but in healthier forms.
        Team Nutrition, launched in 1995, is a network of public/
    partnerships designed to promote making food choices for a healthy
    diet. It is based on the active involvement of over 200 National
    nutrition, education, health, agriculture and industry supporters and
    partners. Team Nutrition brings together stakeholders and builds
    community coalitions to bring healthier school meals and state-of-the-
    art training and technical assistance nutrition information to children
    and their families. We already have 17,000 schools serving over 9.8
    million children actively participating in Team Nutrition.
        Team Nutrition has two major components--technical assistance and
    training to support school food service personnel in providing
    healthful meals, and nutrition education to enable children to make
    food choices for a healthy diet. The technical assistance and training
    component provides state-of-the art tools and techniques to improve
    meals. The nutrition education component is a multi-faceted education
    program. Team Nutrition uses research and science-based nutrition
    messages that reach children in a language they understand, building
    skills and motivating children to make food choices for a healthy diet.
    These messages have been integrated into the classroom curricula for
    elementary schools, materials for use wherever children live, learn,
    and play, including the cafeteria, and at home, as well as into
    nutrition education messages broadcast on National network media. For
    example, we have distributed a Tool Kit for Healthy School Meals,
    including a comprehensive set of new recipes, a training manual and a
    marketing guide to every school participating in the National School
    Lunch Program. All States and local school food service agencies have
    received ``Serving it Safe,'' a training tool for food safety and
    sanitation. A complete operational kit for Assisted NuMenus has been
    provided for local schools; and food purchasing at schools has been
    enhanced with a food specification reference guide called ``Choice
    Plus''. We have provided National Healthy School Meals Training
    Workshops to ``train the trainers'' in meal preparation, and we have
    established on-line computer resources and information to support
    schools in meeting nutrition standards. Through Team Nutrition, have
    also provided over $6 million in Team Nutrition Grants to States to
    assist in implementation of the School Meals Initiative and will award
    another $4 million in grants in 1997. Grant projects have included
    developing training programs for school food service personnel and a
    cafeteria classroom link to support nutrition education and healthy
    food choices. The National Food Service Management Institute is being
    provided $800,000 for cooperative agreement work that includes an 800-
    phone-number help desk and a ``Service on Site'' project. Both of these
    efforts bring the services and expertise of the Institute to local food
    service operations. This training has been very well received by the
    school food service professionals.
        With your support, Team Nutrition has accomplished much toward
    helping schools to provide healthier meals and to become the focal
    points for nutrition learning in their communities.
     supplemental nutrition program for women, infants, and children (wic)
        This Administration is committed to making WIC available to
    eligible women, infants, and children who wish to participate in the
    program. Mr. Chairman, I would like to express my sincere appreciation
    for the support this subcommittee has provided the WIC Program.
        The strong bipartisan support reflects a recognition of a program
    that works and works well and is cost effective. WIC makes a positive
    difference in the health status of low income women, infants and
    children through the provision of supplemental food packages rich in
    needed nutrients, nutrition education and counseling, and referrals to
    local sources of health care. WIC also promotes breastfeeding as the
    feeding method of choice, furnishes drug, tobacco, and alcohol abuse
    information, and promotes immunization. Studies have documented that
    participation in the WIC Program results in real improvement in the
    health of participants, including fewer premature births, a lower
    incidence of low birthweight, fewer infant deaths, increased likelihood
    of receiving prenatal care, and improved children's diets.
        In recent years, thanks to strong bipartisan support, WIC funding
    has increased substantially from year to year. In addition, food
    package cost containment efforts have succeeded in allowing
    participation to increase substantially. Since the beginning of this
    Administration, we have added over 1.7 million participants to the
    program. Our current budget request would allow us to meet the long-
    standing goal of providing funds to serve 7.5 million persons by the
    end of fiscal year 1998.
        The successful expansion of the WIC Program presents significant
    management challenges. We fully recognize the need to manage the
    transition from this period of rapid growth to one of more stable
    funding and participation. Our budget request is an integral component
    of our strategy for managing this transition without disruptive swings
    in participation this year and the next. The supplemental we have
    requested for fiscal year 1997 would allow for an orderly transition
    from fiscal year 1997 to fiscal year 1998 by maintaining participation
    at approximately current levels. Without the supplemental, we believe
    States will have to reduce participation by several hundred thousand.
        We are working with State agencies on better management reporting
    which will lead to more timely and accurate data and improved systems
    to forecast demand, needs and costs. FCS has requested that States
    submit more comprehensive and timely spending and caseload management
    plans for use in better forecasting of participation trends and in
    making needed adjustments in caseload to manage within grant levels. We
    are also working on integrity rules for vendors and studying the funds
    allocation process to see if it can be made more responsive to need.
        FCS will encourage cost control strategies for State use in
    managing expenditures. Rebate strategies for foods other than just
    infant formula, selection of food vendors with lower costs and history
    of good program management, and the use of the most economically
    allowable WIC foods will continue to be emphasized as major cost
    containment techniques.
        In times when resources cannot meet demand, benefits must be
    targeted to those most in need. FCS plans to review policy and
    regulatory requirements to insure more consistent eligibility
    assessments and to refine States' techniques for effectively targeting
    benefits.
        We will continue to develop new and better strategies and tools to
    ensure the continued success and effectiveness of the WIC Program, and
    to guarantee that WIC continues to contribute actively and positively
    to the preservation of the good health and well being of the Nation's
    low income, at risk population of pregnant, breastfeeding and
    postpartum women, infants and children.
                         commodity assistance programs
        In fiscal year 1996, the Commodity Assistance Programs were
    reconfigured to combine the Commodity Supplemental Food Program, The
    Emergency Food Assistance Program and the Soup Kitchens and Food Banks
    Program. FCS is committed to supporting the agricultural economy while
    at the same time, providing a nutrition safety net for those most in
    need. Our fiscal year 1998 request reflects continued support for our
    commodity programs, including the use of funds made available through
    the Food Stamp Program for purchasing commodities for distribution to
    States under the Food Distribution Program on Indian Reservations and
    the Emergency Food Assistance Program. This change further demonstrates
    our commitment to streamlining the commodity programs and providing
    States more flexibility. It also demonstrates our on-going efforts to
    respond to and better serve the needs of our clients.
        In addition, we provide commodities to those in need of as a result
    of disaster situations. FCS is one of the first Federal agencies on the
    scene to provide disaster relief.
        The Administration also supports food recovery. Food recovery
    allows us to share food resources that would otherwise be wasted. This
    activity is accomplished mainly through volunteerism. For example,
    TEFAP providers generally distribute large quantities of commodities
    donated by the private sector. Although our budget request does not
    specifically earmark funds for food recovery, TEFAP administrative
    funds may be used for this purpose.
                   center for nutrition policy and promotion
        USDA's Center for Nutrition Policy and Promotion (the Center) was
    created on December 1, 1994, as part of the USDA reorganization. The
    Center is a classic example of how a small amount of resources can be
    leveraged to better serve the consumer. The best example of this was
    the release of the Dietary Guidelines for Americans. Our Center led the
    consumer research and co-chaired the interdepartmental work group with
    the Department of Health and Human Services that produced this key
    statement of Federal nutrition policy. This work showed how the Center
    fulfilled its mission as the focal point within USDA for linking
    scientific research to the consumer.
        This year the Center is fulfilling its mission by completing a set
    of highly significant products. It is reporting on the nutrient content
    of the U.S. food supply--a key link in monitoring nutritional status in
    the United States; it is updating the Healthy Eating Index--a
    measurement of how well Americans are eating; and it is adapting the
    Food Guide Pyramid specifically for children. The Center is also
    positioning itself to launch, in fiscal year 1999, a National nutrition
    promotion campaign stressing the many consumer-oriented benefits of
    healthy eating.
                            research and evaluation
        The three FCS research accounts are used to determine if policy
    objectives are met; test innovations; and describe what works, what
    does not work, and why. These accounts are instrumental in enabling the
    Agency to respond to the oversight responsibilities of Congress and
    have a proven track record of improved government performance. For
    example, FCS research made critical contributions to the emergence and
    expansion of Electronic Benefit Transfer, supporting the first
    demonstrations of feasibility and cost-effectiveness; helped to fight
    fraud and abuse and improve program operations, generating the first,
    and only, data-based estimates of the prevalence of food stamp
    trafficking and WIC overcharging practices; documented the Federal cost
    savings associated with participation in the WIC program; and, provided
    the foundation for historic changes in the school nutrition programs by
    determining the nutrients available in the school lunch and breakfast
    programs.
        With the funding requested for fiscal year 1998, the Agency will be
    able to support efforts to help States identify effective ways to
    design programs using the new flexibility provided by welfare reform
    and understand the consequences of change, continue critical updates of
    basic program information; address fully Congressional questions about
    the impact of legislative changes on family day care homes; and collect
    and analyze data to provide Congress with outcome measures of program
    performance.
        The relatively small expenditures made on research will help to
    protect the $40 billion investment made in the Federal nutrition
    programs. Without such research support, we run the risk of making
    crucial policy decisions without adequate knowledge of the
    consequences.
                       food program administration (fpa)
        The FPA appropriation funds most of the salaries and expenses of
    the Food and Consumer Service, and is the critical account that ensures
    the effective use of other program appropriations. Efforts of Agency
    staff have resulted in progress toward improving the nutrition of
    program participants, strengthening program integrity, and implementing
    EBT Nationwide. These results were achieved despite staff reductions
    which in 1995 enabled FCS to meet its fiscal year 2000 streamlining
    target in accordance with the National Performance Review and the Vice
    President's goal of reducing the Federal work force. In spite of
    declining staff and overall systems resources, we have made significant
    improvements to our financial management operations. Our efforts have
    resulted in tighter controls over our financial resources and financial
    statement preparation. We are pleased with our progress to date.
    However, as a result of recent FPA funding reductions, FCS is now only
    able to deploy staff from crisis to crisis, which is proving
    insufficient for effective program administration.
        Historically, the FPA account has been funded below the President's
    request. The fiscal year 1998 administrative request is a ``bare
    bones'' request. The Agency simply cannot sustain additional reduction
    in staff or funding without seriously impairing its ability to provide
    children and low-income families access to our Food Assistance Programs
    and provide basic program integrity oversight. Mr. Chairman, our
    administrative budget is less than one-third of one percent of total
    FCS budget authority. Providing less funding than our request may place
    billions of Federal dollars at risk to increased program fraud and
    abuse. In fact, our ability to prevent as well as resolve problems
    identified in the past by GAO depend in part on sufficient
    administrative funding. The Food and Consumer Service, funded at the
    requested level, will continue serving as a model for Federal
    government efficiency.
                                   conclusion
        Mr. Chairman, I would like to take this opportunity to thank you
    and members of this Subcommittee for your continued support of our
    Nutrition Assistance Programs. With your support, we have had
    remarkable success in alleviating hunger and promoting healthier diets
    for children and low income families. We have made dramatic changes--
    changes that will have a lasting effect on the recipients of our
    programs. Our fiscal year 1998 request reflects our continued efforts
    to provide a nutritional safety net for Americans and to provide
    adequate oversight of these programs. This concludes my statement. The
    testimony of William Ludwig, Administrator for the Food and Consumer
    Service presents more of the technical aspects of our request.
    Additional information on the Center will be provided by Eileen
    Kennedy. I request that both statements be submitted for the record. I
    will be happy to answer any questions that you may have.
                                     ______

                    Prepared Statement of William E. Ludwig
        Mr. Chairman, thank you for the opportunity to appear before this
    subcommittee to discuss the fiscal year 1998 budget request proposed
    for the U. S. Department of Agriculture's Nutrition Assistance Programs
    and the Food and Consumer Service (FCS). As the Administrator of FCS
    for the last three years, I want to take the opportunity to point out
    the exceptional performance of the agency during a period of
    extraordinary change and diminishing resources. Just in the past year,
    FCS has begun implementation of the historic changes effected by
    Welfare Reform, significantly improved its financial management and
    continued the expansion of the School Meals Initiative for Healthy
    Children. During this time, EBT has grown from a small experiment to
    the method for Food Stamp Benefit issuance. All of these major efforts
    have been accomplished with a declining staff, while many requirements,
    such as those in financial management, have continued to increase. I
    cannot say enough about the extraordinary efforts of the FCS staff
    under these difficult circumstances.
                       budget request 1997 supplementals
        I want to begin my testimony on the particulars of the President's
    Budget request by discussing the need for supplemental appropriations
    for fiscal year 1997 in the Women, Infants and Children (WIC) and
    Nutrition Education and Training (NET) Programs.
        A supplemental appropriation of $6.25 million is needed in Child
    Nutrition to complete funding for NET. The cost of this supplemental is
    fully offset by a one-time reduction in food stamp funding for
    commodity purchases for The Emergency Food Assistance Program (TEFAP).
    We have recently shifted $3.75 million from Team Nutrition to NET to
    continue the program in fiscal year 1997 until you can act on our
    supplemental request. The Appropriations Act for fiscal year 1997 did
    not include funds for NET because the program was funded by a permanent
    appropriation when the Appropriations Act was passed. The permanent
    appropriation was repealed by the subsequent enactment of Welfare
    Reform. We believe that it was an oversight that NET received no
    funding in fiscal year 1997. We are pleased that we were able to
    provide stop-gap funding to maintain the long-established network of
    State NET coordinators until the Congress can act on our supplemental
    request.
        A supplemental appropriation of $100 million is needed for the WIC
    program to assure that participation is maintained throughout fiscal
    year 1997 at approximately 7.4 million, the fiscal year 1996 year-end
    levels. Without the supplemental, WIC will experience a significant
    reduction in participation during 1997. This, in turn, would negatively
    impact our ability to meet 1998 goals for full funding in an orderly
    manner. This extremely cost effective program has benefited many needy
    and vulnerable people for many years. Since its modest start in 1972,
    the number of women, infants and children receiving food and health
    care, and achieving healthier lives has grown from a few thousand to
    last year's year-end level of 7.4 million. WIC is making a real
    difference in the health of pregnant women and infants, thus saving
    large health care costs in future budgets. Without this supplemental,
    participation could decline by several hundred thousand women, infants,
    and children. We are requesting that the Secretary be provided
    discretion to distribute funds among States outside the current
    regulatory funding formula. We would use this discretion to avoid
    disrupting service to high priority participants and ensure that States
    avoid large participation drops.
                              1998 budget request
        The Food, Nutrition, and Consumer Service requests $40.6 billion in
    new budget authority in fiscal year 1998. This includes contingency
    reserves of $2.5 billion for the Food Stamp Program and $100 million
    for the Supplemental Nutrition Program for Women, Infants, and Children
    (WIC). The request is a decrease of $258 million below the fiscal year
    1997 appropriation level, based on continuing economic improvement and
    welfare reform. The President's 1998 request also contains policy
    proposals that will ameliorate some of the harsher aspects of welfare
    reform.
                               food stamp account
        The Food Stamp account now contains funding for the Food Stamp
    Program and its alternatives, the Nutrition Assistance Program for
    Puerto Rico and the Food Distribution Program on Indian Reservations.
    Welfare Reform legislation also added section 27 to the Food Stamp Act
    which provides Food Stamp account funding for commodity purchases for
    TEFAP.
        The Food Stamp Program is the primary source of nutrition
    assistance for low-income Americans. The mission of this nutrition
    security program is to assure low-income Americans access to a
    nutritious, healthful diet through food assistance and nutrition
    education, thereby improving the nutritional status of low-income
    households and strengthening the agricultural economy. We are
    requesting $27.6 billion for the Food Stamp Program, including a
    contingency reserve of $2.5 billion that will ensure available funding
    for any unforeseen circumstances, such as economic disturbances,
    natural disasters and Welfare Reform changes in the cash assistance
    programs that could lead to fluctuations in Food Stamp costs. Our
    request also includes $1.2 billion for the Program of Nutrition
    Assistance for Puerto Rico, as well as funds for nutrition assistance
    for the Northern Marianas and American Samoa.
        Under the current economic forecast for fiscal year 1998 we project
    that: The average rate of unemployment is expected to be 5.5 percent in
    1998; program participation will average 23.4 million persons monthly
    in 1998; and the Thrifty Food Plan, will be $415.00 for a family of
    four. These factors will result in an average monthly benefit of $77.27
    per person.
        The number of program participants declined throughout fiscal year
    1996, an indication of a strengthening economy. Throughout most of
    fiscal year 1996 and continuing into the early months of 1997, the
    number of food stamp recipients remained at approximately 1 million
    less each month than participation was for the same month in the
    previous year. This steady decline, which started in August of 1994,
    resulted in the Food Stamp Program spending $3 billion less than it
    would have had participation not declined. This trend reflects the Food
    Stamp Program's ability to respond to changing economic conditions,
    expand in times of rising poverty and unemployment, and shrink as the
    economy improves.
        The requested benefit reserve takes on new importance in light of
    dramatic changes effected by welfare reform. States have a great deal
    of latitude in implementing these changes. Welfare Reform has given
    States broad new authority under the Temporary Assistance for Needy
    Families block grant. The choices States make concerning the level and
    form of benefits provided can affect Food Stamp Program costs
    dramatically. For example, if States decide to reduce cash assistance,
    food stamp costs will increase. The benefit reserve serves as insurance
    in the event of unforeseen changes in the implementation of Welfare
    Reform. The benefit reserve provides the mechanism to protect the
    program's ability to get food to people who need it and to ensure that
    benefits will continue to be available for eligible low-income
    children, elderly, families and individuals.
                          food stamp program proposals
        The Personal Responsibility and Work Opportunity Reconciliation Act
    of 1996, signed by the President on August 22, 1996, is a historic law,
    for it has dramatically changed the cash welfare system. It promotes
    self-sufficiency and personal responsibility, it enhances State
    flexibility, it simplifies program administration, and it strengthens
    program integrity.
        However, the President has also said that some provisions will
    cause unfair and unwarranted harm to many families. Our food stamp
    legislative proposals address those concerns within the fiscal
    constraints of balancing the budget by fiscal year 2002.
      --They will create a real work requirement for unemployed adults by
            significantly increasing work opportunities, providing funds to
            create work slots so that almost all individuals subject to the
            time limit who are unable to find employment would be offered a
            work slot, and establishing a tough sanction so that
            individuals are forced to make the choice of living up to the
            responsibilities of accepting food assistance or becoming
            ineligible for the program.
      --They delay the implementation and deadline dates for removing legal
            resident participants from the program to help ensure a more
            orderly implementation and allow immigrants additional time to
            seek naturalization.
      --By fiscal year 2002, our proposals will eliminate the cap on the
            excess shelter expense deduction to help families with children
            who have high shelter expenses.
      --They will resume indexing the standard deduction in fiscal year
            2002 to prevent further decline in the real value of this
            deduction.
      --They will raise and index the vehicle fair market value exclusion,
            recognizing that access to reliable transportation is critical
            to finding and keeping employment.
        We estimate that these proposals will increase Food Stamp Program
    costs by $365 million in fiscal year 1997 and $805 million in fiscal
    year 1998.
                    food stamp program anti-fraud activities
        Combating fraud and abuse in the Food Stamp Program remains a high
    priority of this Administration. Our strategy is to prevent fraud by
    ensuring that only legitimate stores participate in the Food Stamp
    Program and by strengthening penalties against those entities that
    violate program rules. USDA has also moved forward under new and
    existing statutory authority to enhance our ability to eliminate
    program violators and better enforce fines and penalties.
        Our request supports measures that will eliminate retailers who
    misuse benefits and remove barriers to EBT expansion--both of which
    will strengthen the link between the Food Stamp Program and a
    healthful, nutritious diet. The Administration believes that the
    actions currently underway will provide significant deterrent to food
    stamp fraud.
        We initiated a contract in fiscal year 1997 to use private vendors
    to increase the number of pre-authorization visits to stores wanting to
    participate in the program. Visits under this contract will begin this
    summer. Our fiscal year 1998 budget includes funding to continue
    contracting with private vendors to increase the number of on-site
    retailer visits and related FCS expenses. Funds for both years will
    finance contracts for pre and post authorization visits by contractors
    and related expenses such as follow-up visits by FCS staff and
    increased reviews of appeals from those stores denied participation in
    the program. These on-site visits are an important part of our efforts
    to ensue that only eligible stores are allowed to accept food stamps
    and restore confidence in the Government's management of the program.
    This requested funding will be used to ensure initial and continued
    store eligibility. FCS will continue to aggressively fight Food Stamp
    fraud and abuse. Administratively, the Agency will also continue to
    work on its own as well as with OIG and State and local officials to
    eliminate ineligible stores from the program. Over the past two years,
    the number of stores authorized to accept food stamps has declined from
    over 210,000 in September, 1994 to about 193,000 today.
                          food stamp payment accuracy
        Payment accuracy will continue to be a major management focus. I am
    pleased to report to you that the States and my Agency, working
    together, have brought food stamp payment error down from 10.8 percent
    in 1993 to 9.7 percent. This has averted erroneous payment of nearly
    $350 million in the last couple of years. However, 9.7 percent is still
    too high and we are concerned that the complexity of implementing
    Welfare Reform may distract State managers from continuing our
    successful campaign to reduce error rates. We will redouble our effort
    so that we can come back in future years and continue to bring you good
    news on error rates.
                          electronic benefits transfer
        In fiscal year 1998, the Administration will keep expanding the
    electronic delivery of Food Stamp Program benefits. Electronic Benefits
    Transfer (EBT) systems modernize delivery cost-effectively while
    improving recipient service, State management, benefit security,
    financial tracking, and fraud detection. EBT operates like a debit card
    system for recipients' food accounts.
        All States have the option to use EBT and 18 States have already
    implemented EBT systems, delivering 15 percent of all Food Stamp
    Program benefits. Eight States--Maryland, New Mexico, South Carolina,
    Texas, Kansas, North and South Dakota and Utah--have Statewide EBT
    systems. Every other State is in the process of planning for or
    implementing EBT. This represents enormous progress in the last three
    years and demonstrates a growing consensus that EBT is effective and
    efficient. We will eventually eliminate paper coupons along with the
    stigma associated with using them and the inefficiencies of processing
    them. EBT not only supports the nutritional purpose of our program with
    a user friendly system, but is also beneficial for every stakeholder
    involved. Recipients, States, stores, banks, and the taxpayers all win.
                        food stamp tax offset expansion
        We are progressing in our efforts to expand the agency's debt
    collection efforts. In fiscal year 1991, the Department initiated a
    test for collecting claims that resulted from household error through
    Federal income tax refund offsets. Between calendar year 1992 and 1995,
    the number of participating States grew from 2 to 32 and collected a
    total of $70 million. In calendar year 1996, 40 States participated and
    collected $40 million in the Tax Offset Program. Collections from this
    program are estimated at $35 million in fiscal year 1998. Welfare
    Reform has given FCS the authority to continue expanding this
    collection tool and we are encouraging all States to participate.
          the food distribution program on indian reservations (fdpir)
        This program, a variant on the delivery mechanism of benefits under
    the authority of the Food Stamp Act, has recently begun to grow after
    several years of decline. There is currently $65 million available in
    fiscal year 1997 and $75 million is requested for fiscal year 1998.
    With the high unemployment in many FDPIR areas, concurrent with
    operation of food stamps, and the potential for Welfare Reform waivers
    of food stamp work requirements, we are not sure how much more growth
    to expect.
                            child nutrition programs
        The purpose of the Child Nutrition Programs is to assist State and
    local governments in providing food services that serve healthful,
    nutritious meals to children in public and nonprofit private schools,
    child care institutions, certain adult day care centers, and summer
    recreation programs. We are requesting a total of $7.8 billion for the
    Child Nutrition Programs. The request is $870 million lower than the
    1997 appropriations because we anticipate funds will be available from
    1997. Welfare Reform legislation changed the rates paid per meal in the
    lunch and breakfast programs by rounding down the payments to the
    nearest cent and made substantial changes in the eligibility criteria
    for the Child and Adult Care Food Program and its payments structure.
    This budget request will provide the funding necessary to support the
    National School Lunch, the School Breakfast, Summer Food Service, the
    Child and Adult Care Food and the Special Milk Programs. We estimate
    that in fiscal year 1998 these programs will support: 4.4 billion
    school lunches, 1.2 billion school breakfasts, 1.7 billion meals in
    centers and family day care homes, 144 million summer food service
    meals, and 154 million half-pints of milk.
        This request reflects the administration's commitment to improving
    the nutritional status of the Nation's children. FCS will also continue
    its efforts to streamline the administration of the Child Nutrition
    Programs at the State and local levels through promulgation of
    regulations and policy issuances affecting each of the programs.
                  school meals initiative for healthy children
        The USDA School Meals Initiative for Healthy Children is a
    comprehensive integrated plan to ensure that children have healthy
    meals at school. A major part of this plan is the historic update of
    nutrition standards so that school lunches and breakfasts meet the
    Dietary Guidelines for Americans. However, just enacting policies will
    not make this change a reality for every child, and USDA cannot
    accomplish this historic change alone. That is why USDA established
    Team Nutrition, a Nationwide integrated program designed to support
    implementation of the School Meals Initiative for Healthy Children.
        The mission of Team Nutrition is to improve the health and
    education of children by creating innovative public and private
    partnerships that promote food choices for a healthful diet through the
    media, schools, families, and the community. It supports implementation
    of updated nutrition standards through two coordinated approaches--
    Nutrition Education and Training and Technical Assistance.
        Nutrition Education is provided through a comprehensive, integrated
    program designed to build skills and motivate children to make food
    choices for a healthy diet in accordance with the Dietary Guidelines
    for Americans. This effort brings proven, focused, science-based
    nutrition messages to children in a language that they understand while
    strengthening social support for healthy children's diets among
    parents, educators, and food service professionals.
        Team Nutrition is built around a framework of in-school and public
    communication efforts, with a focus on local schools and communities to
    support implementation of updated nutrition standards. Innovative
    educational resources are developed and distributed through supporter
    networks, directly by FCS and USDA's Cooperative State Research,
    Education, and Extension Service, and through other government agencies
    such as the Department of Education and the Department of Health and
    Human Services. Support is focused at the local level through Team
    Nutrition Schools, which actively engage children and their parents,
    food service staff, teachers, agricultural organizations, and other
    leaders in their communities to improve school meals. There are now
    over 17,000 Team Nutrition Schools across the country, and the number
    continues to grow.
        Training and Technical Assistance is a ``change-driven'' program
    providing support to school food service personnel implementing the
    Dietary Guidelines for Americans. This effort will ensure that school
    nutrition and food service personnel have the education, motivation,
    training, and skills necessary to provide healthy meals that appeal to
    children and meet USDA's nutritional requirements. These personnel will
    also have a clear vision of their role in the school community and as
    integral team members of comprehensive school health programs.
        In fiscal year 1998, FCS requests $10 million for this two-pronged
    effort. These funds are critical to supporting schools' efforts toward
    achieving full implementation of the Dietary Guidelines in school
    meals. We will use the funding to support several important activities.
    Team Nutrition will continue to provide technical assistance and
    training for food service professionals and nutrition information that
    empowers children and families to make healthy food choices. We will
    accentuate the importance of public-private partnerships in order to
    maximize the Federal dollars available for this endeavor. The number of
    Team Nutrition schools will continue to grow, engaging additional
    children and their families, teachers, food service staff, agricultural
    organizations and other community leaders in improving school meals.
                           child nutrition integrity
        In keeping with the Department's commitment to make our programs
    more effective, FCS aggressively pursues suspension and debarment
    actions whenever suitable cause exists. To that end, FCS formed a task
    force dedicated to this effort and joined forces with the Department of
    Justice and the Defense Logistics Agency to identify offenders. At the
    time of our budget request, FCS had identified 221 individuals and
    corporations subject to suspension and debarment determinations;
    actions had been initiated against 202. Final administrative action had
    been taken in 159 cases with 80 entities debarred for 3 years from
    involvement on a nonprocurement basis with all Federal Programs.
    Compliance agreements aimed at protecting the Federal interest had been
    signed or were under discussion for 51 other corporations. FCS will
    continue to pursue appropriate debarment action as necessary.
        Furthermore, coordinated review efforts attempt to improve school
    management of the National School Lunch Program through evaluation of
    the local meal service data and provides training and technical support
    to help improve local program accountability. Reviews have been
    conducted at over 7,000 schools.
       supplemental nutrition program for women, infants & children (wic)
        The purpose of the WIC Program is to improve the health of
    nutritionally at risk, low-income pregnant, breastfeeding and
    postpartum women, infants and children up to their fifth birthday. The
    Budget requests $4,108 million in 1998, an increase of $378 million
    over the 1997 appropriated level. The size of the increase over 1997 is
    somewhat misleading, however, for several reasons. One, it does not
    reflect the proposed 1997 supplemental request of $100 million. Two, it
    includes a contingency fund of $100 million to guard against
    unanticipated food price costs. The contingency fund is assumed to have
    no outlays. Three, reductions in carryover funds from $145 to $100
    million in 1997 provide $45 million in additional program resources in
    1997. Since carryover is assumed to remain constant at $100 million in
    1998, an additional $45 million in Budget Authority is needed to
    maintain the same program level in 1998. When these three factors are
    accounted for, the Budget Authority request increases by only $133
    million between 1997 and 1998. Over $100 million of the increase is
    needed to cover inflationary increases in program costs. Only about $30
    million is used to expand participation in 1998.
        During fiscal year 1996, the program continued to provide service
    to low-income women, infants and children at nutritional risk. Average
    participation in WIC for fiscal year 1996 was 7.2 million persons per
    month. For fiscal years 1997 and 1998, average participation is
    estimated at 7.40 and 7.45 million persons per month, respectively.
        A major reason for WIC's success has been access to health care as
    well as an emphasis on nutrition education and provision of
    supplemental foods. Emphasis is placed on the benefits of
    breastfeeding, as well as the dangers of substance abuse including
    smoking during pregnancy. WIC also serves as a gateway to other related
    health and social services, such as prenatal care, well-child care,
    Medicaid, and immunization programs. Studies published by USDA and
    other groups have found that participation in WIC is highly cost
    effective and results in improved birth outcomes and reduced health
    care costs. During the past seven years, participation in this program
    has increased by over 70 percent, with the largest increases being in
    children's participation.
                        wic cost containment initiatives
        All WIC State agencies and most Indian Tribal agencies have
    implemented some measure of cost containment activities in order to use
    their food grants more effectively. The use of infant formula rebates
    continues to be the most successful cost containment method. This
    subcommittee's support for WIC appropriations is evident from the
    program's growth. However, we cannot ignore contributions from
    successful cost containment efforts. This activity will help USDA to
    reduce formula cost by over $1.2 billion in fiscal year 1997 which in
    turn allows the program to reach 1.7 million more participants each
    month.
                         wic funding allocation formula
        The Department is requesting authority to waive selected aspects of
    the grant allocation formula while awaiting regulatory revision. The
    current formula worked well when the program was growing rapidly. It is
    less well suited to allocating funds among States as the program moves
    closer to the goal of full funding. The rule making will update the
    formula to better serve the needs of a more stable full-funded program.
                         commodity assistance programs
        The Commodity Assistance Programs combines funding for the
    Commodity Supplemental Food Program (CSFP), administrative funding for
    The Emergency Food Assistance Program (TEFAP), The Nutrition Program
    for the Elderly (NPE) and Pacific Island Assistance. The budget
    requests:
      --$86 million in support of 123,900 women, infants, and children and
            187,600 elderly in CSFP. In contrast to fiscal year 1997, when
            $16 million of fiscal year 1996 funding was available to
            support this program, no funds from fiscal year 1997 are
            available for program operations in fiscal year 1998. This
            budget request will therefore necessitate a reduction in
            elderly participation.
      --$45 million for TEFAP administrative expenses plus the $100 million
            available in the Food Stamp Account, allowing for a total
            program cost of $145 million.
      --$140 million for NPE, which will fund an estimated 248 million
            meals at a payment rate of 56.4 cents per meal.
      --$1.2 million for Pacific Island Assistance, which will fund the
            nuclear affected islands, disaster relief for non-
            Presidentially declared disasters and the Freely-Associated
            States. This reduced funding is consistent with the phase-out
            of the Freely Associated States.
                            research and evaluation
        The fiscal year 1997 appropriation severely restricted the funds
    available for research and evaluation on the grounds that the number of
    studies underway at FCS appeared high. The President's budget request
    includes $17 million to partially restore these accounts to their
    historic levels.
        There is a critical need for research and evaluation. FCS research
    is used to determine if policy objectives are met and to describe what
    works, what doesn't, and why. Research activities are instrumental in
    enabling FCS to respond to the oversight responsibilities of Congress;
    provide assistance to States to identify and share best practices;
    measure the effectiveness of program operations and alternatives; and
    provide objective, reliable outcome measures of program performance.
        The Agency's research has a proven track record of improved
    government performance. For example, FCS research has:
      --Made critical contributions to the emergence and expansion of EBT,
            supporting the first demonstrations of feasibility and cost-
            effectiveness;
      --Helped fight fraud and abuse by generating the first, and only,
            data-based estimates of the prevalence of food stamp
            trafficking;
      --Determined the nutrients provided to school children in school
            lunches and breakfasts, leading to the first update of
            nutrition standards in school nutrition programs in 50 years;
            and
      --Documented every dollar invested in prenatal WIC participation
            saves an average of $3 in Medicaid costs during the first 60
            days after an infant's birth.
        The number of studies may appear large because we deal with
    multiple programs that are highly complex with many stakeholders and
    policy audiences, and we face a broad array of research issues related
    to food security, work, health, family, economic well-being, program
    management and program integrity. Our studies collect impartial and
    relevant data, use techniques that meet the highest standards of
    accepted scientific practice, and provide objective analyses. The
    investment in FCS research has proved beneficial over the years. We
    serve the needs of many audiences, and the technical credibility of our
    products is well established.
        With the funding requested in the President's budget, the Agency
    will be able to:
      --Expand efforts to assess the consequences of Welfare Reform on Food
            Stamp and Child Nutrition Program clients;
      --Continue critical updates of basic program information, including
            the characteristics of food stamp participants and changes in
            nutrients available in school nutrition programs following the
            School Meals Initiative meal pattern improvements;
      --Focus WIC research on improving program management and efficiency
            and improve WIC eligibility determination tools as recommended
            by the Institute of Medicine; and
      --Expand development of cost-effective ways to improve program
            integrity and reduce administrative costs, focusing on
            operational improvements to reduce error and fight trafficking.
            Additional funds would enable extensions of ongoing work on
            recipient and retailer trafficking to better target
            investigations.
        Restoring the investment in FCS research is critical in light of
    Welfare Reform, the most sweeping set of changes in social policy in
    the last 60 years. Congress needs to make an investment in policy-
    relevant research.
        Our research request of $17 million represents less than one half
    of one tenth of one percent of our investment in our programs. This is
    a tiny investment to provide vital information about how effectively we
    are spending $40 billion annually.
                     government performance and results act
        We have developed a five-year Strategic Plan in response to the
    requirements under the Government Performance and Results Act (GPRA) of
    1993. This Strategic Plan defines the Agency's goals and objectives for
    all its nutrition assistance programs as well as administration and
    financial management. Each goal and objective is accompanied by one or
    more performance measures. In addition, we are developing the Annual
    Performance Plans required by GPRA. These plans are derived from the
    Strategic Plan and their activity outcomes are designed to contribute
    directly to meeting the Agency's strategic goals and objectives. We are
    also coordinating strategic planning with other agencies within the
    Department as a part of a USDA-wide effort to improve nutrition
    assistance and education.
                          food program administration
        Funding for the Food Program Administration is requested in the
    amount of $105.5 million. The FPA appropriation funds the majority of
    the salaries and administrative expenses of FCS, although a small
    portion of these expenses are funded from program appropriations. The
    efforts of agency staff during fiscal year 1996 resulted in progress
    toward improving the nutrition of program recipients, strengthening
    program integrity, and implementing EBT Nationwide. However, due to
    restrictive staff year ceilings in the Food Stamp and Child Nutrition
    accounts, and continuing yearly reductions of 60 to 80 staff years in
    the FPA appropriation, we have only been able to deploy staff from
    crisis to crisis, which is making continuous, effective program
    administration nearly impossible.
        The administrative resources required to keep pace with changing
    program needs and to implement new financial management initiatives
    such as: Federal Financial Management Improvement Act, Government
    Performance and Results Act, Government Management and Results Act,
    Debt Collection Improvement Act, Cash Management Improvement Act, and
    the Chief Financial Officers Act have further strained available staff
    years. Outside authorities, including GAO and OIG, have consistently
    called for additional staff to improve program oversight. Clearly,
    ensuring proper fiscal and program management for an agency managing
    over $40 billion in program funds must be a top priority.
        While the agency has struggled to maintain adequate program
    oversight by prioritizing its work and implementing numerous
    efficiencies, the dramatic loss in staff has stretched available FPA
    resources to the breaking point. It is imperative that FCS maintain a
    steady work force to meet the challenges of nutrition program delivery
    and keep up with new legislation such as Welfare Reform. Further
    resource reductions will most certainly result in increased risk to
    program integrity and possibly require significant organizational
    changes, including closure of Regional offices and reduction of program
    oversight functions.
        Without the necessary staff to properly implement, control, and
    maintain accountability over FCS program funds, Federal oversight,
    financial reporting, and fiscal management to protect Government
    interests will suffer. FCS long ago met its fiscal year 1999
    streamlining target in accordance with the National Performance Review
    and the Vice President' goals of reducing the Federal work force. The
    FCS administrative budget is a ``bare bones'' request. For the past
    several years, we have requested increases, which were not approved by
    the appropriations committees. This year's request is nothing more than
    last year's funding level plus half the inflation needed to offset
    mandated salary increases. No funding is requested for updating the
    agency's automated infrastructure, which demands attention. The agency
    simply can not sustain additional reductions in staff or funding
    without seriously impairing its ability to provide children and needy
    families with access to a more healthful diet through its Food
    Assistance Programs, nor can we maintain adequate vigilance over the
    resources entrusted to us by the Congress on behalf of the American
    taxpayer.
                                   conclusion
        Since its inception in 1969, the goal of FCS has been to provide
    food and nutrition assistance for the Nation's children and low-income
    families. We are committed to achieving this goal as efficiently and
    effectively as possible. We believe that our request of $40.6 billion
    and each proposal contained therein is crucial to continued efficient
    program operations.
        Mr. Chairman, this summarizes the fiscal year 1998 FCS budget
    request. I will be happy to answer any questions that you may have.
                                     ______

                      Prepared Statement of Eileen Kennedy
        Good morning Mr. Chairman and Members of the Committee. I am Dr.
    Eileen Kennedy, Executive Director, of the Center for Nutrition Policy
    and Promotion (the Center) within the Food, Nutrition, and Consumer
    Service mission area of the U.S. Department of Agriculture. I am
    delighted to tell you about the exciting and innovative work our Center
    is doing and planning for the Department and for all Americans.
        As the lead Federal Agency in human nutrition, the Department is
    charged with developing nutrition policy and conducting science-based
    nutrition education programs for all Americans, including those
    involved in Food Assistance Programs. Our Center, established in 1994,
    is the Department's focal point for linking scientific research to the
    consumer. It accomplishes this mission by developing and analyzing
    National survey data on food consumption, nutrient content of the U.S.
    food supply, food groups and recipes; by analyzing trends and
    determinants of dietary behavior, including responsiveness to consumer-
    oriented nutrition promotions; and assessing impacts of alternative
    approaches to improving the nutritional quality of American diets. To
    continue this work in fiscal year 1998, we are requesting $2.499
    million for the Center.
        The Center is an exciting model of how the Federal government can
    be reinvented to leverage a relatively small investment into impressive
    achievements. Capitalizing on its multi-disciplinary, highly motivated
    and diverse staff, in fiscal year 1996, the Center produced (1) the
    ``Nutrition Action Themes for the United States'' that supported the
    U.S. delegation at the World Food Summit in Rome, Italy; (2) the
    report, ``Expenditures on Children by Families'' used by 50 percent of
    States in setting foster care payments; (3) food plans, including the
    Thrifty Food Plan, that constitute the basis for the Food Stamp Program
    benefits and military food cost allowances; and (4) ``The State of
    Nutrition Education: A Report to the Secretary'' that provided the
    first self-assessment of the Department's nutrition education programs
    and helped formulate a nutrition education policy for the 21st Century
    that meets the requirements of the Government Performance and Results
    Act.
        As a result of the Center's activities, Americans have a better
    understanding of good nutrition and a good diet. For example, recent
    survey data indicate that 60 percent of Americans recognizes the Center
    produced Food Guide Pyramid. In addition, because the Center's
    activities and long rich history of nutrition education within USDA,
    significant, positive changes in the American diet are occurring. The
    percent of calories from fat has dropped from 40 percent to 33 percent.
    However, the challenge of improving the American diet continues. A
    government review in the summer of 1994, indicates that at the current
    rate of change, we will not meet the Year 2000 goals for reductions in
    fat and saturated fat. Continued efforts in nutrition promotion are
    critical. Within USDA, the Center will have a key role in nutrition
    promotion for all Americans.
        The Center achieves its accomplishments using a few key strategies.
    First, a dynamic core of analysts from the disciplines of nutrition,
    food science, agricultural and consumer economics, social marketing,
    and computer and telecommunication specialties permits the Center to
    conduct significant in-house analysis and produce appropriate products
    for a variety of key customers. Second, the Center leverages its
    relatively small resources by entering into partnerships and alliances.
    For example, the Center spearheaded the ``Community Nutrition Action
    Kit'' by working with the Cooperative State Research, Education, and
    Extension Service to bring state-of-the-art nutrition education into
    every county in the Nation. This cost-effective project produced 35
    fund and interactive activities for children, their families and their
    communities to promote food choices for a healthy diet. For another
    example, the Center represented the Department in the Dietary
    Guidelines Alliance--a new alliance of food industry, health
    organizations, and government to help consumers implement ``The Dietary
    Guidelines for Americans.'' The Alliance's consumer-tested messages
    will be highlighted in March 1997 during National Nutrition Month.
        In fiscal year 1997, the Center embarks on an enhanced mission to
    provide a vision for the 21st Century of how the Department of
    Agriculture can effectively apply science-based research from
    nutrition, economics, consumer marketing research, and other relevant
    disciplines to the challenge of recreating U.S. nutrition policy for a
    new Century. The Center is executing a strategy for identifying the
    needs of its most important customers--including decision makers and
    news makers who help disseminate messages--to provide them with
    targeted information in the form they can use best. Working with many
    close partners, the Center is completing a set of highly significant
    products--Thrifty Food Plan, Nutrient Content of the U.S. Food Supply,
    the new Healthy Eating Index, a new monthly series of briefs. At the
    same time the Center is updating the research base supporting the Food
    Guide Pyramid, planning for the next edition of the Dietary Guidelines,
    and positioning itself to launch a National nutrition promotion
    campaign stressing the many consumer-oriented benefits of healthy
    eating to coincide with the release of the next Dietary Guidelines in
    the Year 2000.
        The Nation is now aware that nutrition is the link between diet and
    health. Four of the leading causes of death in the United States are
    linked to diet. Heart disease, cancer, stroke, and diabetes account for
    more than 1.4 million deaths annually, nearly two-thirds of the U.S.
    total. Diet also plays a role in other health conditions such as
    overweight, hypertension, and osteoporosis, which can reduce the
    quality of life and productivity and contribute to premature death.
    Taken together, these seven diet-related health conditions cost society
    an estimated $250 billion each year in medical costs and lost
    productivity.
        Improving the diets of all Americans can reduce early deaths,
    improve the quality of life and increase market opportunities for new
    food products and technologies. For example, Americans are currently
    eating too much saturated fat. Reducing the percentage of calories
    consumed from saturated fat by 3 percentage points could prevent about
    100,000 new cases of coronary heart disease by the year 2005 and save
    nearly $13 billion in medical costs and lost earnings.
        By providing timely and insightful analysis to decision makers, by
    forecasting dietary trends, by promoting consumer-oriented nutrition
    messages, and by working collaboratively with key stakeholders in the
    food, agriculture and health fields, the Center can continue to
    leverage its modest resources and help Americans enjoy healthier diets
    and lives.
        Mr. Chairman, this concludes my testimony. I will be happy to
    answer any questions that you may have.

                      WIC Farmers Market Nutrition Program

        Senator Cochran. I know that Senator Leahy is a member of
    the Judiciary Committee, which is meeting as we speak on other
    issues, and may have to leave early. I am going to call on him
    at this point, if our distinguished ranking member has no
    objection, for any opening statements or questions that he may
    have.
        Senator Leahy.
        Senator Leahy. Well, Mr. Chairman, I appreciate that
    courtesy. I know how much I enjoyed and have enjoyed working
    with you on the authorizing committee, both in years when
    either you have been chairman of various subcommittees and I
    have been ranking member or I have been chairman and you have
    been ranking member. We have worked closely together.
        I am going to ask a question regarding my strong support of
    the WIC Farmers Nutrition Program. What this does, for those
    not aware, is to set up farmers markets that allow WIC families
    to buy from these farmers markets.
        In my own State, that means a lot of them get the most
    nutritious and fresh food, but it also has the added advantage
    that if we are spending those WIC dollars, it is going right to
    people in the area. It has kind of a plus-plus situation with
    it.

                  Farmers Market Nutrition Program--Expansion

        The President requested a funding increase, which I
    support, but I want to make sure that if we add increases,
    Vermont is going to be in good shape on this. But I want some
    money to go to States not yet in this program, if they want to.
        Will you be able to take steps, if we do get more money, to
    be sure that this program reaches more States? My wife and I go
    to a couple farmers markets near where our home is in Vermont.
        The chairman has visited that area with me a couple
    different times. And I just see the tremendous benefit. Every
    farmer there tells me how helpful it has been.
        Will we be able to expand this?
        Ms. Keeffe. Senator, we are very hopeful that we will. In
    terms of the request that we have made for the Farmers Market
    Program this year, we foresee that we would be able to expand.
    We would have a little over $2 million of that money earmarked
    for that purpose.
        The priorities in the Farmers Market Program are, first,
    that we are able to meet the current levels of funding in
    current States that are already in the program.
        The second priority is granting expansion requests within
    those States, and the third level is bringing new States into
    the program. We feel that with the increase that we have
    requested, we will be able to meet all of these priorities and
    will be able to expand.
        We have had requests from a half dozen States that are
    interested in coming into the program. We are very excited by
    that.

                            WIC Supplemental Funding

        Senator Leahy. Well, I would encourage any States that have
    the opportunity to do so. I really think it is a win-win
    situation. The WIC participants are getting used to buying
    locally produced products, usually fresher, but it is also
    helping the local economy.
        I testified that 400,000 participants may have to be taken
    off WIC unless the supplemental is approved. What States would
    be hurt the worst? Which States would be hurt the worst? Do we
    have that kind of a breakdown? And if not, could it be supplied
    for the record?
        Mr. Braley. Senator Leahy, we have done our own analysis
    and we have also asked the States for their plans of how they
    would likely react to the current level of funding in the WIC
    Program.
        A significant number of States have reported that they will
    have to reduce their participation below current levels. I
    believe the number is about nine geographic States.
        We have Indian State agencies as well that are reporting
    the need to reduce their participation by more than 5 percent,
    some of them well above even a 5-percent reduction.
        Those are fairly optimistic scenarios that the States have
    provided us. We think that because States will not be able to
    spend every dollar they have this year, that actual
    participation reductions would be even more severe than
    reported by the States.
        We expect quite a few States would have to make major
    reductions in participation between now and the end of the
    year.
        Senator Leahy. Thank you.

                       Electronic Benefits Transfer [EBT]

        And how are we doing on EBT?
        Ms. Keeffe. We are very proud of our progress in EBT,
    Senator. Currently, we have 18 States that have EBT operations.
    There are eight States where EBT is operating on a statewide
    basis. Currently, about 15 percent of all total benefits are
    provided via EBT.
        By the end of fiscal 1997, we estimate that 25 States will
    be operational, and we will be delivering 30 percent of
    benefits via EBT. It is moving quite rapidly. We expect to
    attain the goal of being completely EBT operational by the year
    2002.
        Senator Leahy. Good. Thank you.
        I will put the rest in the record, Mr. Chairman.
        Senator Cochran. Thank you very much, Senator, for your
    participation and your leadership in a lot of these nutrition
    areas. We know of your strong support for many of these
    programs and assistance and leadership in drafting a lot of the
    legislation that is funded in this bill.
        Senator Bumpers.
        Senator Bumpers. Mr. Chairman, I only have a couple
    questions, and I will submit the rest of mine for the record.

                   Federal Tax Refund Offset Program [FTROP]

        But I guess, Mr. Ludwig, I probably should direct this
    question to you. You have indicated that the Food Stamp Offset
    Program has helped recapture, I think you said, $70 million. Is
    that correct?
        Mr. Ludwig. It is approximately $100 million, I believe,
    sir.
        Senator Bumpers. $100 million?
        Mr. Ludwig. Yes, sir.
        Senator Bumpers. And 32 States are participating?
        Mr. Ludwig. Let me give you the updated numbers. As of
    1996, a total of 40 States participated in the FTROP Program.
    We have collected in excess of $100 million to date.
        Senator Bumpers. Why do we not just mandate all the States
    to do that? It seems to be a very effective collection program.
        Mr. Ludwig. Yes, sir; we have seen great progress among our
    States over the last few years. We have the highest
    expectations that the remaining 10 will be coming on board and
    implementing FTROP over the next few years. We have not had the
    authority to mandate it on States, but they are proceeding
    forward.
        Senator Bumpers. Do we pay the States their administrative
    expense to operate this program?
        Mr. Ludwig. Yes, sir; we pay it on a 50-percent match.
        Senator Bumpers. Fifty percent of what they collect?
        Mr. Ludwig. No, sir.
        Senator Bumpers. Fifty percent match of the administrative
    expense.
        Mr. Ludwig. Yes, sir; 50 percent match of their
    administrative costs.

                                  WIC Funding

        Senator Bumpers. On the WIC Program your budget request for
    1998 is based on a caseload of 7.4 million, is that correct,
    Madam Secretary?
        Ms. Keeffe. In 1998 it is based on 7.5 million.
        Senator Bumpers. 7.5 million. What is the present caseload?
        Ms. Keeffe. Well, we are seeing numbers in excess of 7.4
    million late last year, October and November figures from last
    year, which is why we are in the position of requesting the
    supplemental, because these numbers are higher than what we had
    estimated fiscal 1997 participation at.
        Senator Bumpers. Now, you are anticipating 7.5 million. We
    have a $100 million supplemental coming up. You had $100
    million carryover. Is that not correct?
        Ms. Keeffe. Yes.
        Senator Bumpers. And you could use that without any further
    legislative authority, can you not, or do you have to have some
    authority to spend that carryover?
        Ms. Keeffe. No; we can spend it.
        Senator Bumpers. All right. I am just trying to put the
    numbers together.
        Ms. Keeffe. Sure.

                             WIC Funding Increases

        Senator Bumpers. You have a $100 million carryover, $100
    million supplemental, and you are getting a $300-plus million
    increase for 1998. So that totals $500-plus million more that
    you will have. No; wait a minute. The supplemental is going to
    be for 1997, is it not?
        Ms. Keeffe. That is right. The supplemental is 1997.
        Senator Bumpers. And the carryover, too.
        Ms. Keeffe. And the carryover will be--we will not have it
    until we are into 1998, when, you know, all the finances come
    through and all the accounting. And the $300-plus million in
    1998 is not all total increase; $100 million of that is a
    contingency fund that would only be used if food cost increases
    of an amount where we need to reach into that pot of money.
        So that is just aside. If that, you know, were to happen,
    then that money can be used for food money for inflation.
        And, really, we are only talking about $30 million of that
    money that is new, increased money for increased participation,
    if you will. The rest will take care of inflation.
        Senator Bumpers. Do you feel comfortable with your request
    for 1998, that that will be adequate?
        Ms. Keeffe. Yes; we do.
        Senator Bumpers. For 7.5 million?
        Ms. Keeffe. For 7.5 million. But we need the supplemental
    for where we are in fiscal 1997 to keep that growth in place.
    Otherwise we are going to drop behind.

                                 WIC Eligibles

        Senator Bumpers. What percentage of the total people who
    would be eligible for WIC if they applied, what percentage of
    7.5 million of that--let me restate it.
        If everybody in the country applied for WIC that would be
    eligible for it, how many would that be? What do you think the
    total pool is?
        Ms. Keeffe. Well, the eligible, the income eligible,
    population, we estimate at 11.4 million. And then the fully
    eligible, which means income eligible and nutritionally at
    risk, is 9.2 million.
        Senator Bumpers. Do you have any outreach programs to reach
    those people that are not on the program that would be
    eligible?
        Ms. Keeffe. Oh, yes; there has been a lot of outreach
    taking place which is why the program has successfully grown
    over the years. We estimate that 80-percent of those fully
    eligible would naturally participate. The 7.5 million figure is
    82 percent of those fully eligible.

                                WIC Immunization

        Senator Bumpers. Madame Secretary, I recently spoke to all
    the WIC directors who were in town. And following their
    convention, they met with CDC in a 1- or 2-day meeting. And I
    had tried to facilitate that meeting for some time to see if we
    could not get the immunization levels up through the WIC
    Program.
        And I did not get any feedback for how well that meeting
    went. That has been a couple months ago, I guess. But the WIC
    directors that I have talked to are always anxious to
    participate and help out with the immunization program.
        Did you happen to attend that meeting?
        Ms. Keeffe. I did, Senator. I had the pleasure of being
    there for the opening. It was really wonderful, because not
    only were there representatives of the WIC directors and CDC,
    but also the Association of State and Territorial Health
    Officials.
        It was a wonderful opportunity to share experiences and
    success stories of what some States had been doing that were
    best practices and to be able to share those practices with
    others.
        The support we have had from CDC in recent years to make
    money available to build data system infrastructure to track
    infant immunization in the WIC Program has been very helpful.
    WIC stands in the forefront of aggressively being part of child
    immunization, especially the very early years. This is
    something that, since I have come to the Food and Consumer
    Service I have been personally very involved with. I have also
    had the pleasure of working with Mrs. Bumpers and Mrs. Carter
    to see other areas in our programs where we could be helpful in
    promoting immunization, which, of course, is vitally important
    to young children.

                               Prepared Statement

        Senator Bumpers. Thank you very much, Ms Keeffe.
        Ms. Keeffe. Thank you.
        Senator Bumpers. Thank you, Mr. Chairman.
        [The statement follows:]
                     Prepared Statement of Senator Bumpers
        I want to join my colleague, Senator Cochran, in welcoming before
    this subcommittee representatives of the United States Department of
    Agriculture. The subject today is a review of the budget request for
    USDA's Food and Consumer Service. The Food and Consumer Service has the
    responsibility of not only ensuring adequate diets for the most
    vulnerable of our people, but also increasing the public awareness and
    encouragement to improve the diets and nutrition-related health of our
    entire society.
        Not only are these programs of special importance to the American
    people, they also represent a substantial portion of funding under the
    jurisdiction of this subcommittee. Of the total in new budget authority
    for all USDA programs funded by this subcommittee, those of the Food
    and Consumer Service represent $39.8 billion, or 78.3. If you include
    additional amounts included in the legislative proposals to come before
    Congress, the Food and Consumer Service request increases to $40.6
    billion, or 79.3 percent of the USDA request before us.
        In spite of the high proportion of subcommittee funding for
    nutrition programs, the amount requested is below what it might have
    been but for a couple of reasons. One is that fewer Americans are
    relying on Food Stamps and similar programs due to a continuingly
    improved economy. In March 1994 program participation levels reached an
    historic level of 28 million persons. Today, that figure has improved
    to a level of 24 million persons.
        Another factor relating to the lower budget request is the passage
    last year of The Personal Responsibility and Work Opportunity
    Reconciliation Act of 1996, commonly referred to as Welfare Reform. I
    look forward to the testimony of today's witnesses on the effect
    Welfare Reform is having on their programs and their thoughts on
    legislative proposals to modify certain parts of that law.
        In addition to the budget requests for fiscal year 1998, this
    subcommittee also is faced with a request for fiscal year 1997
    supplemental funding for programs of the Food and Consumer Service. One
    supplemental item is funding for the Nutrition Education and Training
    Program. This program was previously included as mandatory spending in
    the Child Nutrition account, but Welfare Reform converted this program
    to discretionary spending. Since Welfare Reform passed subsequent to
    the fiscal year 1997 Appropriations Act, the sequence of events
    resulted in a shortfall for this program. I understand this request is
    fully offset by mandatory spending in The Emergency Food Assistance
    Program.
        One other supplemental item is a request of $100 million for the
    WIC program. Because of the importance of this program and the
    complexity of its allocation system, I would like to provide for the
    record an overview of why the supplemental request is before us.
        WIC is, and has been, one of the most successful and popular
    programs within the federal government. While there has been differing
    opinions on funding levels for various USDA programs, support for the
    WIC program has always been unanimous. Not only does the program serve
    a most important constituency, women, infants, and children, it is also
    proven to be cost-effective. USDA documentation has established that
    for every $1 spent on the WIC program, $3 in Medicaid spending is saved
    during the first 60 days after an infant's birth.
        For many years now, the bipartisan goal for the WIC program has
    been to achieve full funding in order that all eligible participants
    who wish to apply, may receive assistance. USDA has projected full
    funding will occur when participation levels can reach 7.5 million. I
    am pleased to say we are clearly in sight of that goal and the budget
    request before us will get us there.
        Due in part to the rapid growth of the WIC program, in the range of
    500,000 new participants a year, and the complexity of program
    delivery, there has been an historic amount of funding remaining
    unspent in one fiscal year yet available in the following year. This is
    the so-called WIC carryover.
        For reasons not entirely clear, the growth that was expected for
    fiscal year 1995 did not fully occur. That year, caseload was expected
    to reach 7.3 million participants but, in fact, it only reached 7.0
    million. The result was a large increase in the carryover and a
    question about the accuracy of future caseload projections. In turn,
    USDA and OMB deemed it prudent to provide more conservative estimates
    for program growth and therefore projected growth in fiscal year 1996
    would reach a year-end figure of 7.3 million, the same level they had
    predicted for the previous year.
        Going into fiscal year 1997, USDA and OMB concluded that the
    funding level provided by this subcommittee would not allow for program
    growth, but it would be adequate to meet level participation needs.
    However, that projection has proved incorrect for a number of reasons.
        First of all, the rate of program growth resumed its pre-fiscal
    year 1995 levels. Rather than a year-end level of 7.3 million, caseload
    in fiscal year 1996 reached 7.4 million. In addition, WIC-related food
    prices increased 1.1 percent above the budget forecast. As a result of
    these two factors, the carryover available for obligation in fiscal
    year 1997 is substantially below earlier assumptions.
        By including the carryover from fiscal year 1996 with the amount
    this subcommittee provided in fiscal year 1997, it is now estimated
    that there is funding to support average participation this year of
    slightly more than 7.2 million, 200,000 participants below the level
    achieved by the end of fiscal year 1996. Since fiscal year 1997 started
    out at a level of 7.4 million participants, USDA has concluded that
    without supplemental funding, they will have to reduce caseload to 7.0
    million in order to maintain an average of 7.2 million. As a
    consequence, some states are now preceding with plans to reduce current
    caseload, an effort directly counter to the long-held, bipartisan goal
    of achieving full participation.
        In spite of the reduction in carryover in WIC funds described
    above, there is still a substantial sum of fiscal year 1996 dollars
    that were unspent at the beginning of this fiscal year. Because of the
    obvious irony of asking for a supplemental at a time when carryovers
    occur, I believe it is important to enter into the record an overview
    of how and why these carryovers occur.
        Funds appropriated for the WIC program are available for
    expenditures for two fiscal years. Due to a number of factors, USDA and
    State WIC agencies do not know at the exact end of any given fiscal
    year exactly how many dollars were spent. In fact, State WIC agencies
    will not know these total amounts until a few months after the end of
    the fiscal year.
        One of the reasons for this delay is that many of the WIC vouchers
    issued late in the year by state agencies are not redeemed and
    reflected back through the accounting system until the fiscal year is
    over.
        It is further possible that all WIC recipients will not use all WIC
    vouchers issued. It is not until after October 1 that all vouchers
    issued in August and September are fully accounted for.
        Another variable is the exact cost of the vouchers. The cost of a
    particular voucher equals the price of the food item purchased by a WIC
    participant on the day of the purchase. State agencies have no way of
    knowing what that purchase price will be until after the vouchers are
    redeemed and returned.
        Another major item that controls WIC expenditures is the cost
    containment aspect of the program as required by law. Cost containment
    has been a very successful tool at reducing program costs and are
    estimated to save approximately $1.1 billion annually. The cost
    containment contracts also add, however, to the difficulty of expending
    all available funds. A State generally cannot bill a manufacturer for
    rebates for infant formula sold in September until after September is
    over and the fiscal year has ended. A State may receive a check from an
    infant formula company early in a fiscal year that represents rebates
    for formula sold to WIC participants in the latter months of the
    previous fiscal year. Such checks are considered funding for the prior
    fiscal year. To the extent that such checks are not freely used to
    defray WIC expense incurred in the previous fiscal year, the remainder
    of the checks constitutes money classified as carryover money from the
    previous fiscal year.
        We must also remember that because State WIC directors do not know
    exactly how much will be spent in any given year, they exercise prudent
    caution in order not to overspend their state's allocation. It is not
    uncommon for a state to withhold some of its allocation at the end of
    the year to avoid the possibility of overspending. This should not be
    viewed as an overly conservative practice, but rather a tool of sound
    program management.
        If all states average expenditures of only 97 percent of their
    annual allocations, the total of carryover would equal $120 million. As
    a guiding principle, USDA, State WIC directors, and the Congress should
    recognize approximately $100 million as a reasonable and expected
    carryover amount. This amount is often referred to as ``structural
    carryover''. While it might be confusing to some who question a
    supplemental request when there exists any carryover at all, it should
    be noted that a ``structural carryover'' is a recognized an inherent
    feature of program operations.
        However, with or without the ``structural'' portion of the
    carryover, we now find ourselves in the position that the carryover
    currently available for obligation this fiscal year is below earlier
    projections. When you factor in increased food costs, which are
    provided in the Department's Explanatory Notes, along with the reduced
    carryover from fiscal year 1996 we are, for the first time in about 15
    years, faced with allocations to the states at a level insufficient to
    meet previous year participation for many states.
        I would also like to mention this supplemental request in the
    context of the request for WIC funding in fiscal year 1998. In order to
    attain the goal of full funding for WIC, a participation level of 7.5
    million women, infants, and children, the budget asks for an increase
    of $378 million. $100 million of that amount is reflected in the $100
    million supplemental request. In other words, the fiscal year 1998
    increase totals $378 million from the fiscal year 1997 level without a
    supplemental.
        Also, the $378 million increase includes another $100 million to be
    held in reserve in the event of future unforeseen program expenses and
    to avoid the need for additional supplementals. In addition, the
    increase also includes amounts necessary to respond to food cost
    inflation and to recapture the fiscal year 1996 carryover reductions
    explained above. This leaves only a $25 to $30 million increase for
    actual program expansion. This is the amount necessary to bring the
    program participation from 7.4 million up to 7.5 million, which is full
    participation.
        I hope that this explanation helps answer questions some may have
    about why the supplemental is needed, why there is a carryover, and how
    the supplemental request ties in with the request for fiscal year 1998.
    I offer it in full recognition of the budget constraints before this
    subcommittee. I honestly believe that every member of this subcommittee
    is fully committed to the goal of full funding for WIC, but I am a
    realist and I know finding offsets will be difficult if the budget
    process does not allow us to use the offsets identified in the
    President's budget request.
        In closing, I want to commend our guests for their fine and noble
    work. I often hear from farmers who complain that our appropriations
    bill has too little to do with real farming. When you look at the
    amount of spending in our bill for food assistance programs, you know
    what those farmers are talking about but you have to ask why they are
    saying it. Domestic feeding programs mean that more of the farmers
    products are getting to people who need them. Improved nutrition
    information means consumers can make better choices and farmers can
    better plan for improved markets. As long as there is hunger in
    America, no one can dispute the purpose of your mission.
        I know there are many other important programs within the Food and
    Consumer Service that I will not take time here to touch on. I do note,
    however, the funding request for the Food Program Administration. I
    agree that your responsibility for $40 billion in program activity is
    evidence enough for your need to retain adequate staff levels. Recent
    action to crack down on fraud and trafficking are probably signals that
    there is much more to be done. For these reasons, and others, we need
    to fully consider your requests for staff needs as well as your ability
    to conduct research on the changing nature of nutrition programs. In
    this way, we may better understand the changes effected by Welfare
    Reform and the economy generally and the implication of those changes
    on your programs. I hope this subcommittee can be helpful in giving you
    the tools necessary to do all these things.

                   WIC Participation and Supplemental Funding

        Senator Cochran. Thank you, Senator Bumpers, for your
    contribution to this hearing.
        I am also interested in this supplemental request. I think
    we need to go ahead and try to get as much information as we
    can, so we can make a decision about the supplemental.
        While there are excess funds in some of the accounts
    because of changes in welfare reform, this is an account which
    you indicate we are going to have a shortfall. And, I am still
    a bit confused about the supplemental.
        Are we trying to maintain the current level of
    participation, or is this designed to increase the level of
    participation to keep expanding the program?
        Ms. Keeffe. The supplemental, Mr. Chairman, is to maintain
    participation at the current level. Without those funds, we
    feel that States will have to reduce caseload by approximately
    400,000 persons by fiscal year end in order to get to that 7.2
    number.
        Senator Cochran. Senator Leahy asked you about the State-
    by-State analysis, if you had information about where the
    dropoffs from the program would occur. Is there a way to
    determine how many participants you would lose in each State?
        Ms. Keeffe. Let me just give a short answer, and I will
    have Mr. Braley elaborate. I do not think we know precisely.
    States are very well intentioned and feel that they are going
    to be able to spend all the money that they have in their
    accounts.

                                WIC State Plans

        But we certainly have to look at what the record and
    history teach us in the program, and how this program operates.
    We feel by necessity they end up with a carryover at the end of
    each fiscal year. I think this is very understandable.
        But for them to take a position that, well, this year we
    are not going to have that carryover, we are going to be able
    to spend down every cent, I do not think is very realistic.
        Mr. Braley. Mr. Chairman, to elaborate a little bit on the
    Under Secretary's point, historically States have carried over
    in the last 3 years between 3.5 and 4 percent of the funds that
    have been appropriated to them.
        The submitted plans indicate that they would reduce
    carryover to less than 1 percent, about seven-tenths of 1
    percent. That is unprecedented even in years when dollars have
    been tight, as they are this year. We believe that about as low
    as they could get would be about 2.5 percent of the total
    grant.
        The reason is that there are a lot of uncertainties. As for
    example, States issue vouchers in the WIC Program toward the
    end of the fiscal year, it is not until the next year that
    those vouchers are redeemed and they actually know what their
    obligations are.
        Similarly, States have rebate contracts with infant formula
    companies, and they do not receive the proceeds from those
    contracts until the next year.
        The consequences of overspending are severe for a State, so
    they tend to underspend slightly, even though in their planning
    at this time of year they typically say, well, sure, I can
    spend everything that is available.
        We have taken the carryover amounts that we expect to carry
    from last year into this year, which were about $145 million,
    and, recognizing that funding is tight this year, reduced that
    to about $100 million, about a 30-percent reduction.

                               WIC Participation

        Even with that drawdown, we believe States can serve only
    an average of 7.2 million participants this year. Therefore, by
    the end of the year, because States started way above that
    figure, they are going to have to come down to about 7 million
    participants, unless the supplemental funding is provided.
        The reason for the supplemental is to maintain
    participation levels that were achieved at the end of fiscal
    year 1996 and the beginning of fiscal year 1997.
        In the reports we have just received, nine States reported
    a participation reduction in excess of 5 percent, even if they
    anticipated spending the full amount of the resources
    available. I can either read those now or provide them for the
    record.
        Senator Cochran. I think providing them for the record will
    be helpful to us, and will give us a chance to review them and
    try to make a determination about the response the subcommittee
    ought to make.
        [The information follows:]

        WIC: States with estimated participation decreases greater
    than 5 percent: Minnesota, New Mexico, Arkansas, Massachusetts,
    Nebraska, Louisiana, West Virginia, Alabama, and Hawaii.

                                Funding sources

        Senator Cochran. Is there a suggestion as to where the
    additional funds should come from. In this budget process here,
    when we add funds over and above what we are allowed, we have
    to take it from some other accounts. What is the recommendation
    of the administration as to where we take this money from?
        Mr. Braley. My understanding is--and maybe Mr. Kaplan can
    correct me, if I am wrong on this--one-half of the offset was
    from Public Law 480 programs within the Department of
    Agriculture, and the other one-half was elsewhere in
    Government, but not specified. There was an offset for all of
    the supplementals that were planned Governmentwide. So one-half
    of it is within the Department, and the other one-half is in a
    more general category.
        Senator Cochran. Mr. Kaplan, is that the way you did it?
        Mr. Kaplan. Yes, sir.
        Senator Cochran. Well, I am curious about that. Because,
    for example, I notice in the food stamp budget proposal here
    there are proposed changes in the law that would result in more
    appropriated dollars for the Food Stamp Program than if we do
    not change the law as recommended. That is, if the authorizing
    committee does not change the law--that is not the
    responsibility of the Appropriations Committee.
        But, if the authorizing committee does change the law to
    add benefits under the Food Stamp Program, as I understand the
    budget process, it will have to make other changes in the law
    in some other area to offset the additional cost of those
    benefits.
        Is there in the budget submission any suggestion as to what
    changes in the law ought to be made by the Agriculture
    Committee to reduce the cost of the programs under its
    jurisdiction at the same time you are asking it to change the
    law to increase the cost of the Food Stamp Program.
        Mr. Kaplan. No, sir; just the increases that are in the
    President's budget.
        Senator Cochran. OK. Well, it is an interesting exercise,
    is it not, that you can submit a budget, if you are the
    administration, and presume these changes to increase spending
    and make people happier. To tell people that they are going to
    get more money from the Federal Government, but not tell them
    the other side of the coin, which is that if these changes
    really are made under existing law, there are going to have to
    be changes in other programs to pay for them.
        But you do not want to tell the beneficiaries of those
    other programs that they are going to get less, because you are
    going to take those funds and give them to food stamp
    beneficiaries who will be given new benefits.
        Ms. Keeffe. Mr. Chairman, I think it is fair to say in this
    discussion that the President is committed to a balanced
    budget. The changes that he has recommended in the Food Stamp
    Program are part of his balanced budget submission.
        Senator Cochran. I understand that he has talked about the
    fact that the budget is a balanced budget, but no one agrees
    with him who is keeping the score, at least no one who
    understands the trigger that calls for all the big cuts to come
    in the last couple of years of the budget cycle and the tax
    increases that would be required to be imposed to balance the
    budget.
        If you just look at the changes in programs, the changes in
    obligations of the Federal Government, it does not come out
    that way. Only the automatic, so-called trigger, makes it a
    balanced budget. I think that is an appropriate summary
    description of the budget that has been submitted by the
    President.
        I am trying not to get into the macroanalysis of the
    budget, as they are doing on the Budget Committee. I would
    rather let Pete Domenici discuss that with Mr. Raines or
    others.
        What we are interested in is what we have to do on this
    subcommittee and what the Agriculture Committee has to do with
    respect to proposed changes in the law. It just seems that the
    requests that we have gotten are to increase spending for
    programs that are very popular with the beneficiaries, but we
    never tell anybody that if you do that, you must cut spending
    somewhere else.

                       Changes in the Food Stamp Program

        I was just curious if you had any suggestions specifically
    about what programs to cut. The changes that you are
    contemplating in the food stamp area I understand relate to
    work requirements and to those who might be terminated who now
    are getting benefits because of immigrant status.
        Are those the main changes that are requested in the Food
    Stamp Program?
        Ms. Keeffe. Well, there are several areas, Mr. Chairman. I
    am going to ask Ms. Jackson to go into greater detail.
        Ms. Jackson. Mr. Chairman, you are correct that one of the
    major changes is a change to basically change the work
    requirement for able-bodied adults between the ages of 18 to
    50, to try and create what the administration feels is a real
    work requirement by increasing work opportunities through
    increased employment and training funding for States; by
    changing the time limit from 3 and 36 months that a person
    could receive benefits without working to 6 and 12 months; also
    by strengthening the penalties against individuals who refuse
    to work; and by also giving States more flexibility to use the
    food stamp benefit as a wage subsidy to encourage more private
    employment.
        In addition to that proposal, there are also proposals to
    eliminate the excess shelter deduction cap by the year 2002, to
    help families with children who have heavy housing and heating
    expenses. There is also a proposal to resume indexing the
    standard deduction by the year 2002 to prevent further decline
    of the actual value of this deduction.
        There is also a proposal to raise and index the vehicle
    fair market value exclusion, recognizing that in order for
    people to work, they have to have reliable transportation.
        So all of these are included in the proposal.
        The one area relating to legal immigrants is a proposal for
    the 1997 budget. We propose to postpone the implementation of
    the restrictions for legal immigrants from the August 22
    deadline, which is currently set in law, to September 30.
        The idea there is to give individuals who are already
    applying for citizenship more time to become naturalized. But
    there is no proposal for legal immigrants and food stamps
    beyond 1997.

                  Food Stamp Error Rates and Payment Accuracy

        Senator Cochran. There is a statement in your submission
    about the error rates and the fact that you have made some
    progress in working with States to improve payment accuracy.
    Could you tell us how you are working to deal with this
    problem, and what are the reasons for this success in bringing
    the error rate down?
        Ms. Jackson. Well, we were very concerned, Mr. Chairman,
    that during fiscal years 1992 and 1993 the national error rate
    increased in the Food Stamp Program. We instituted some
    partnership programs with States and, through our regional
    offices, targeted States with very high error rates.
        We also sponsored a national payment accuracy conference to
    try to raise the consciousness level, particularly of top
    management in States, about the need to focus on payment
    accuracy.
        We were given additional funding to provide State Exchange
    money to States. This funds transportation for them to travel
    to other States that had been very successful in reducing their
    error rates, to see firsthand what types of initiatives and
    programs they established.
        All of these various activities have been very successful
    in allowing us to reduce the payment error rate. The high rate
    that we had in the program was in fiscal year 1993, where the
    error rate went all the way up to 10.81 percent. That is both
    underpayments as well as overpayments.
        We were able to reduce that error rate down to 10.32
    percent in fiscal year 1994 and then 9.72 percent in fiscal
    year 1995. Those reductions over those 2 years, from 1993 to
    1994 and then again from 1994 to 1995, resulted in savings to
    the American taxpayer of over $350 million.
        We are pleased that early results from the 1996 data show
    that we are still in that downward trend.
        Senator Cochran. Well, that is good news. I had heard about
    that and wanted to bring it out and urge you to continue to use
    your good judgment and imagination on how to deal with that.
        Ms. Keeffe. Mr. Chairman, this is an area, that really
    exemplifies the Federal Government and the States working
    cooperatively to achieve this positive story. We were the
    impetus behind this, and we did have this funding earmarked to
    move aggressively in this area, but it is really the States
    that have turned this around. I think it is a very positive
    story.

                     Food Stamp Program Contingency Reserve

        Senator Cochran. As a result of welfare reform, there is a
    suggested new importance for the Food Stamp contingency
    reserve. Your statement indicates that $2.5 billion is
    requested for a contingency reserve.
        Could you tell us if you have done any assessment on how
    the program funding requirements might fluctuate, given the
    choices States make concerning the level and form of benefits
    provided and waivers requested under welfare reform?
        Ms. Keeffe. Well, I think that one of the rationales for
    requesting the contingency is welfare reform and its
    uncertainties. The amount we requested really is not too large.
    It translates into 6 weeks' worth of Food Stamp benefits.
        Another reason for the contingency fund is the situation we
    are in right now. It does not have anything to do with welfare
    reform, but disaster flooding and emergency food stamp
    issuance. This is an area where the contingency is also very
    helpful. We have been faced with a number of serious disasters
    in recent years, and it is helpful to have contingency funding.
    The combination of potential disasters, coupled with the
    uncertainties of welfare reform, made us think that this was
    not an outlandish amount to request.
        Senator Cochran. Well, in 1997 we had a $100 million
    contingency reserve. Will that $100 million be needed?
        Mr. Braley. Mr. Chairman, we do not anticipate needing it.
    I know you have been with this committee for a number of years,
    and it was not too many years ago that we consistently needed
    food stamp supplementals.
        We started requesting the contingency reserve because it is
    difficult to predict exactly how much the Food Stamp Program is
    going to cost.
        Especially with welfare reform this year, we thought it was
    particularly critical to have a significant contingency reserve
    in case some of the estimates are wrong or in case some things
    happen in the economy that would cause that to happen.
        It is a year of a lot of change and uncertainty. The
    reserve is even more important than it has been in the last
    several years, from our perspective.

                 Disaster Assistance in the Food Stamp Program

        Senator Cochran. What is the outlook, if you know, about
    the natural disaster impact on food stamp dollars in fiscal
    year 1997?
        Mr. Braley. Mr. Chairman, we are just really getting
    disaster efforts underway in States, so it is a little early to
    tell. Mr. Ludwig may want to comment further on that.
        Mr. Ludwig. Mr. Chairman, we are early in the year, but I
    will speak about what we have going right now. Then I will talk
    briefly about what we have had in previous years.
        As of this morning, I have authorized emergency food stamps
    for 12 counties in the State of Arkansas.
        Now, those are not entire counties, but are segments of the
    counties that actually had destruction. We approved four
    counties in Arkansas Saturday morning, and the additional eight
    last night. So we do have 12 counties there.
        I am expecting to receive requests from both Ohio and
    Indiana. We do not know, since we have not received the
    request, exactly how many counties are going to be affected.
    One of the problems with a flood, as it all moves south and
    downstream, is that there is more flooding.
        Until an area is actually cleared of the water, it is hard
    to determine what portions of counties were affected. We are
    expecting the aforementioned two States to come forward.
        On more of a global basis, and speaking from last year's
    history, we have not moved yet into hurricane season. Last year
    we had an unprecedented number of hurricanes on the east coast.
    We are also looking at additional flooding due to the vast
    amounts of snow that fell throughout the Midwest.
        So in the long-term projections, between the snow and the
    hurricanes, we believe we will have quite a year for disasters.
    The last 2 years we have had a significant number.

              Natural Disaster Spending in the Food Stamp Program

        Senator Cochran. Do you know how much funding in each of
    the last 2 years has been required in the Food Stamp Program as
    a result of natural disasters?
        Mr. Ludwig. I can get that number for you. We have it.
        [The information follows:]

        In fiscal year 1995, the Food Stamp Program spent zero
    money on disaster response. In fiscal year 1996, the Food Stamp
    Program issued $64,888,920 worth of benefits responding to
    three disasters: Hurricane Marilyn in the Virgin Islands, the
    floods in the Pacific Northwest, and Hurricane Fran in North
    Carolina.

        Senator Cochran. Yes; that would be good to just have in
    the record what we spent in 1996 and in 1995. I know in 1997,
    we have had these tornadoes and floods already. We have read
    about and seen broadcast reports of the damages and the
    terrible problems that victims have had in coping with those
    disasters.
        I know in my State I think nine counties have now been
    designated eligible for some form of Federal disaster
    assistance. I do not know whether the food stamp benefits are
    included in that or not.
        But if they are, we certainly do not want to turn around
    and find out we do not have the money to make those available
    and we have to rush through a supplemental, and maybe the
    Congress will be out on a recess or whatever.
        I do not want to run into a situation where we do not have
    the funds to respond quickly to these emergency situations.
    That is why I am asking these questions about the contingency
    reserve.
        You know, one thing I do remember, Mr. Braley, and I know
    you do as well, the tendency of some who are in leadership
    positions on Appropriations to intentionally underestimate in
    the annual appropriations bill funds that would be needed for
    mandatory programs to build in the necessity for a
    supplemental. It was just part of the process in years past.
        That is probably not a good budget practice and we would be
    criticized today if it were done. But who knows what these
    costs are going to be. They are estimates, as we are all
    acknowledging here.
        We do not know what the natural disasters are going to
    cause in terms of outlay responsibilities for food stamps. And
    there are many other areas in this part of the appropriations
    bill where we are just not able to exactly predict what the
    needs are going to be.
        I think the submission, insofar as you can do it, is
    straightforward and we appreciate that very much. And we commit
    to you that we will endeavor to work with you to help satisfy
    these needs that we have under the law.
        Many of these are mandatory programs. We do not have a
    choice about making the payments available. If people are
    entitled to benefits under the law, we must fund the benefits
    that they are entitled to. So this committee is going to
    cooperate with the administration in that regard.

                   Welfare Reform and the Contingency Reserve

        Let me ask you one other question about the contingency
    reserve. Does the fiscal year 1998 request rely solely on the
    contingency reserve to accommodate any increased cost resulting
    from the choices States might make under welfare reform?
        Ms. Keeffe. That certainly was something that we were
    trying to anticipate in making that request. The $2.5 billion
    benefit reserve is about 10 percent of the total food stamp
    money.
        Our most basic assumption is a continued good economy.
    There is no reason to think otherwise. We cannot assume how
    States are going to react in regards to TANF and that part of
    welfare reform which would then trigger changes in food stamps.
        With those questions, we came up with the basis for our
    request.

                Electronic Benefits Transfer and Fraud Reduction

        Senator Cochran. In connection with the electronic benefits
    transfer, I know Senator Leahy asked you how that was going.
        In your prepared statement, Mr. Ludwig, you mentioned that
    eight States now have these systems in place for the delivery
    of food stamp benefits. Ten others have already implemented the
    system, and every other State is in the process of planning for
    or implementing the system. Do you have any feedback yet on the
    extent to which these systems are working to improve efficiency
    and to reduce fraud?
        Mr. Ludwig. Yes, sir; we do have some preliminary results
    on those issues. Three years ago, internally we began a major
    initiative to get States to implement EBT. As we stated
    earlier, today we have 18 States in pilot status. In excess of
    40 States are in some type of major development process right
    now.
        EBT does not eliminate fraud. But it gives us the ability
    to track individuals or retailers that are committing fraud.
    With the paper coupon, we do not have any processes to know
    where those coupons go and how they ultimately get to the
    street.
        With EBT we have an electronic tracking system that shows
    when benefits are redeemed, where they are redeemed, and for
    what amounts they are redeemed.
        We are in the process of piloting a new software program,
    ALERT, that statistically gives us the results of individual
    stores with probabilities of which stores are trafficking. The
    system targets stores based on the store size in comparison to
    other stores in similar situations and their redeeming
    processes, so that we can decide from our compliance standpoint
    and from the OIG standpoint, which stores we should visit.
        So yes, we are getting positive feedback. Two years ago, we
    had 225,000 stores redeeming food stamp benefits. Today we are
    down to approximately 196,000 stores. We think there is a
    combination of reasons for that, EBT being one and our stepped-
    up compliance efforts another.

                             EBT: Savings and Costs

        Senator Cochran. There is an indication in your request
    that there is a reduction in the cost of printing and shipping
    and processing stamps as a result of the development of the
    electronic benefit alternative. What is the potential savings
    in this area when all States have implemented their EBT
    systems?
        Ms. Jackson. Right now the total cost in printing and
    distribution is $49 million. So we would be able to realize,
    once all States are operational, almost that entire amount in
    savings in terms of the current printing contract and all of
    the related expenses in distributing the coupons.
        Senator Cochran. What level of funding, if any, is included
    in the request for this next year for work on the electronic
    benefits transfer of Food Stamps? Are there Federal costs
    associated with expanding this program and putting it on line
    in every State?
        Ms. Jackson. We are matching State costs at a 50-percent
    match rate. So for every dollar spent by a State, we are
    matching that with a dollar in Federal funds to encourage the
    expansion of EBT.

                                  Regulation E

        Basically in the past, the biggest complaint that we heard
    from States as to why they were moving slowly in implementing
    EBT was because they were fearful of potential increased costs
    of regulation E. Welfare reform legislation basically
    eliminated regulation E from State EBT systems. So those
    increased costs that States were concerned about no longer
    exist.
        So we think that States are going to continue to move very
    rapidly. And as I said, we are matching their administrative
    expenses at a 50-percent match rate.
        Senator Cochran. What is regulation E?
        Ms. Jackson. Regulation E regulates how debit and credit
    cards work today. If you take, for example, an ATM card and
    lose it, as long as you report the loss within 48 hours, you
    are not liable for any more than the first $50 of loss. That
    also applies for most consumer credit cards today.
        The Federal Reserve Board once had ruled that regulation E
    would also apply to EBT cards. That was a huge concern for
    States because of the fear that fraud and abuse would basically
    dramatically increase State costs. Those costs would be carried
    by the card issuer, and, in this case it would have been State
    governments.
        Welfare reform legislation ruled that State EBT systems
    were not subject to regulation E. Therefore, the potential
    increased costs that concerned States are no longer an issue.
    We feel that was one of the last remaining big barriers to EBT
    implementation.
        Senator Cochran. Who bears the loss, if there are losses?
        Ms. Jackson. Right now, because of the legislation,
    basically the cards will work the way food coupons work today.
    The recipient is responsible.
        However, there are more protections with EBT than with the
    food coupons. Right now if a recipient loses his or her
    coupons, except for extenuating circumstances, such as a
    disaster, they are not replaceable. They are treated like cash.
        The EBT card, however, is protected because it has to be
    used in conjunction with a personal identification number. As
    long as a person does not do something foolish, like write that
    PIN number on the card--and they are specifically instructed
    not to do that--a lost EBT card basically should be nonuseable
    as long as the person has not publicized their personal
    identification number.
        So that is the added protection that the EBT system
    provides to our customers. It is far more secure against theft
    and loss than coupons.

                              WIC Funding Request

        Senator Cochran. The WIC supplemental funding request of
    $100 million we have discussed. I think we ought to fully
    understand the estimated shortfall. If I understood what you
    said, we would lose 400,000 program participants if we did not
    approve the $100 million supplemental, is that correct?
        Ms. Keeffe. Yes; that is our assumption based on the
    numbers.
        Senator Cochran. Because I had heard another number from
    Mr. Braley on some subject, but that was not this number
    dropoff.
        Mr. Braley. No; the reduction that we expect to experience
    would be about 400,000, from about 7.4 million down to 7
    million participants.
        Senator Cochran. OK. I have some other questions on the WIC
    request. I understand $4.108 billion is the total request for
    the full 1998 fiscal year, which represents an increase of $378
    million over fiscal year 1997, and, I understand from your
    testimony, that would achieve full funding of the WIC Program
    by the end of the fiscal year--some 7.5 million participants.
        Ms. Keeffe. That is correct.
        Senator Cochran. And that includes the increased
    participation, as well as a $100 million contingency fund if
    food costs exceed budget estimates.
        Ms. Keeffe. Yes.
        Senator Cochran. As you know, WIC is a popular program. I
    expect that we will do everything possible to try to ensure
    that there is full funding.

                               WIC Effectiveness

        There is no question about the efficacy in terms of health
    cost savings and improved learning capacity and just general
    well-being that is a cost savings in other programs, as a
    result of the WIC Program.
        I think our hearings have clearly established that over
    time. The access to clinics and the immunizations, which many
    times are administered at or near the WIC clinic sites, are
    very, very important in the overall health of the population
    that is served by the program.
        Ms. Keeffe. Well, you have stated it very well, Mr.
    Chairman. Of course, we are deeply appreciative of your support
    in the past, as well as that from the entire committee. I think
    everyone has recognized what we say--in short, WIC works. It is
    a wonderful program.
        We have research that demonstrates its success. It is also
    a program that has been managed effectively over the years. It
    has received high marks in that regard.
        So we are very close to our goal. We really are hopeful
    that we will be able to have the supplemental for 1997, as well
    as the funding request for fiscal year 1998.

                           WIC Eligibility Standards

        Senator Cochran. I know it is very subjective to make the
    determinations that are necessary to establish eligibility for
    participation. There is just no exact science in place to
    measure against any set of standards to determine nutritional
    risk, for example, which is part of the process to determine
    eligibility.
        Are you satisfied that the guidelines are sufficient and
    the practices are to the point where you can say that there is
    little or no abuse of this program in falsifying things like
    nutritional risk or just making subjective judgments that are
    not based on facts?
        Ms. Keeffe. Well, this is an area that we are continuing to
    investigate. We would like to see more intra-State uniformity
    in regard to the nutrition eligibility standards. Our Office of
    Analysis and Evaluation is planning a report on this.
        We have also been working with the National Academy of
    Sciences that also has researched this area. We are not
    entirely comfortable that there is not much uniformity.
        We do not know of any instances of terrible abuse; however,
    we are trying rather aggressively to establish more uniformity.

                                WIC Cost Control

        Senator Cochran. In our State of Mississippi, John Barr has
    been one of the leaders in the Nation at State administrators'
    organizations and in developing new ways of keeping costs down
    and administrative overhead under control.
        I wonder why we continue to see nationwide though,
    administrative expenses that are a high percentage of the
    total, or the average, cost of the WIC food package. I
    understand that it is now about 26 percent. Is that high or
    low? Should we be happy with this? It seems to me that that is
    too high.
        Mr. Braley. Well, Mr. Chairman, those costs include
    traditional administrative costs comparable to those in other
    programs like food stamps, and a lot of nutrition services and
    referrals to other health programs, provisions of nutrition
    education, and a whole host of activities under the nutrition
    services and administrative grant heading. So, to call those
    funds strictly administrative understates what is really
    provided by those funds.
        The other thing that has happened is the tremendous success
    we have had in reducing food package costs through infant
    formula rebates. We have realized a $1.1 billion influx or
    recycling of funds in the WIC Program through these rebates.
        That has had the effect of lowering the cost of food per
    person, which makes the percent of dollars spent on nutrition
    services and administration go up compared to funds spent on
    food.
        So it is certainly an area that we continue to look at and
    work with States. The States would indicate that they are doing
    a lot with those resources and that the program is not
    overfunded.

                     WIC Funding Formula and Participation

        Senator Cochran. There is a request in your budget that the
    bill include language, our appropriations bill include
    language, authorizing the Secretary to adjust allocations to
    the States to reflect food funds spent forward and to make
    other funding formula revisions.
        I am, quite frankly, reluctant to recommend that the
    committee do that without knowing what the practical results
    will be. Do you have any notion now as to who the winners and
    losers would be under such a formula change?
        Mr. Braley. Well, Mr. Chairman, I think there are two goals
    that we want to achieve. If we had a supplemental for this
    year, we want to mitigate the effects in caseload in those
    States which would have to make dramatic reductions so that
    high-priority participants are not forced off the program.
        In 1998, I think the emphasis shifts from that approach to
    also recognizing that some States have had an opportunity to
    grow and reach a fairly good saturation level in terms of
    serving the eligibles in their State.
        We would like some flexibility to try to target some of the
    States that have lower than average participation rates but
    still protecting existing participation levels in other States.
        That is a little bit of a roundabout answer, and I cannot
    give you the specific States that would be winners and losers
    under that, because it would be something we would have to
    judge based on what has happened up to that point in particular
    States with regard to how much money they have used and how
    many participants they have served.
        We feel we do need some flexibility outside of the existing
    funding formula to minimize the adverse effects in some States
    and also make sure that other States have an opportunity to
    grow and reach full potential.

                            WIC Participation Rates

        Senator Cochran. As a matter of curiosity, do you have any
    notion as to which States are those States that you describe as
    having a lower rate of participation than others? Could I guess
    Idaho, Utah, North and South Dakota?
        Mr. Braley. We do have information in terms of the
    estimates of eligibles in each State and what percentage of
    those eligibles are served in the current program.
        I think some of the Western States do have less
    participation among eligibles than some of the Eastern States.
    But there is quite a bit of variation. We could certainly
    provide that information for the record on a State-by-State
    basis.
        Senator Cochran. That would be good to have, just as a
    matter of curiosity.
        Mr. Braley. Yes, sir.
        [The information follows:]

             Rates of Participation (by State) Among WIC Eligibles

        The Food and Consumer Service (FCS) annually estimates the
    number of women, infants and children who are both income-
    eligible for WIC and at nutritional risk at the National level.
    National participation rates are then calculated relative to
    this estimate of the fully-eligible population.
        FCS also develops estimates of the number of infants and
    children who are income-eligible for the program by State.
    These estimates, which are provided annually to the States, are
    produced primarily for use in the WIC funding formula to
    determine each State's share of the National estimated income-
    eligible population. Estimates of income-eligible pregnant,
    post partum and breastfeeding are typically not developed for
    use in the funding formula. Because women are estimated as a
    direct function of income-eligible infants, their inclusion
    would not have a significant impact on the percentage
    distribution of eligibles among States. In addition, FCS does
    not attempt to make estimates of the incidence of nutritional
    risk at the State level, as accurate data on State-specific
    incidence of nutritional risk is not available.
        In order to address your question, the Agency has
    calculated the number of income-eligible women in each State
    for 1994 (latest data available), assuming the same
    relationship between the number of income-eligible infants and
    income-eligible women as is used for developing National
    estimates. These estimates were added to the estimated number
    of income-eligible infants and children to create State-level
    estimates of the total income-eligible population in 1994.
    These estimates were then compared to average monthly
    participation by State in order to estimate participation rates
    among the income-eligible population in 1994.
        While these data can provide some indication of the
    relative coverage of the WIC program by State, they cannot be
    considered true coverage rates because they do not factor in
    the incidence of nutritional risk. Further, they are not
    directly comparable to the National WIC coverage estimates
    produced by FCS, which are based on the fully-eligible
    population estimate.
        [The information follows:]

                         RATES OF PARTICIPATION (BY STATE) AMONG WIC ELIGIBLES--FISCAL YEAR 1994
    ----------------------------------------------------------------------------------------------------------------
                                                                                                        Percent of
                                                                                                          income-
                                                                          Income-         Monthly        eligibles
                                  State                                  eligibles        average         served
                                                                       estimate \1\    participation     (coverage
                                                                                                           rate)
    ----------------------------------------------------------------------------------------------------------------
    Alabama.........................................................         177,042         122,328              69
    Alaska..........................................................          32,432          15,882              49
    Arizona.........................................................         229,461         115,676              50
    Arkansas........................................................         112,701          87,829              78
    California......................................................       1,824,764         897,706              49
    Colorado........................................................         118,844          69,556              59
    Connecticut.....................................................          86,553          65,244              75
    District of Columbia............................................          36,101          17,656              49
    Delaware........................................................          23,019          15,838              69
    Florida.........................................................         598,798         299,907              50
    Georgia.........................................................         317,542         210,799              66
    Guam............................................................          10,909           5,572              51
    Hawaii..........................................................          50,389          24,846              49
    Idaho...........................................................          49,864          31,849              64
    Illinois........................................................         458,152         232,338              51
    Indiana.........................................................         215,141         134,428              62
    Iowa............................................................          85,964          60,379              70
    Kansas..........................................................          95,283          58,609              62
    Kentucky........................................................         164,481         115,677              70
    Louisiana.......................................................         230,522         122,200              53
    Maine...........................................................          38,239          27,281              71
    Maryland........................................................         143,210          83,678              58
    Massachusetts...................................................         149,391         111,288              74
    Michigan........................................................         398,543         207,614              52
    Minnesota.......................................................         130,165          93,721              72
    Mississippi.....................................................         155,478         103,560              67
    Missouri........................................................         217,997         121,651              56
    Montana.........................................................          32,934          19,898              60
    Nebraska........................................................          48,541          34,791              72
    Nevada..........................................................          52,287          27,527              53
    New Hampshire...................................................          23,412          19,437              83
    New Jersey......................................................         193,556         139,176              72
    New Mexico......................................................         107,632          51,915              48
    New York........................................................         834,469         437,735              52
    North Carolina..................................................         296,137         177,250              60
    North Dakota....................................................          21,536          18,146              84
    Ohio............................................................         395,560         252,653              64
    Oklahoma........................................................         151,563          89,627              59
    Oregon..........................................................         110,199          76,947              70
    Pennsylvania....................................................         388,848         260,398              67
    Puerto Rico.....................................................         425,143         170,391              40
    Rhode Island....................................................          33,005          20,624              62
    South Carolina..................................................         168,471         120,915              72
    South Dakota....................................................          28,738          22,910              80
    Tennessee.......................................................         235,378         131,632              56
    Texas...........................................................       1,055,151         614,694              58
    Utah............................................................          84,600          55,387              65
    Vermont.........................................................          19,974          16,136              81
    Virgin Islands..................................................           8,781           7,552              86
    Virginia........................................................         198,132         126,798              64
    Washington......................................................         186,969         101,637              54
    West Virginia...................................................          81,256          52,268              64
    Wisconsin.......................................................         137,611         107,088              78
    Wyoming.........................................................          17,008          12,256              72
    ----------------------------------------------------------------------------------------------------------------
    \1\ This estimate does not include persons who become adjunctly income-eligible through State Medicaid programs
      with eligibility standards over 185 percent of poverty.

                              WIC Funding Formula

        Senator Cochran. Of course, those would be States that you
    would give more money to under your new plan.
        Mr. Braley. The funding formula that we developed was
    developed at a time when WIC participation and funding was
    growing dramatically from year to year. We have reached the
    point now where funding is relatively stable.
        As a result, this year, for the first time, we were not
    able to meet last year's grant levels plus inflation in States
    because the resources were not there. That meant everybody was
    treated exactly the same as they had been historically in terms
    of being able to maintain participation. If we had some
    additional funding, it would have been nice to recognize the
    fact that some States have not had an opportunity to reach
    their potential. That is one factor which would be considered
    in making allocations under the budget request.
        Senator Cochran. Do you think some of these reasons are
    societal or cultural and there is less willingness to admit
    that you need to depend on the Government for help, or can you
    look to your neighbors, or to the churches or the community to
    help you meet those needs? Is that part of the reason why we
    have those differences among States?
        Mr. Braley. Well, that may be a part of it. But, Mr.
    Chairman, what we are looking at is that some States are now
    using all of the resources that they have available to them.
    They are serving a smaller proportion of their State's
    eligibles than their neighboring States and have indicated that
    they have more people that could potentially be served if the
    resources were available. We are not trying to encourage States
    to take money that they cannot effectively use to serve
    additional clients. Any resources we get would be targeted to
    States who have a demonstrated ability to use that money to
    serve eligible clients.

                    WIC Participation Variation Among States

        Senator Cochran. Well, it would be helpful to have your
    analysis and explanation in writing for the record to set out
    what you have learned over time and where we are in the
    recognition of differences among States and why they do or do
    not participate in the program, and why some participate more
    than others. That would be helpful to know.
        [The information follows:]

        There are numerous reasons why States would have varying
    degrees of participation among their eligible populations.
    Historically, States have varied in the degree to which they
    have emphasized development and expansion of the WIC program
    since its establishment in 1972. Those States which emphasized
    WIC expansion at an earlier stage generally were funded at
    relatively higher levels than other States. More recently,
    States have differed in their ability to develop infrastructure
    and conduct outreach in order to reach more of their eligible
    population. In addition, States' per-person costs can vary
    substantially. States with relatively low costs for example
    due, to higher infant formula rebates, are able to serve more
    persons with the funds available to them.
        In 1995, the formula used by FCS to determine State's WIC
    food grants was revised, in part to better target funds to
    States which have been underfunded relative to the size of
    their eligible population. The formula defines each State's
    ``fair share'' of total available funds as equal to their share
    of the estimated total population of income-eligible infants
    and children. After providing each State funds equal to the
    prior year grant plus inflation, the formula targets all
    remaining funds to States which are under their ``fair share''.

        Senator Cochran. You suggest, without saying so, that you
    may be submitting a new regulation in this connection. You
    indicate, for example, that this legislative discretion to
    revise the funding formula is needed in recognition of the time
    needed for a regulatory change, et cetera.
        So you are contemplating, I presume, making a change in the
    regulation, is that not correct?
        Mr. Braley. That is correct, Mr. Chairman. I think we need
    to do that in recognition of the fact that the dynamics of the
    program have changed as it is reaching full funding levels. The
    last time we wrote a regulation governing the funding formula,
    it was when we were foreseeing continued growth for a number of
    years in the program. I think the dynamics of the situation now
    warrant at least a reopening of that issue, although we could
    conceivably come out somewhere near where we are now. But I
    think the circumstances have evolved to a point where it is
    time to reopen that question.

                            WIC and Native Americans

        Senator Cochran. Are these program dollars available on
    native American reservations and through tribal organizations?
        Mr. Braley. They are, Mr. Chairman. Over 30 of the State
    agencies that we speak of when we talk about 86 or 87 State
    agencies in the WIC Program are organizations that serve native
    Americans. They function as independent tribal organizations in
    administering the WIC Program.
        Senator Cochran. Do you see any differences in the
    administration of the program in terms of overall costs or
    participation levels among those groups as you do among the
    population at large?
        Mr. Braley. Mr. Chairman, I have not looked at the specific
    figures. I imagine the administrative costs in some of the
    smaller organizations could be slightly higher just due to
    economies of scale.
        I think in terms of being responsive to the needs of the
    native American populations that they are serving, I think they
    are quite effective.
        Senator Cochran. I assume then that you are going to
    proceed with a regulatory change so that even if we provide you
    with some language that you would find helpful, that would be
    only an interim authority. You would proceed with the
    regulatory change in any event.
        Ms. Keeffe. That is correct, Mr. Chairman. But as you know,
    going through the regulatory process takes time. That is why we
    are requesting an immediate change through the appropriations
    process.

                           WIC Infant Formula Rebates

        Senator Cochran. You may have answered this awhile ago. You
    were talking about the infant formula rebates. Has the
    Department taken action through the regulatory process on this?
    Do you have a regulation on that now?
        We included legislative authority in the appropriations
    bill last year to ensure maximum cost savings from infant
    formula rebates, that infant formula rebates be awarded on the
    basis of lowest net wholesale cost.
        In our report, we indicated that we were acting on an
    interim basis and encouraged the Department to utilize the
    rulemaking process to address the issue on a permanent basis.
    Has that been done?
        Mr. Braley. That regulation is in clearance within the
    Department, and we hope to issue it in the near future.
        Senator Cochran. What savings, if any, can you identify
    from competitive bidding for the purchase of infant formula for
    WIC participants over time, from 1995 to 1997, for example? How
    many participants have been funded as a result of savings in
    each of these years?
        Ms. Keeffe. Currently, Mr. Chairman, we estimate $1 billion
    annually is saved or comes back into the program through
    rebates, and that the savings accounts for approximately 24
    percent of WIC participants.

                           WIC and Child Immunization

        Senator Cochran. Do you know what increase in child
    immunizations can be attributed to the WIC Program? I mentioned
    that in some of my comments about the program. Do we have any
    kind of quantitative analysis of that?
        Ms. Keeffe. I do not have a figure available with me, but
    we certainly can look into it. It is an area where the program
    has been very aggressive. We will certainly be glad to submit
    it for the record, if there is a figure or at least an estimate
    in that regard.
        [The information follows:]

        While the Centers for Disease Control and Prevention (CDC) data
    suggest that immunization coverage rates are at an all time high, the
    data is not sufficiently detailed to be able to specifically attribute
    the increase to a particular initiative or program such as WIC.
    Nevertheless, given the many activities and cooperative efforts
    underway in the WIC program, and CDC's special emphasis on using WIC as
    a major conduit to a large segment of the target population, it would
    be reasonable to assume that WIC is instrumental in facilitating major
    positive impacts on coverage rates. CDC has made the assertion that WIC
    is one of its most important allies in raising and maintaining
    immunization coverage rates. In fact, CDC has suggested that WIC may
    have been instrumental in the control of the 1989-91 measles epidemic.
        WIC program administrators at all levels agree that one of the
    major public health challenges of this decade is a need to improve our
    Nation's capacity to deliver age-appropriate immunizations to infants
    and young children in need. As an adjunct to critically needed health
    care, the WIC Program plays a large role in the public health
    community's response to immunization promotion. While applicants may be
    prompted to come to the WIC clinic just for food help, they are also
    provided WIC nutrition education and enter a gateway to health care
    services through WIC referrals. Among these services are immunization
    screening and referrals. As the largest single point of access to
    preschool children nationally--reaching about 45 percent of all
    infants--WIC can make and is making a positive difference in the health
    and well being of low income children.
        The FCS and CDC have developed and maintained a strong partnership
    with State cooperators in WIC and immunization to improve the quality
    of services and the health status of children under 2 years of age who
    are in need of nutrition assistance and immunizations.
        To help raise and sustain high immunization coverage rates,
    numerous special WIC immunization promotion activities are taking place
    at the National, State and local levels. All WIC State agencies
    (including territories and Indian Tribal Organizations) are actively
    involved with immunization promotion activities. These activities range
    from comprehensive immunization screening and referral procedures and
    media campaigns to providing incentives and sending immunization
    reminders to clients. Some WIC agencies have expanded clinic hours to
    include immunization screening and others have formed immunization
    promotion task forces and committees. Many offer on-site immunizations
    for the convenience of families.
        As a result of these initiatives, the WIC Program has been and will
    continue to be a major contributor to the current high levels of
    immunization coverage among low income children in the United States.
        Just over the past year activities have included:
      --The National Association of WIC Directors (NAWD), the Association
            of State and Territorial Health Officials (ASTHO), CDC, and FCS
            co-hosted a WIC immunization promotion conference, entitled
            ``Working Together for Healthier Children,'' February 12 and
            13, 1997. The conference fostered positive communication at the
            State level between Immunization Programs and the WIC Program
            by: increasing understanding of each programs' goals and
            objectives; and highlighting win-win situations in State and
            local WIC and immunization partnerships. The conference also
            focused on State WIC Directors' and Immunization Program
            Managers' concerns.
      --FCS, CDC, NAWD, and ASTHO have formed the WIC/Immunization Research
            and Evaluation Subcommittee. The purpose of this group is to
            coordinate research and evaluation activities directly related
            to immunization promotion efforts in WIC. The Subcommittee
            facilitates and reports on cost-effective strategies that
            improve vaccination coverage rates among WIC participants.
      --FCS has been active and supportive of strengthening State
            Immunization Information Systems as a major initiative to
            improve immunization status assessment and referrals among WIC
            children. To further promote this linkage, in fiscal year 1996,
            FCS awarded a total of $946,793 for State WIC/Immunization
            System Linkage Grants to nine WIC State agencies to design,
            develop, and implement information system linkages between
            State Immunization Information Systems and WIC data systems at
            the State and local levels. Made possible through funding from
            the Centers for Disease Control and Prevention's National
            Immunization Program, the purpose of this partnership is to
            enhance automation capabilities in WIC clinics to facilitate
            accurate and efficient assessment of the immunization needs of
            WIC infants and children. Grants were awarded to the following
            States: Alabama, Chickasaw Indian Nation, Florida, Iowa,
            Massachusetts, Nevada, Rhode Island, Texas, and Virginia.
      --During the 1997 31st National Immunization Conference to be held in
            Detroit, Michigan, the WIC Program will be a prominent point of
            discussion. Representatives from FCS and State and local WIC
            staff will be present at approximately 25 workshops and many
            poster sessions. The conference provides WIC with an
            opportunity to show the more than 2,000 attendees from both
            private and public sectors WIC's commitment to improving the
            quality of services, preventing the occurrence of health
            problems, and improving the health status of WIC participants
            under 2 years of age.
        Immunization promotion activities in WIC are comprehensive and
    numerous. FCS would be pleased to provide a briefing in greater depth
    regarding WIC's role in increasing and maintaining immunization
    coverage rates.

        Senator Cochran. You might check in our State of
    Mississippi. I think we have the best participation rate and
    immunization rate of any State in the Union for childhood
    immunizations.
        It is not just because of the WIC Program, but it is
    because of strong leadership in the public health community and
    in State government agencies. So the Federal Government cannot
    claim any credit for it.
        But I point it out to say that the Federal Government might
    be able to learn from the successful experience in the State of
    Mississippi and use that in your communications and training
    programs that you have with administrators from other States,
    if they would like to find out how that was achieved. It might
    be helpful.
        We are talking about overall health of our population of
    children around the country, and that is one of the main goals
    of the WIC Program. This is something that ought to be
    emulated.
        Ms. Keeffe. Right. Thank you.
        Senator Cochran. That is a matter of record in hearings
    that the Appropriations Committee had a couple of years ago. So
    it is not new information. But we continue to achieve great
    results in our State in that area.

                      WIC Farmers Market Nutrition Program

        Senator Leahy mentioned the Farmers Market Nutrition
    Program. I did not think any State but Vermont was eligible for
    that program. [Laughter.]
        Was I wrong about that? I notice you asked for some money
    here, to increase the funding from $6.75 to $12 million. Will
    that extend the program to Mississippi, or will it still be in
    Vermont only?
        Ms. Keeffe. Well, Mississippi is one of those States that I
    referred to, Mr. Chairman, that has expressed interest in
    becoming part of the program. We are hopeful that with that
    additional funding this year, that they will join.
        Senator Cochran. Well, that is good to hear. And I am
    hopeful that we can look at other options for making sure that
    we have food, nutrition, education, and health care available
    to those who need that kind of assistance from the Federal
    Government. So when we can expand Federal programs like WIC,
    particularly those that are cost effective, we want to
    encourage it.
        Ms. Keeffe. Of course, I think the Farmers Market Program
    is one of those little jewels that really accomplishes so much
    with a relatively little amount of money.
        In terms of being part of the Department of Agriculture,
    that connection is made with agriculture and small local
    resource farmers. It introduces people to the whole concept of
    purchasing nutritious foods from their local farmers, and the
    benefits of fresh foods. We think this is wonderful, especially
    for people who otherwise really do not know that this exists.

                    Nutrition Education and Training Program

        Senator Cochran. I know when we visited the other day in
    anticipation of this hearing, we talked about the Nutrition
    Education Training Program, the NET Program, and the
    supplemental funding request. There has been $10 million in
    annual direct funding for NET in previous years.
        The administration's fiscal year 1997 supplementals and
    rescissions package includes proposed legislative language to
    shift to the NET Program $6.25 million in food stamp funding
    for commodity purchases of The Emergency Food Assistance
    Program.
        Given the fact that grants to States are available through
    the school meals initiative, and you have reprogrammed funds to
    make available almost $4 million in fiscal 1997 funding for the
    NET Program, why is it a priority to provide additional
    supplemental funding for this program?
        Ms. Keeffe. Well, Mr. Chairman, the NET Program has existed
    for almost 20 years and has a well-established record of
    success in providing nutrition education for the child
    nutrition programs.
        As you mentioned, the money was lost last year through
    legislation that moved simultaneously on two different tracks.
    Our appropriations legislation was completed before welfare
    reform was. In welfare reform, the NET money was dropped from
    the mandatory account and we had no means to fund it on the
    appropriations side.
        Beginning in 1996, the school meals initiative for healthy
    children standards were taking effect in schools where we were
    upgrading nutrition standards. The nutrition education
    component of that is very important. And the NET network, if
    you will, which always provided that education, no longer had a
    means to function. We were able to take $3.75 million from Team
    Nutrition education funds to temporarily fund it.
        However, that was all the money that was available for us
    to move at that time. The other money in the Team Nutrition
    account was earmarked for training and technical assistance,
    most of it in the form of grants to States for training and
    really was not appropriate for NET funding.
        Therefore, we have asked for the additional $6.25 million
    as a supplemental for fiscal 1997, and requested that the $10
    million, the amount NET has been funded at in recent years, be
    a part of fiscal 1998.
        NET provides the infrastructure for nutrition education and
    the Team Nutrition funding provides the materials for that
    education. The two really work in conjunction with each other,
    in partnership, to provide that very important nutrition
    education message to children.

                         NET; Impacts of Welfare Reform

        Senator Cochran. What is confusing to me is that the
    welfare reform bill eliminated the funding for NET, as
    requested by the administration. That is my information. Did
    the administration not request that permanent funding be
    eliminated in the welfare reform process?
        Ms. Keeffe. I do not believe so, Mr. Chairman. It had moved
    over into the mandatory account last year.
        Mr. Braley. Mr. Chairman----
        Ms. Keeffe. We are going to clarify.

                                  NET Funding

        Mr. Braley. Yes; we can provide that information for the
    record in terms of the sequence of events. I believe there was
    a request to shift the funding from one area to another, and it
    did not get funded last year, I think that was inadvertent.
    That is the reason we are in this position.
        Senator Cochran. We have so many accounting games that we
    play with each other, it is hard to figure out what is on the
    level anymore. I think we are turning ourselves into not only
    just counting beans, but it is difficult to communicate with
    all these rules and nuances that I do not fully understand I
    have to admit.
        Well, I would appreciate an explanation of that for the
    record. It seems that we have on the one hand the
    administration requesting elimination of the direct funding of
    a program, and then coming in and asking for a supplemental to
    restore part of the funding and then shifting money,
    reprogramming from another account to have it funded.
        We all know there is a constituency out there that loves
    the program. I learned that really early on when I said, Why
    did we fund this? And the answer was, Because everybody likes
    it.
        We have a lot of folks out there who would be upset if you
    terminated this program or made any cuts in it. We have had a
    $10 million program for a good while.
        [The information follows:]

      Nutrition Education and Training (NET) Funding for Fiscal Year 1997

        Neither the budget request nor the Appropriations Act for
    fiscal year 1997 contained funds for NET because funds were
    available under permanent appropriations authorized under Child
    Nutrition legislation prior to welfare reform.
        NET was specifically identified as a program not funded in
    the 1997 Appropriations Act. As part of Welfare Reform, the
    permanent funding for NET was deleted.
        The Agriculture Appropriations Act for Fiscal Year 1997
    passed, followed quickly by the passage of Welfare Reform. Due
    to the timing of the two pieces of legislation, there was no
    opportunity to add funding to the Appropriations Act. Welfare
    reform also changed the funding authorization from mandatory to
    discretionary.
        Subsequent to the passage of the Appropriations Act for
    fiscal year 1997, $3.75 million was reprogrammed within the
    Child Nutrition account to make the funds available for NET.
    Funds were issued to States in December, 1997.

        Ms. Keeffe. Well, I think it is also an important time in
    terms of the work of that program, too. We certainly heard very
    clearly, when we were upgrading the nutrition standards in
    school meals, how important it is to reach children with
    nutrition education, as well reach the school food service
    providers with the training and technical assistance that was
    important to them.
        The work NET does and the fact that it is well established
    and well received in the school community is crucial at this
    time, considering that we are making vast changes in the meals.
    It is important that we continue to reach the children in any
    way necessary.

                       Impacts on NET Program Activities

        Senator Cochran. I have a question here that my staff has
    prepared, and I am going to ask it, because I am curious to
    know what the answer is. You may have already answered it,
    though.
        What activities are not being funded by States with
    available NET Program funding of $3.75 million?
        Mr. Braley. Mr. Chairman, as I understand it, the States
    are barely able to keep a program operating at this point at
    that funding level.
        A lot of States have curtailed significantly their
    programmatic activities, work with actual school districts, and
    their customary nutrition education to teachers and food
    service workers.
        Early on, before the shift in funding was done to provide
    even the $3.7 million, a number of NET coordinators were laid
    off. Consequently, there has been a severe impact on the
    ability of that program to perform its function.
        I think it is safe to say that folks who are still working
    in that area are doing the best they can with very limited
    resources, but it is not funded at a level that will sustain
    the kind of quality program we have had historically.
        Senator Cochran. I think you and I both misunderstood the
    question. And that is why I asked it, to see if I could figure
    it out while you were answering it.

                             Team Nutrition Funding

        I think what the question means is, since the $3.75 million
    was reprogrammed by the administration from the school meals
    initiative line item, what programs that had been paid for with
    that money suffered the loss of $3.75 million and what was the
    impact of that on the States?
        Ms. Keeffe. Well, that money would have gone for
    educational materials related to the Team Nutrition effort. A
    lot of that money is in the form of 2-year money. We had money
    in the pipeline that was able to carry forward a lot of the
    materials that were already in progress.
        Certainly one notable area where I have had personal
    experience when visiting a lot of schools is getting our
    materials translated into Spanish. We have a tremendous need
    for this throughout the country, but we have recognized we are
    not going to be able to fund it this fiscal year. We have had
    to make it clear to States that they will have to wait until
    next year.
        So it basically is materials in support of our Team
    Nutrition schools, which now we have 20,000 schools across
    America that have signed on to be Team Nutrition schools. The
    nutrition education materials that we have as part of that
    effort to get into schools, to help with nutrition education
    for the children, is definitely on a slower track as a result
    of the loss of those funds for that part of the program.

                         Commodity Assistance Programs

        Senator Cochran. I am going to submit questions regarding
    the Commodity Assistance Program and some of the other
    programs. I visited one of our warehouses in Jackson, MS, where
    a lot of these commodities are accumulated and distributed to
    soup kitchens and others providing meals to folks in that
    fashion. It seemed to me to be an important program to support,
    and I hope that we can find a way to continue to support that.
        Do you provide enough flexibility, do you think, in these
    programs to suit the administrators in the States? I know you
    are adding programs to the Commodity Assistance Program, the
    Nutrition Program for the Elderly, and Pacific Island
    Assistance. Is this to give people more flexibility or less?
        Ms. Keeffe. In the commodity assistance programs, Mr.
    Chairman, we are providing more flexibility than we have in the
    past through legislation which has combined the old TEFAP
    Program, along with soup kitchens and food banks.
        It is really the States who are able to determine best how
    to serve the needs of their communities, whether through
    congregate feeding in soup kitchens, through pantry food banks,
    or mass distribution of commodities, which used to be the old
    TEFAP Program.
        States make the determinations. The administrative funding
    applies across the board to help run those programs in the best
    way.
        In addition to that, of course, the funding also comes into
    play with the gleaning and food rescue initiatives that the
    Department has been undertaking, which of course are voluntary
    efforts on the part of people to secure more foods for soup
    kitchens in food banks. Those administrative funds for the
    commodity assistance programs have been very beneficial in
    helping to handle those extra foods that they get through those
    processes as well.

                           Food Recovery and Gleaning

        Senator Cochran. I am also interested in the National Food
    Service Management Institute funding, and I will submit
    questions on that and Team nutrition as well and on
    administrative costs, research and evaluation, and other
    subjects.
        You mentioned the food recovery and gleaning initiative. I
    think Bill Emerson led an effort to put that into law, the Good
    Samaritan Act, I think it is now called.
        The Secretary indicated that at the Department there is an
    initiative under way to carry out the spirit of that law and
    try to reclaim foods and distribute them to places where the
    need exists.
        Is there any effort by the Food and Consumer Service to
    implement that program? What progress, if any, are you making
    in that regard?
        Ms. Keeffe. Mr. Chairman, we have worked very closely with
    the goals of that program--I hesitate to call it a program
    because that has other implications--but with that effort of
    the Secretary. I know the Secretary takes every available
    occasion to encourage groups to help out with this effort.
        It has many facets, from gleaning in the fields, to food
    rescue from supermarkets, terminal docks, or leftover foods
    from restaurants, and matching this excess food, which is of
    course in tremendous quantities in this country, to people in
    need.
        Certainly through our commodity assistance programs, soup
    kitchens, and food banks, there is a natural connection. So we
    have been working with the Secretary's efforts through our Food
    Distribution Division, which works with those programs.
        As I said, the important administrative funding for these
    commodity programs helps them to deal with the foods that
    originate from this voluntary effort. It has been very
    exciting. I think it has been very well received. The
    Department, of course, for many years has been providing food
    to D.C. Central Kitchen from our own cafeterias every week. The
    Secretary has been encouraging other Federal Departments to do
    the same.
        Senator Cochran. In a visit I had to the Mississippi gulf
    coast, we were conducting hearings on the subject of the
    growing aquaculture industry there, shellfish particularly, and
    research using fish instead of other animals for research
    laboratories.
        Anyway, part of our tour included a stop at a place where
    they were developing machinery to reclaim what would be wasted
    fish that would have been thrown away. And it was just amazing.
        They were making products like--what is it? It is something
    that you can use just a regular fish and make it taste like
    crabmeat or lobster or shrimp, some of these other varieties of
    shellfish particularly.
        It was quite amazing to see the efficiencies and the
    technologies that can be harnessed in reclaiming food waste
    like that. I hope we do learn to waste less and be more
    efficient in the use of our food supply.
        It is almost shameful how much food we throw away every day
    in America. I have the notion that we could feed entire
    countries from just the scraps from the tables of American
    families.

                             Agency Administration

        There are a couple of questions that I had in my notebook,
    which I was going to submit, about program administration
    requirements. You mentioned that there were problems regarding
    appropriations for staff-years.
        And you have not had, because of restricted staff-year
    ceilings in these accounts, any option except just to deploy
    staff from crisis to crisis, which makes effective program
    administration nearly impossible.
        You do have a lot of responsibilities, nearly $40 billion
    in program funds to administer. That is quite a huge amount. I
    think that has gotten up to over 70 percent of the Department's
    total budget.
        Ms. Keeffe. Yes; that is correct. Moreover, we have less
    than 2 percent of the personnel.
        Senator Cochran. How many staff have you lost? Do you have
    numbers to indicate lost staff-years from your agency?
        Ms. Keeffe. I do. Actually, one of the ways I look at it is
    to go back to 1980, because the growth of our programs from
    that time has been dramatic. And yet our staff and
    administration levels have been dropping significantly.

                               Streamlining Goals

        We dropped from 2,800 employees to 1,750 today, which is
    about a 40-percent decrease. During that same time, our
    programs have doubled in size. It really is a critical
    situation.
        And, as you know, we have a major integrity role in these
    programs. There has been a lot of recent emphasis on this. It
    is something that we take very seriously but we really have
    reached the point at which we are truly at a barebones level of
    operation.
        Just in the few years that I have been associated with the
    programs, we have lost 60 personnel one year, and 80 in
    another. Now those do not sound large when you are talking
    about numbers of Government employees, but out of a total base
    of less than 2,000 people, those are substantial numbers in a
    given year.
        I really think that we are to a point which we cannot go
    below. What we have requested is holding the line where we are.
    We have met all of our streamlining requirements, and are ahead
    on those numbers. So we really need to stay the course in terms
    of where we are right now.
        Mr. Ludwig. Mr. Chairman, Mary Ann is exactly right. We
    have reached all our streamlining objectives. But what she did
    not mention is that we met our streamlining objectives 3 years
    ahead of schedule. In the past 4 years, FCS has reduced our
    supervisory ratio by 40 percent to a 1-to-7 ratio and we
    reduced headquarters staff over 12 percent. This also was 3
    years ahead of our schedule. Additionally, we reduced the
    number of senior staff level positions, that is GS-14's, 15's,
    and SES'ers, by over 18 percent over the last 4 years.
        Basically, Mr. Chairman, we do not have the bodies to do
    the everyday preventive maintenance of our programs. On any
    given day, we will have between 12 and 18 audits, either
    through the Inspector General's Office or the GAO office,
    evaluating our agency.
        Based on those numbers and the reduced numbers of staff-
    years, we go, as you said, from crisis to crisis instead of
    being able to be proactive in our programs and heading off
    crises.
        Senator Cochran. What is the answer to it?
        Mr. Ludwig. We have reduced staff as Mary Ann has said,
    anywhere from 60 to 100 positions every year. Over the last 17
    years, we have lost in excess of 1,000 employees. We are down
    to less than 1,800, about 1,750. If I could just hold what I
    have, I would be happy.
        Senator Cochran. Well, you have asked for an increase of
    $1.6 million above last year's level for program
    administration.
        Mr. Ludwig. Those numbers basically cover inflation.
        Senator Cochran. Does it take into account cost-of-living
    adjustments or pay increases and the like----
        Mr. Ludwig. Yes, sir; it includes one-half of the mandatory
    pay increases.
        Senator Cochran. For all the employees?
        Mr. Ludwig. Yes, sir.

                                Closing Remarks

        Senator Cochran. Well, we appreciate very much your
    explanation of the Department's request for these programs that
    are under this subcommittee's jurisdiction. They are all very
    important and serve very important needs in our Nation.
        This committee wants to work with you in a cooperative way
    to be sure that the programs receive the funds that are
    necessary for their appropriate administration, and we will
    work to achieve that goal with you.

                              Submitted Questions

        For the questions that are submitted, we hope that you will
    be able to respond to them in a timely fashion so we can have
    the benefit of your input into the process as we decide on the
    levels of funding for this next fiscal year.
        [The following questions were not asked at the hearing, but
    were submitted to the Department for response subsequent to the
    hearing:]
                     Questions Submitted by Senator Cochran
               wic fiscal year 1997 supplemental funding request
        Question. The Administration is seeking $100 million in fiscal year
    1997 supplemental funding for the Supplemental Nutrition Program for
    Women, Infants, and Children (WIC).
        What has been the increase in the cost of a food package above the
    original fiscal year 1997 budget estimate level?
        Answer. In the original 1997 budget, the Agency estimated that the
    average cost of a WIC food package for all of fiscal year 1997 would be
    $31.91--about 3.3 percent above what was estimated at that time would
    be the final for 1996. However, the actual average cost of a food
    package in the first quarter of 1997 is $31.85--about 4.2 percent above
    first quarter 1996, which was $30.53.
        Question. What has been the increase in the average monthly
    caseload above the fiscal year 1996 level?
        Answer. Average monthly WIC caseload in fiscal year 1996 was 7.193
    million. At the end of fiscal year 1996 the caseload was 7.428 million.
    During the first quarter of fiscal year 1997, caseload averaged 7.386
    million--that is, in October of fiscal year 1997 caseload was 7.474
    million, in November it was 7.400 million and in December it was 7.283
    million. The WIC program has a normal seasonal pattern in which
    participation falls in December and rises again in January.
        Question. What did the Department do at the outset of the fiscal
    year to manage the WIC Program within available funding to avoid
    disruptive participation cuts and to first serve ``high priority''
    women, infants and children?
        Answer. Total fiscal year 1997 projected grant and participation
    levels, including reallocation estimates, were provided to States in
    September. States were advised that the total funds available for
    fiscal year 1997 would not be sufficient to meet last year's grant
    levels, adjusted based on inflation. These September estimates
    indicated that many States would need to manage caseload levels
    carefully to ensure expenditures would not exceed available fiscal year
    1997 funding.
        In January, when it was clear that many WIC State agencies might be
    in danger of overspending their WIC grants, FCS transmitted alerts to
    all WIC State agencies of the seriousness of the situation and
    requested State spending and participation plans for fiscal year 1997.
    States were again provided estimated grant levels reflecting all
    anticipated available funding, to include both appropriated funds and
    reallocation of prior year unspent funds. The agency will continue to
    work with States that will need to reduce caseload levels and /or
    tailor food packages more based on recipient need and/or increase food
    package management efforts as the year progresses so they will not
    overspend their grant.
        When funds are not available to serve all eligible persons seeking
    WIC services, State agencies are required by WIC Program regulations to
    establish waiting lists which use a participant priority ranking
    system. Participants are assigned a priority level at certification
    which is based on their degree of nutritional and medical risk. This
    priority system ensures that the highest priority persons are served
    when caseload slots become available.
        Question. You indicate that without this supplemental funding,
    states will have to reduce participation by 400,000. Would you please
    justify this estimate and give us reductions which would occur by
    state.
        Answer. At the end of fiscal year 1996, WIC participation was 7.4
    million persons and has remained at approximately this level through
    the first quarter of fiscal year 1997. FCS estimates that the current
    appropriation will serve an average of 7.2 million persons per month in
    fiscal year 1997. In order to achieve an average of 7.2 million for
    fiscal year 1997, WIC participation must fall to 7.0 million by year
    end--a reduction of approximately 400,000 women, infants and children
    who would otherwise receive WIC benefits. The Agency does not have
    adequate information at this time to produce State-by-State estimates
    associated with this 400,000 reduction in participation.
        States have submitted detailed expenditure and participation plans
    to FCS, that were provided to the subcommittee on March 13, 1997.
    However, based on historical evidence, our analysis indicates that the
    expenditure assumptions upon which many State plans are based are not
    supportable, because they indicate that States will spend all or
    nearly-all the resources available in 1997. Without a supplemental in
    fiscal year 1997, the Agency estimates that participation may decline
    by 400,000 by the end of the year and that there will be a significant
    drawdown of carryover funds.
        Question. Will 400,000 current WIC participants be dropped from the
    program without the supplemental funding requested? Please explain.
        Answer. At the end of fiscal year 1996, WIC participation was 7.4
    million and has remained at approximately this level through the first
    quarter of fiscal year 1997. FCS estimates that the current
    appropriation will serve an average of 7.2 million persons per month in
    fiscal year 1997. This assumes that funds States carryover from 1996 to
    1997 is reduced by $45 million and these funds are used to support
    participation in 1997. In order to achieve an average of 7.2 million
    for fiscal year 1997, WIC participation must fall to 7.0 million by
    year end--a reduction of approximately 400,000 women, infants and
    children who would otherwise receive WIC benefits.
        When participation demand exceeds available funding, WIC State
    agencies establish participant waiting lists based on a priority system
    established by nutritional risk criteria and/or tailor the food
    packages more carefully to address specific recipient nutritional
    needs. It is anticipated that WIC State agencies will employ a variety
    of measures to reduce caseload, as necessary. Some participants may no
    longer be at nutritional risk at the end of their certification period
    and would therefore not be recertified. Also, States may choose, in
    accordance with Program regulations, not to recertify lower priority
    participants at the completion of the current certification period,
    providing benefits to only those determined to be in the highest
    priority categories. Many States may need to establish waiting lists
    for all or most new applicants, again in accordance with the priority
    system established by the WIC State agency. As a last resort, State
    agencies do have the authority to discontinue Program benefits to
    certified participants. Such action may be taken only after the State
    agency has explored alternative actions. If taken, the action should
    affect the least possible number of participants and those participants
    whose nutritional and health status would be least affected by the
    withdrawal of Program benefits.
        The expectation is that States will continue to do their best to
    carefully manage their caseloads and closely scrutinize and monitor
    their expenditures, making adjustments to caseload as necessary, by not
    certifying new applicants, by not recertifying some recipients or, as a
    last resort, by discontinuing benefits mid-certification.
                     wic farmers' market nutrition program
        Question. The fiscal year 1997 appropriations act makes ``up to''
    $6.75 million of the funding provided for WIC available to carry out
    the WIC Farmers' Market Nutrition Program. If the Administration
    thought there might be a shortfall in funding for WIC, why did it make
    funding available to the WIC Farmers' Market Nutrition Program?
        Answer. In September 1996, FCS allocated the farmers' market funds
    based on the best available information that was available at that
    time. That information reflected that approximately $145 million in
    recoverable fiscal year 1996 WIC funds would be available in addition
    to the fiscal year 1997 appropriated funds. It was thought that the sum
    of these funds would be sufficient to support the expected WIC
    September 1996, participation level of 7.3 million.
        Subsequently, data became available reflecting a higher
    participation rate than anticipated. Thus, it became apparent that WIC
    caseloads could not be fully maintained with currently available
    funding for fiscal year 1997. In response to this unanticipated need,
    the Agency has requested supplemental funding, so that both the FMNP
    and, the WIC Program may continue without disruption.
        Question. The Administration's requested supplemental language also
    proposes to allow the Secretary of Agriculture to distribute the
    supplemental funds among States using criteria other than the current
    regulatory funding formula. How would the Secretary's distribution of
    these funds differ from the current regulatory funding formula? Please
    provide a comparison by state.
        Answer. Current WIC program funding regulations require that the
    first priority for allocating funds is to provide all State agencies
    with stability funding, which is each State agency's prior year food
    grant plus inflation. Funds remaining after stability food grants are
    met are allocated through the fair share component. A State's fair
    share of funds is defined as equal to its share of the National
    estimated WIC-eligible population. The fair share component provides
    funds to States with stability grants below their fair share level.
        The Department is requesting flexibility in allocating the
    supplemental funding in order to ensure that the Secretary allocates
    funds with the goal of minimizing fluctuations in program
    participation. FCS anticipates that the allocation process of the
    supplemental funds would be as follows: (1) allocate funds to under
    fair share State agencies requiring additional funds to maintain
    current participation; and to the extent that additional funds are
    available, (2) allocate funds to over fair share State agencies
    requiring additional funds to maintain current participation up to the
    level of their defined stability grants.
        The Agency is currently unable to provide an allocation comparison
    by State. One element in determining eligibility for supplemental
    funding is not known at this time--the magnitude of declines in
    participation resulting from financial shortfalls. However, information
    reflecting each State's percent of fair share as of March 1997, is
    provided for the record.
        [The information follows.]

                            WIC PROGRAM FISCAL YEAR 1997 FOOD GRANT AS PERCENT OF FAIR SHARE
                                              [As of January reallocation]
    ----------------------------------------------------------------------------------------------------------------
                                                                            Fiscal year 1997--
                                                                     -------------------------------- (C) Food grant
                              State agency                             (A) Fairshare  (B) Food grant   as percent of
                                                                        (w/January      (w/January       fairshare
                                                                       reallocation)   reallocation)
    ----------------------------------------------------------------------------------------------------------------
    NERO:
        Connecticut.................................................     $21,250,368     $27,253,449          128.25
        Maine.......................................................       9,449,961       9,853,574          104.27
        Massachusetts...............................................      36,670,089      39,675,626          108.20
        New Hampshire...............................................       5,492,504       6,058,806          110.31
        New York....................................................     198,815,414     190,924,889           96.03
        Rhode Island................................................       8,130,507       8,394,806          103.25
        Vermont.....................................................       4,927,626       6,428,953          130.47
        Indian Townshp..............................................          20,334          51,633          253.92
        Pleasant Point..............................................          20,334          51,277          252.17
        Seneca Nation...............................................         284,165         196,710           69.22
                                                                     -----------------------------------------------
          Subtotal..................................................     285,061,303     288,889,723          101.34
                                                                     ===============================================
    MARO:
        Delaware....................................................       5,637,336       5,881,309          104.33
        Dist Columbia...............................................       8,227,163       6,907,483           83.96
        Maryland....................................................      35,128,720      35,707,939          101.65
        New Jersey..................................................      47,435,289      53,338,129          112.44
        Pennsylvania................................................      95,551,983      99,467,345          104.10
        Puerto Rico.................................................      99,914,129     110,483,381          110.58
        Virginia....................................................      48,321,749      51,863,779          107.33
        Virgin Islands..............................................       2,739,319       4,449,299          162.42
        West Virginia...............................................      19,920,678      20,636,087          103.59
                                                                     -----------------------------------------------
          Subtotal..................................................     362,876,365     388,734,751          107.13
                                                                     ===============================================
    SERO:
        Alabama.....................................................      43,192,080      44,041,321          101.97
        Florida.....................................................     146,596,396     130,226,516            88.3
        Georgia.....................................................      77,469,568      80,480,204          103.89
        Kentucky....................................................      40,045,506      44,707,356          111.64
        Mississippi.................................................      37,661,546      38,986,361          103.52
        N Carolina..................................................      72,296,903      64,366,359           89.03
        S Carolina..................................................      41,378,508      42,517,123          102.75
        Tennessee...................................................      56,464,000      57,123,217          101.17
        Seminoles...................................................          83,358         130,607          156.68
        Choctaw, MS.................................................         213,876         191,103           89.35
        E. Cherokee.................................................         211,917         338,855          159.90
                                                                     -----------------------------------------------
          Subtotal..................................................     515,613,658     503,109,022           97.57
                                                                     ===============================================
    MWRO:
        Illinois....................................................     109,335,184     109,181,078           99.86
        Indiana.....................................................      52,559,537      47,897,520           91.13
        Michigan....................................................      92,700,795      82,863,707           89.39
        Minnesota...................................................      31,323,020      32,682,605          104.34
        Ohio........................................................      96,977,427      86,602,032           89.30
        Wisconsin...................................................      33,822,214      40,766,412          120.53
                                                                     -----------------------------------------------
          Subtotal..................................................     416,718,178     399,993,354           95.99
                                                                     ===============================================
    SWRO:
        Arkansas....................................................      27,575,435      30,593,402          110.94
        Louisiana...................................................      53,078,346      57,569,814          108.46
        New Mexico..................................................      21,324,664      19,249,196           90.27
        Oklahoma....................................................      31,718,305      30,697,307           96.78
        Texas.......................................................     256,565,664     202,319,522           78.86
        Acl, NM.....................................................         183,811         302,196          164.41
        8N Pueblo...................................................         236,950         195,901           82.68
        Isleta......................................................         376,797         289,314           76.78
        Santo Domingo...............................................         127,537         161,635          126.74
        5 Sandoval..................................................         171,517         206,581          120.44
        San Felipe..................................................         140,731         161,705          114.90
        Wcd. Ent....................................................         728,060       1,031,163          141.63
        Choctaw, OK.................................................         656,059       1,055,737          160.92
        Cherokee....................................................       1,645,945       2,548,663          154.85
        Chickasaw...................................................         466,193         991,406          212 66
        Otoe-Missouria..............................................         204,314         293,654          143.73
        Potawatomi..................................................         742,612         962,336          129.59
        Zuni........................................................         753,814         455,032           60.36
        ITC.........................................................          94,428         166,947          176.80
        Muscogee Creek..............................................         717,958         392,947           54.73
        Sac and Fox.................................................          81,534         123,310          151.24
        Osage Nation................................................         140,716         378,575          269.03
                                                                     -----------------------------------------------
          Subtotal..................................................     397,731,389     350,146,343           88.04
                                                                     ===============================================
    MPRO:
        Colorado....................................................      26,367,512       26,985269          102.34
        Iowa........................................................      20,919,451      23,889,029          114.20
        Kansas......................................................      23,069,359      20,866,397           90.45
        Missouri....................................................      53,516,758      50,349,227           94.08
        Montana.....................................................       8,126,292       8,379,425          103.11
        Nebraska....................................................      11,370,227      13,324,203          117.19
        North Dakota................................................       5,049,945       6,376,135          126.26
        South Dakota................................................       6,433,360       7,081,118          110.07
        Utah........................................................      20,547,294      20,915,615          101.79
        Wyoming.....................................................       3,971,763       3,939,705           99.19
        Shosh/Ara...................................................         209,417         371,012          177.16
        Ute Mtn.....................................................         110,576          68,783           62.20
        NIITDC......................................................         123,352         329,258          266.93
        Cheyenne River..............................................         145,784         394,345          270.50
        Rosebud.....................................................         294,625         692,908          235.18
        Standing Rock...............................................         251,124         564,415          224.76
        Three Affiliated............................................          98,465         278,595          282.94
                                                                     -----------------------------------------------
          Subtotal..................................................     180,605,305     184,805,439          102.33
                                                                     ===============================================
    WRO:
        Alaska......................................................      10,178,281      11,051,964          108.58
        Arizona.....................................................      46,124,452      43,909,583           95.20
        California..................................................     442,438,400     469,535,464          106.12
        Guam........................................................       3,890,167       3,713,183           95.45
        Hawaii......................................................      20,276,861      16,826,150           82.98
        Idaho.......................................................      12,212,021      12,050,207           98.67
        Nevada......................................................      12,413,245      12,213,962           98.39
        Oregon......................................................      26,884,995      31,160,478          115.90
        Washington..................................................      45,888,198      58,231,142          126.90
        ITCN........................................................         325,976         418,150          128.28
        Navajo Nation...............................................       5,278,374      10,638,316          201.55
        ITCA........................................................       4,372,907       3,605,828           82.46
        American Samoa..............................................       3,482,896       3,339,913           95.89
                                                                     -----------------------------------------------
          Subtotal..................................................     633,766,774     676,694,340          106.77
                                                                     ===============================================
          National..................................................   2,792,372,972   2,792,372,972          100.00
    ----------------------------------------------------------------------------------------------------------------

        Question. I understand that States are submitting to the Department
    detailed expenditure and participation plans based on current funding
    levels which reflect food cost data, cost containment initiatives,
    anticipated fiscal year 1996 and 1997 spend forward amounts and
    anticipated surpluses and shortfalls in funding levels. Please make
    this information available for the record.
        Answer. WIC State agency fiscal year 1997 spending plans were
    received by the FCS from all WIC State agencies in February. An
    analysis of the spending plans, as well as the actual plans provided by
    each State agency, were provided to the Senate Appropriations Committee
    on March 18, 1997.
                          fiscal year 1998 wic request
        Question. A WIC contingency fund of $100 million is requested for
    fiscal year 1998 to avoid participation reductions from unexpected food
    price increases. The Secretary would be authorized to release amounts
    from the contingency reserve ``should food costs exceed budget
    estimates.'' What is the budget estimate which would be used as the
    ``trigger'' for the proposed reserve?
        Answer. The contingency fund is intended to serve as a buffer
    against unforeseen conditions which could threaten the goal of
    supporting participation at a stable, full funding level. It is for use
    only if needed to avoid participation reductions from the full-funding
    level caused by higher-than-expected food costs. FCS believes it is
    important to provide this buffer as the program enters a period of
    greater funding stability. In the past, when WIC participation was
    increasing steadily each year, higher-than-expected food costs would
    have resulted in slower program growth. However, in the coming year,
    when participation is expected to be much more stable and many States
    will only have funds to support current participation, unanticipated
    inflation would mean actual reductions in service, rather than simply a
    reduction in the growth rate.
        The Administration has not established a fixed technical approach
    for determining the circumstances under which contingency funds would
    be spent.
        Question. Why does the budget propose that the requested
    contingency reserve funds remain available until expended?
        Answer. The contingency reserve is intended to serve as a buffer
    against unforeseen conditions which could threaten the goal of
    supporting participation at a stable, full funding level, and would be
    used only if needed to avoid participation reductions from the full-
    funding level caused by higher-than-expected food costs. FCS believes
    that the need for such a buffer will remain beyond fiscal year 1998 as
    the program operates at a stable level. Furthermore, it is the Agency's
    best estimate that these funds will not be used in fiscal year 1998. It
    is requested that the budget authority for this fund remain available
    until expended, rather than periodically re-establishing the budget
    authority for such a fund, as would be required if the budget authority
    is granted for a fixed period.
        Question. The ``full funding'' level is assumed to be approximately
    7.5 million persons. Please provide the Committee with a detailed
    explanation of how this full participation estimate was produced.
        Answer. The ``Eligibility And Coverage Estimates 1995 Update--U.S.
    and Outlying Areas'' is provided for the record.
        [The information follows:]
    Special Supplemental Nutrition Program for Women, Infants, and Children
                                     (WIC)
    eligibility and coverage estimates 1995 update--u.s. and outlying areas
    Overview
        The Special Supplemental Nutrition Program for Women, Infants, and
    Children (WIC) is a Federal-State nutrition and health assistance
    program for low-income childbearing women, infants and young children.
    To be eligible, an applicant must meet three basic criteria:
        (1) Categorical--Participants must be pregnant women, breastfeeding
    women up to 1 year after delivery, non-breastfeeding postpartum women
    up to 6 months after delivery, infants up to 12 months of age, or
    children up to their fifth birthday.
        (2) Income--The maximum income limit is 185 percent of the U.S.
    Poverty Guidelines (e.g., $28,860 for a family of four as of July 1,
    1996). In addition, individuals are automatically considered income-
    eligible if they receive benefits under the Federal Medicaid, Aid to
    Families with Dependent Children (AFDC), or Food Stamps Program (FSP).
    Income limits for the AFDC and FSP are below the WIC income cutoff;
    however, in some cases, Medicaid serves persons over 185 percent of
    poverty.
        (3) Nutritional Risk--Participants must be certified to be at
    nutritional risk. Three major types of risk are recognized: medically
    based risk, such as anemia, underweight, maternal age, history of
    pregnancy complications or poor outcomes, etc., diet-based risk--
    inadequate dietary patterns, as determined by 24-hour food recall or
    food-frequency analysis, and predisposing risk conditions, such as
    homelessness and migrancy.

                                              1995 ESTIMATE OF WIC ELIGIBLE
                                                 [Numbers in thousands]
    ----------------------------------------------------------------------------------------------------------------
                                                                  Postpartum
                                                     Pregnant        and
                                                      women     breastfeeding    Infants      Children      Total
                                                                    women
    ----------------------------------------------------------------------------------------------------------------
    1994:
        Income eligible..........................        1,266           906         1,703        7,709       11,584
        Fully eligible...........................        1,156           832         1,618        5,797        9,403
        Participation (CY).......................          682           842         1,796        3,298        6,618
        Coverage (FY) (percent)..................           59           101           111           57           70
    1995:
        Income eligible..........................        1,300           931         1,748        7,313       11,292
        Fully eligible...........................        1,187           855         1,661        5,499        9,202
        Participation (CY).......................          689           900         1,817        3,541        6,947
        Coverage (CY) (percent)..................           58           105           109           64           75
    ----------------------------------------------------------------------------------------------------------------
    The Personal Responsibility and Work Opportunity Reconciliation Act of 1946 (Public Law 104-193) replaced AFDC
      with the Temporary Assistance for Needy Families (TANF) program. TANF recipients will continue to be
      considered automatically income eligible for WIC as long as the income standards established by States for
      TANF are not less restrictive than those for AFDC

        Estimates of persons eligible for the WIC program are used for
    several purposes. They provide an indication of the number of persons
    who would participate in WIC if funds were available. As such, the
    eligibles estimates are an important component in developing program
    budget estimates used in the President's budget request and the
    Congressional budget process. Finally, the eligibles estimates provide
    a basis for estimating program coverage--that is, for determining what
    share of the eligible population the program is currently reaching.
    Based on the March 1996 Current Population Survey (CPS). FCS estimates
    that 9.2 million women, infants and children were fully eligible for
    the WIC Program in 1995, a 2.1 percent decrease from the number
    estimated eligible in 1994. A total of 11.3 million women, infants and
    children fell below the WIC income eligibility limit in 1995, vs. an
    estimated 11.6 million in 1994.
    Program Coverage
        The decrease in the estimated number of WIC income-eligibles,
    combined with an increase in average monthly participation of over
    300,000 for the calendar year, allowed overall program coverage to
    increase by five percentage points, from 70 percent in 1994 to 75
    percent in 1995. This coverage estimate does not factor in increases in
    participation that have occurred since 1995.
        Estimated coverage of pregnant women is approximately 58 percent
    for 1995. This represents the proportion of women at all stages of
    pregnancy who are participating in WIC. Because women are very unlikely
    to participate in WIC for a full 40 weeks of pregnancy, this rate
    should be expected to be significantly below 100 percent. For example,
    if all eligible pregnant women were to participate for six months of
    their pregnancy, the calculated participation rate would equal 65
    percent.
        Estimated coverage rates for infants and breastfeeding/postpartum
    women were over 100 percent in 1995. These extremely high coverage
    rates are likely attributable to some disparities between the
    methodology used to estimate income-eligibles and the certification
    practices in the WIC program, as well as the imprecision inherent in
    any survey-based estimate. However, these data do strongly suggest that
    the program has likely achieved virtually full coverage of persons in
    this category at the national level. Estimated coverage of children
    also rose substantially from 1994 to 1995, from 57 percent to 64
    percent.
        The estimate of 9.2 million WIC eligible persons in 1995 assumes
    that about 4 out of 5 income eligible persons are also at nutritional
    risk and thus fully eligible for the WIC Program. The estimates of
    pregnant, postpartum and breastfeeding women are based on the count of
    infants from the CPS and relationships found in the 1990 Decennial
    Census.
    WIC Full Participation
        The President's Budget proposes to fully fund the WIC Program and
    serve 7.5 million women, infants, and children by the end of fiscal
    year 1998. The full funding participation level, providing adequate
    funding to serve all eligible persons who would chose to participate in
    WIC, has been assumed to be approximately 7.5 million persons for
    budget purposes for the past several years. This target was originally
    based on a budget estimate prepared in 1993 by the Congressional Budget
    Office. It is also consistent with FCS' full participation estimate
    produced in 1996 using 1994 WIC eligibles data.
        Using the same methodology as was used for last year's full
    participation estimates, the 1995 eligibles data would imply that 7.3
    million persons would participate in the program if adequate funds were
    available. This methodology assumes that, on average, approximately 80
    percent of all persons fully-eligible for the program would
    participate.\1\
    ---------------------------------------------------------------------------
        \1\ This estimate also assumes that a portion of the WIC-eligible
    population (approximately 65,000 persons) would continue to be served
    by the Commodity Supplemental Food Program.
    ---------------------------------------------------------------------------
        This key assumption regarding the overall maximum participation
    rate is not exact and now appears somewhat low. First, year-end fiscal
    year 1996 participation was approximately 100,000 greater than the 7.3
    million level calculated by the model. This alone indicates that the 80
    percent participation rate assumption understates the actual
    participation rate. Indeed, the program has a goal of increasing
    participation rates and has been successful in achieving high
    participation rates for infants and women. The key variable in
    determining overall program participation rates is the participation
    rate among children. The strong and steady participation growth that
    occurred among children in WIC throughout fiscal year 1996 suggests
    that a 80 percent maximum participation rate for the program is likely
    too low. The conclusion that the 80 percent participation assumption is
    too low is further supported by the experience of the Food Stamp
    Program, where participation rates for families with children under 5
    are over 90 percent.
        The 7.5 million full funding participation target is slightly above
    the full participation level estimated based on 1995 CPS data using
    previous methods. Given that the estimated number of fully-eligible
    persons exceeds this level and the actual participation experience of
    WIC and other low-income assistance programs serving children, a full
    funding participation target for fiscal year 1998 of 7.5 million is
    reasonable and prudent.
        Question. Based on your estimates, administrative expenses
    represent approximately 26 percent of the average cost of a WIC food
    package. Of this amount, what portion is for administrative program
    costs and what portion is for nutrition services?
        Answer. The latest nutrition services and administration (NSA)
    expenditure data available is for fiscal year 1995. This data shows
    that 74 percent of total expenditures were for supplemental foods and
    26 percent of total expenditures were for NSA. NSA refers not only to
    program management costs, but to all costs other than the cost of the
    supplemental foods. Only 9 percent of total expenditures were for
    program management. This amount includes the cost to authorize and
    monitor vendors to accept WIC food instruments; printing, reconciling
    and payment of food instruments; development and management of ADP
    systems; accounting, reporting, and auditing; and outreach. Nutrition
    education and breastfeeding promotion and support were 6 percent of
    total expenditures. These services include the preparation and
    provision of education sessions (group or individual) on nutrition and
    breastfeeding promotion and support; peer counseling support for
    breastfeeding mothers; breastfeeding aids such as breast pumps;
    equipment and materials for nutrition education; and interpreter or
    translator services to facilitate nutrition education. The remaining 11
    percent of total expenditures were for other client services. These
    services include diet and health assessments for certification;
    issuance and explanation of food instruments; referrals to other health
    and social services; voter registration activities; other coordination
    efforts, such as immunization promotion and drug, alcohol and tobacco
    education; and coordination with other family and child health and
    social programs.
        Question. The fiscal year 1998 budget also requests appropriations
    bill language authorizing the Secretary to adjust fiscal year 1998
    state allocations to reflect food funds spent forward, and to make
    other funding formula revisions.
        Please provide a detailed explanation of the revisions which would
    be made to the current regulatory formula, the reasons for each
    revision, and a comparison of the allocation each state would receive
    under the revised versus the current regulatory formula.
        Answer. The Department is requesting legislative language
    authorizing the Secretary to adjust the funds allocation process in
    fiscal year 1998. The first adjustment would require the Secretary to
    reduce each State agency's allocation for fiscal year 1998 appropriated
    funds by the amount of food funds that the State chooses to spend
    forward from fiscal year 1997. This will provide the Department with
    the ability to reallocate a greater amount of funds to States most in
    need. The second change pertains to the allocation of fiscal year 1997
    funds that are recovered from the States. To the extent funds are
    available, funds would be allocated to all States to maintain the level
    of funding received in fiscal year 1997, adjusted based on inflation.
    Any additional funds would be allocated to under fair share States that
    the Secretary has determined can effectively utilize and manage
    additional funds. Under fair share States are those States that are not
    receiving funds commensurate with their percent of the total WIC
    population.
        A comparison of the allocation each State would receive under the
    revised formula can not be provided at this time. Additionally, the
    Agency is unable to determine which States will be under fair share and
    would be eligible to receive additional funds. However, FCS provided a
    list of fair share grants and food grants as of January 1997, in answer
    to your previous question. These give a sense of where States are with
    respect to fair shares to date.
        Question. You indicated that the Department plans to proceed with a
    regulatory change so that the requested appropriations bill language
    would provide only interim authority. When does the Administration plan
    to publish a proposed rule?
        Answer. The Department plans to revise the current food funding
    formula in consultation with WIC State agencies. The Agency envisions
    that the proposed rule would be published in fiscal year 1998.
                             infant formula rebates
        Question. What savings have been generated from competitive bidding
    by States for the purchase of infant formula for WIC participants in
    each of fiscal years 1995 through 1997? How many participants have been
    funded as a result of this savings in each of these years?
        Answer. Infant formula rebates reduce the cost of infant formula,
    thereby allowing additional participants to be served monthly. The
    requested information is provided for the record; however, the rebates
    listed include rebate savings for other foods, e.g., infant cereal, but
    infant formula rebates represent the vast majority of rebates.
        [The information follows:]

                             [Dollars in thousands]
    ------------------------------------------------------------------------
                                                                Estimated
                                                              participation
                 Fiscal year                   Rebates       increase due to
                                                             rebate savings
    ------------------------------------------------------------------------
    1995................................        $1,051,000         1,620,000
    1996................................     \1\ 1,180,000         1,790,000
    1997 \2\............................         1,172,000         1,720,000
    ------------------------------------------------------------------------
    \1\ Rebates reported by State agencies as of 2/24/97.
    \2\ Estimated rebates from infant formula only.

        Question. How successful have efforts been to promote breastfeeding
    as the feeding method of choice among WIC participants? What impact
    does this have on savings from infant formula rebates?
        Answer. FCS believes that WIC's efforts to promote breastfeeding as
    the feeding method of choice for all mothers, particularly among WIC
    participants is having an impact. Proprietary marketing data from the
    Ross Laboratories Mothers Survey is the most recent source of
    breastfeeding data available at this time. The Ross data as well as
    other information suggest that WIC breastfeeding rates are growing, and
    are growing at a faster rate than among non-participants. For example,
    the Ross data showed that between 1989, when Congress enacted several
    provisions to strengthen WIC's support for breastfeeding, and 1994, the
    percentage of WIC mothers breastfeeding in the hospital increased from
    34 to 44 percent, while the percentage of non-WIC mothers breastfeeding
    in the hospital rose from 63 to 69 percent. This is an increase of ten
    percentage points for WIC mothers compared to six percentage points for
    non-WIC mothers. The 1993 General Accounting Office (GAO) report to
    Congress entitled Breastfeeding-WIC's Efforts to Promote Breastfeeding
    Have Increased provides additional encouraging information. The GAO
    report indicated that between 1989 and 1992, in-hospital breastfeeding
    among WIC participants increased nearly 12 percent. The percentage
    increase in the breastfeeding rate of WIC participants was more than
    twice the 5 point increase of other women in the hospital. The Agency
    believes that substantial efforts directed at improving breastfeeding
    rates in WIC by Federal, State and local personnel are responsible for
    the encouraging trend exemplified in these data.
        Infant formula rebates serve to reduce the net cost of infant
    formula to the program. If a breastfed infant receives no formula, or
    less formula than he/she would otherwise have received, program
    expenditures are reduced by the net cost of the formula that would
    otherwise have been provided. However, there are additional costs
    associated with serving the breastfeeding mother, as the food package
    provided to breastfeeding women is almost as large as the package
    provided to those using infant formula. Breastfeeding women can
    participate for up to a year, whereas non-breastfeeding postpartum
    women are eligible for up to six months while they also receive formula
    for their infant. In effect, it is possible but unlikely that
    significant increase in the incidence and duration of breastfeeding may
    increase overall program costs even as the cost of infant formula is
    further reduced. In any case, the promotion of breastfeeding in the WIC
    program is a priority for health rather than cost considerations.
                               child immunization
        Question. Please give us a status report on how successfully the
    WIC program has been utilized to increase child immunizations. What
    level of funding is being spent on this in 1997? What is proposed for
    fiscal year 1998?
        Answer. The WIC Program has been and will continue to be a major
    contributor to the current high levels of immunization coverage among
    low income children in the United States. In fact, the Centers for
    Disease Control and Prevention (CDC) considers the WIC program to be
    one of its most important allies in raising and maintaining
    immunization coverage rates. Of the 87 WIC State agencies (including
    territories and Indian Tribal Organizations), all are currently
    actively involved with immunization promotion activities. These range
    from comprehensive immunization screening procedures and media
    campaigns to providing incentives and sending immunization reminders to
    clients.
        WIC agencies provide direct ongoing administrative support for
    immunization promotion efforts. Allowable WIC expenditures which can be
    covered by WIC program Nutrition Services and Administrative funding
    include activities such as immunization education, outreach, assessment
    of immunization status (which ranges from manual to computerized
    assessment), referral and follow up. WIC agencies develop cost
    allocation agreements to fairly share costs of immunization promotion
    activities with CDC and other sources of support for immunization. The
    amount of WIC funds spent on immunization activities is unknown because
    State WIC agencies are not required to report on this type of
    expenditure. As technical assistance to WIC State agencies, CDC is
    developing a new methodology for calculating the costs of WIC
    immunization activities which may provide a tool for estimating WIC
    immunization expenditures in the future.
        CDC has contributed funds directly to WIC to meet mutual
    immunization goals. In 1995, Congress directed CDC to ensure that all
    grantees receiving Immunization Action Plan (IAP) funds reserve 10
    percent of those funds for the purpose of funding immunization
    assessment and referral services in WIC sites. Immunization grantees
    must use the funds for WIC linkages unless the grantee can document
    that assessment and referral are taking place in WIC sites without the
    need for specific funds. This amounted to approximately $10 million in
    both fiscal years 1996 and 1997. Future year funding from CDC is
    unknown at this time.
        In fiscal year 1996 approximately $1 million of CDC funding was
    provided to nine WIC State agencies to design, develop, and implement
    information system linkages between State Immunization Information
    Systems and WIC data systems at State and local agency levels.
                 cap on sugar in wic-approved breakfast cereals
        Question. In its hearings last year and in the report on the fiscal
    year 1997 appropriations act, this Committee expressed concerns about
    the Department's effort to revisit the limitation on the sugar content
    of WIC-approved cereals. Specifically, we recalled that the WIC sugar
    cap has been examined by the Department on a least seven prior
    occasions, each of which resulted in a confirmation of the cap at its
    current level (6 grams of sugar per ounce). We also expressed our sense
    that, unless there is new evidence that this particular nutrition
    standard requires further study, the Department's effort may represents
    an inefficient use of limited resources.
        We understand that despite full consideration of the Department's
    Notice of Intent to Propose Rulemaking, with significant participation
    in the public comment opportunity, this matter stands unresolved.
        Are there any new developments in the underlying research that
    would prevent a resolution of this issue?
        Answer. Since the time that the Department conducted its last
    review of WIC food packages, the 1995 Dietary Guidelines were issued.
    That, in combination with the fact that recent studies continue to fail
    to document an association between sugar consumption and an increased
    risk of certain diseases and medical conditions, prompted the
    Department in March of 1996 to seek public opinion on the continued
    appropriateness of the current regulatory sugar caps for WIC cereals.
    While commenters were generally very supportive of retaining the
    current cap, some suggested that the Department should undertake a more
    comprehensive review of packages, rather than just considering the
    sugar content of cereals. In response, the Department intends to
    publish another Federal Register notice announcing specific future
    intentions regarding this new review.
        In the interim, the Department is taking no action to propose
    changes in current WIC regulations.
        Question. What was the outcome of comments the Department received?
        Answer. At the close of the 90-day comment period on the WIC Cereal
    Sugar Limit Notice published in the Federal Register on March 18, 1996,
    the Department received 731 letters from a total of 878 commenters,
    representing a wide range of interested parties. Eight hundred and nine
    commenters expressed support for retaining the 6-gram sugar limit
    unchanged, 27 commenters recommended that the limit be redefined to
    discount naturally occurring sugars found in grain and fruit
    ingredients in cereals, 26 commenters favored an elimination of the
    sugar limit, 7 commenters suggested that USDA establish a lower sugar
    limit, and 11 commenters expressed other points of view. (A few
    commenters expressed two positions in their letters, which were
    captured accordingly in the counts reported above.)
        As of March 13, 1997, 164 letters, representing 182 commenters,
    were received after the closing date for the notice's comment period.
    Although late letters were read and considered, they were not included
    among the official counts comprising the comment analysis stated above.
    Of these, 156 commenters supported retaining the sugar limit unchanged,
    while the remaining 26 comments took other positions.
          nutrition education training (net) program fiscal year 1997
                          supplemental funding request
        Question. The Administration's fiscal year 1997 supplemental/
    rescission package includes legislative language to shift to the NET
    program $6.25 million in food stamp funding for commodity purchases of
    The Emergency Food Assistance Program (TEFAP).
        Given the fact that grants to states are available through the
    school meals initiative and you have reprogrammed funds to make
    available $3.75 million in fiscal year 1996 funding for the Nutrition
    Education and Training (NET) Program, why is it a priority to provide
    additional supplemental funding for the NET program?
        Answer. Through Team Nutrition, the program that supports
    implementation of the School Meals Initiative for Healthy Children,
    grants are offered to State agencies on a competitive basis. These
    grants provide money to establish or enhance training programs for
    school food service personnel to enable local school districts to
    provide healthy meals to children and to meet the USDA nutrition
    requirements. In 1996, 17 States were awarded Team Nutrition Training
    Grants for School Meals for a total funding of $2,710,920.
        The Nutrition Education and Training Program (NET), in contrast,
    provides grants to all States. Under the legislative mandate NET
    provides: (1) instruction to educators to enable them to impart
    nutrition education to children and parents; (2) instruction in basic
    nutrition, as well as food service management training, to school food
    service personnel; and (3) funds for educational materials development
    for use with these audiences.
        NET provides ongoing nutrition education and food service training
    support to the Child Nutrition Programs. With $3.75 million
    reprogrammed to fund NET activities in fiscal year 1997, funds were
    divided equally among all States at a level of $66,951 to make it
    feasible to keep the Program in operation in every State. This amount
    is less than the current legislated minimum NET grant of $75,000, an
    amount needed to support the service delivery infrastructure, i.e., in-
    service training for teachers through community colleges; lending
    resource centers for instructional materials; mini-grants to local
    schools, that can meet minimum obligations to each program audience.
    The minimum grant currently applies in 20 States with relatively low
    numbers of children enrolled in schools and child care institutions.
    NET funds are allocated based on enrollment figures obtained annually
    from the Department of Education.
        The $66,951, then, severely underfunds States with higher
    enrollments, hindering their ability to adequately meet the needs in
    their States for nutrition education and training. Some of these needs
    are continuous as new teachers, food service personnel, and children
    enter the school system each year. Knowledge and skills of educators
    and food service personnel must be updated as new information in food
    and nutrition becomes available. NET has a vital role in the
    implementation of the current activities in the Team Nutrition
    initiative.
                     wic farmers' market nutrition program
        Question. The fiscal year 1998 request proposes to increase funding
    for the WIC Farmers' Market Nutrition Program from $6.75 to $12
    million.
        How many state agencies and Indian tribal organizations are
    currently participating in this program? Please identify the number of
    farmers' markets by State and Indian tribal organization supported by
    this program and indicate the amount of funds being allocated for each.
        Answer. Thirty State agencies (including 2 Indian tribal
    organizations) are currently participating in the program. A chart is
    provided for the record that shows the number of farmers' markets and
    current grant amounts for fiscal year 1997 by State agency.
        [The information follows:]

    ------------------------------------------------------------------------
                                                Fiscal year
                                               1997 Federal      Number of
                                                   grant          markets
    ------------------------------------------------------------------------
    California..............................        $150,102              47
    Chickasaw, OK...........................          40,000               5
    Connecticut.............................         261,810              45
    District of Columbia....................         145,760               6
    Illinois................................         104,097               8
    Indiana.................................          32,897              11
    Iowa....................................         368,697              69
    Kentucky................................          77,119              22
    Maine...................................          92,568              34
    Maryland................................         175,427              45
    Massachusetts...........................         472,311              89
    Michigan................................         271,208              68
    Minnesota...............................         183,345              14
    Missouri................................          31,173               3
    MS Choctaw..............................          10,121               1
    N. Carolina.............................         111,378              18
    New Hampshire...........................          85,003              25
    New Jersey..............................         136,727              99
    New Mexico..............................          75,000               7
    New York................................       1,443,901             185
    Ohio....................................          95,582              29
    Oregon..................................          55,114               8
    Pennsylvania............................         676,891             270
    Rhode Island............................          81,153               6
    S. Carolina.............................          99,778              21
    Texas...................................         936,863              44
    Vermont.................................          74,676              27
    Washington..............................         135,230              18
    West Virginia...........................          68,015              10
    Wisconsin...............................         233,054              13
    Undistributed funds \1\.................          25,000  ..............
                                             -------------------------------
          Total.............................       6,750,000           1,247
    ------------------------------------------------------------------------
    \1\ These are funds that were initially allocated for Cherokee, Oklahoma
      which has since withdrawn from the program. The funds remain
      undistributed due to current FMNP funding restrictions.

        Question. Which states or Indian tribal organizations have
    expressed interest in beginning programs? Which states or Indian tribal
    organizations have made requests to expand their programs?
        Answer. Colorado, Florida, Idaho, Mississippi, Montana, Nebraska,
    Georgia and Utah have expressed interest in beginning programs.
    Additionally, Georgia has submitted an approved State Plan to
    participate, positioning it as the first of the interested States to be
    funded if additional funding is made available. The following
    participating State agencies have requested expansion funds for fiscal
    year 1997: California, Indiana, Iowa, Kentucky, Michigan, Minnesota,
    Missouri, Mississippi Choctaw, New York, North Carolina, Ohio, Oregon,
    Pennsylvania, Rhode Island and West Virginia.
        Question. How would the additional $5.25 million requested for
    fiscal year 1998 be allocated? Please provide a breakdown by state/
    Indian tribal organization.
        Answer. By law, the first priority for these funds is to restore
    State agencies to their previous year's funding level. Of the remaining
    funds, 75 percent would be allocated to currently participating State
    agencies that request expansion funding. A funding formula, designed by
    the Department in consultation with State agencies, is used to
    distribute expansion. Basically, this formula ranks State agencies
    according to their previous year's average FMNP grant per WIC
    participant. Expansion requests are funded in rank order, beginning
    with the State agency with the lowest FMNP grant per participant. The
    remaining 25 percent would be allocated to new State agencies that are
    seeking to initiate a WIC Farmers' Market Nutrition Program (FMNP). A
    ranking process, based on factors specified in the law, is used to
    allocate funds to new State agencies. The law requires allocation on
    the basis of factors such as prior experience with a similar program,
    State plans that have the greatest access to farmers' markets, the
    highest concentration of eligible persons and such other factors as
    determined appropriate by the Department.
        Because fiscal year 1998 State Plans, which are the vehicle for
    requesting expansion or new funding, are not due until November 30,
    1997, FCS cannot provide a specific breakdown of the allocation of the
    $5.25 million by State/Indian tribal organization at this time. FCS
    can, however, identify the States that have expressed interest in
    initiating the FMNP. The following States have expressed an interest in
    participation in the FMNP: Colorado, Florida, Georgia, Idaho,
    Mississippi, Montana, Nebraska and Utah.
        Question. How many farmers are currently participating in this
    program? How many WIC participants?
        Answer. Preliminary data indicate that in fiscal year 1996 there
    were 8,239 farmers representing 1,231 farmers' markets participating in
    the program. Additionally, there were 991,121 WIC participants enrolled
    in the Program.
        Question. What are the Department's latest findings with respect to
    the significant benefits of this program to farmers and to WIC
    participants? How are these benefits measured?
        Answer. The Department has not conducted a formal evaluation of the
    WIC Farmers' Market Nutrition Program (FMNP) since 1989 when the
    program was still in its pilot phase. As such, a conclusion must be
    drawn regarding the benefits of the program from informal survey data
    that are provided by each State agency.
        Based on the most recent survey data available, reflecting fiscal
    year 1995 program operations, 51 percent of recipients who responded to
    the survey said they had never been to a farmers' market before taking
    part in the FMNP. In addition, 77 percent said they planned to eat more
    fruits and vegetables all year round and 89 percent said the quality of
    the fresh produce at farmers' markets was as good as or better than at
    their grocery stores.
        Regarding farmers who responded to the survey, 84 percent said that
    the FMNP increased their sales. In addition, 35 percent reported
    increased fruit/vegetable production and 32 percent stated that they
    plan to grow a wider variety of fruits or vegetables next year because
    of their involvement in the FMNP.
                          commodity assistance program
        Question. Beginning in fiscal year 1996, funding for the Commodity
    Supplemental Food Program, Soup Kitchens, and The Emergency Food
    Assistance Program was merged into a Commodity Assistance Program. The
    fiscal year 1998 President's budget proposes to add to the Commodity
    Assistance Program funding for the Nutrition Program for the Elderly
    and Pacific Island Assistance.
        In its fiscal year 1997 report, the Committee encouraged the
    Department ``to distribute the commodity assistance program funds more
    equitably among States, based on an assessment of the needs and
    priorities of each State, and the State's preference to receive
    commodity allocations'' through each of the programs funded through the
    commodity assistance program account. Are you doing this? If not, why?
        Answer. Of the $166 million appropriated to this account for fiscal
    year 1997, the Department exercised discretion granted in the
    appropriations act to provide $76 million, the amount requested in the
    President's budget, to the Commodity Supplemental Food Program (CSFP).
    The remaining $90 million has been made available for the Emergency
    Food Assistance Program (TEFAP) administrative grants and commodity
    purchases. (TEFAP and the Soup Kitchens/Food Banks Program (SK/FB) were
    separate programs at the time of the appropriation, but SK/FB was
    absorbed by TEFAP under the Personal Responsibility and Work
    Opportunity Reconciliation Act of 1996 (Public Law 104-193) enacted two
    weeks later.) States have been given the discretion to request that all
    or any portion of their administrative grants be used instead to
    provide commodities. They also have full discretion to determine how to
    divide their TEFAP commodities between congregate meal service and
    household distribution.
        The Department did not implement the Committee's suggestion because
    such action might have caused severe reductions in CSFP services in
    many of the 18 States and two Indian Tribal Organizations administering
    the program. The benefits in this program are well targeted to at-risk
    population groups, and the program delivers these benefits efficiently
    and effectively. In contrast to the extremely disruptive impact
    Nationwide dispersal of resources would have in areas where the program
    currently operates, such action would not provide the other States with
    a significant increase in resources. Moreover, the funding for TEFAP
    commodity purchases increased by $100,000,000 in fiscal year 1997 by
    the enactment of Public Law 104-193. This increase in TEFAP funding was
    another reason for allocating CSFP funding in accordance with the
    Administration's fiscal year 1997 budget request.
        Question. One of the programs funded under the commodity assistance
    program--the Commodity Supplemental Food Program--serves a very limited
    number of states. Are all states now allowed to receive funding under
    this program, or, conversely, to receive more soup kitchen/emergency
    food assistance funding if they elect not to participate in the
    Commodity Supplemental Food Program? If not, why?
        Answer. The Department chose to devote $76 million, the amount
    requested in the President's budget, to the CSFP. This funding was
    intended to maintain the program in the areas where it currently
    operates. CSFP funding was not increased beyond the budget request to
    support expansion of the program into other States, nor was program
    funding reduced to compensate States which do not currently administer
    the CSFP.
        Question. If the Department is not giving states flexibility in
    receiving commodity assistance program funds but instead maintaining
    separate funding streams for the individual programs funded through
    this account, why is the Department not asking to restore separate
    appropriations for each of these programs rather than merge more
    programs into this account?
        Answer. While the Department is maintaining separate funding for
    these programs included in this account, the merging of these programs
    in this manner maintains their discretionary status while simplifying
    the budget presentation.
        Question. Most states do not opt for commodity assistance under the
    Nutrition Program for the Elderly program. They instead elect to
    receive a cash reimbursement for each meal served. Why is the
    Administration proposing to merge this program, which for the most part
    does not provide commodity assistance, with the Department's commodity
    assistance programs?
        Answer. The Nutrition Program for the Elderly (NPE) provides States
    with the flexibility to receive commodities and/or cash. Since the
    States have the option to receive commodities, both entitlement and
    bonus, the program has always been classified as a commodity program.
    In fiscal year 1996, nearly one third of the States elected to receive
    some level of their NPE entitlement in the form of commodities.
        Question. The Administration proposed last year that funding for
    the Nutrition Program for the Elderly be transferred to the Department
    of Health and Human Services (DHSS). Does the Administration no longer
    believe that this program should be managed by the DHHS in conjunction
    with other elderly feeding programs? Why?
        Answer. Unlike the other commodity programs, the Older Americans
    Act, which authorizes the Nutrition Program for the Elderly (NPE),
    expired last year. The Administration has determined that the better
    avenue for considering the transfer of NPE to the Department of Health
    and Human Services is through the reauthorization process. The Agency
    still believes that the recipients would be best served if NPE were
    combined and administered by HHS, since HHS' portion of the funding for
    the program is about 3 times greater than USDA's, and one set of rules
    would be easier to follow than two.
        Question. What has been the decline in WIC-type participation in
    the Commodity Supplemental Food Program as eligibles shift into the WIC
    program in each of the last five fiscal years? Why not reduce funding
    for the Commodity Supplemental Food Program as eligibles shift into the
    WIC program?
        Answer. Prior to fiscal year 1995, the number of women, infants,
    and children (WIC) participating in the Commodity Supplemental Food
    Program (CSFP) increased each year. In fiscal years 1995 and 1996 the
    number of WIC participants decreased by 36,315 and 26,761 respectively.
    Based on participation to date, it is estimated that the number of WIC
    participants will decrease by 8,744 in fiscal year 1997.
        The Department does not request reduced funding for the CSFP as the
    participation of WIC declines because the CSFP provides an efficient
    and effective service to its low-income elderly participants as well.
    Whereas many women, infants, and children have WIC as an option to the
    CSFP, no such clear alternative or equivalent program exists for the
    elderly.
        It should be noted that the elderly prefer participation in CSFP
    for various reasons. One primary reason is that the application process
    is much simpler than for other programs, such as food stamps and SSI.
    Moreover, the commodity distribution sites are sometimes more
    conveniently located than stores and for the homebound elderly, the
    commodities are taken directly to them. Lastly, participants report
    liking the types of commodities distributed. Therefore, funding not
    required to support women, infants, and children should be retained for
    service to the elderly.
        Question. Although the fiscal year 1998 budget proposes a reduction
    in elderly participation in the Commodity Supplemental Food Program,
    the program's elderly population has increased over the past years.
    What assistance is provided to the elderly through this program which
    cannot be provided to this population through other federal food
    assistance programs?
        Answer. Like child bearing women, infants and young children (the
    other populations served by the Commodity Supplemental Food Program
    (CSFP)), the elderly have special nutrient needs. The CSFP is designed
    to provide a nutrient dense food package to supplement the nutrient
    intake from other sources. CSFP is well-suited to the needs of the
    elderly for several reasons. Some CSFP sites deliver the commodities to
    the elderly person's home or centralized centers where the elderly, who
    often have transportation problems, are able to receive the assistance.
    In addition, anecdotal evidence suggests that the elderly associate
    programs such as the Food Stamp Program (FSP) with charity and
    therefore underutilize the program while viewing CSFP as acceptable
    assistance. In fiscal year 1994, only 35 percent of elderly eligible
    for the FSP participated in the program; the overall participation rate
    for all ages of eligibles in the FSP was 71 percent.
                          food program administration
        Question. The prepared testimony indicated that restrictive staff
    year ceilings in the Food Stamp and Child Nutrition accounts and
    limited appropriations have enabled you only to ``deploy staff from
    crisis to crisis, which is making continuous, effective program
    administration nearly impossible.''
        How have staff year ceilings in the Food Stamp and Child Nutrition
    accounts and appropriations limitations affected the agency's staff?
    What has been the impact of staffing reductions on the Department's
    ability to properly administer and oversee these programs?
        Answer. Since fiscal year 1995, FCS has had to reduce its staff by
    60 to 80 staff years every fiscal year due to funding reductions in the
    Food Program Administration (FPA) account. Although the Agency is
    committed to the National Performance Review and the Vice President's
    goals of reducing the Federal workforce and FCS has been diligent in
    implementing efficiencies, the Agency believes that the cuts have been
    very deep. FCS reached its fiscal year 1999 streamlining target 3 years
    ago. Restrictive staff year ceilings in the Food Stamp and Child
    Nutrition accounts have made the Agency inflexible in its ability to
    shift staff to changing priority areas, such as program oversight. Due
    to the ceilings, increased focus on areas needing attention, such as
    program integrity and providing technical assistance to State agencies,
    cannot be properly staffed by the Food Stamp or Child Nutrition
    accounts where the effort is most vital. This has had a significant
    impact on the Agency's ability to carry out its mission.
        Staff restrictions and reductions have also affected the Agency's
    ability to properly monitor and oversee everyday activities of FCS
    programs. Due to funding reductions, FCS has curtailed travel that is
    crucial to monitoring sites and maintaining Federal presence in the
    field. Staffing reductions have placed highly labor-intensive
    activities, such as store investigations and maintaining program
    integrity at risk. Federal on-site management reviews are critical to
    the proper administration of Child Nutrition Programs. These reviews
    reveal administrative and operational problems at early stages.
    Additionally, external audits from GAO and OIG have consistently cited
    insufficient staff to exert proper oversight of State administrative
    costs and debt management practices.
        The reductions in staff also affects the Agency's ability to
    respond to program changes. Implementing new legislation, such as
    Welfare Reform, the Healthy Meals for Healthy Americans Act, and the
    Government Performance and Results Act, impose significant, new, and
    ongoing administrative burdens on FCS. These new laws effect
    comprehensive program changes and are extremely important to our
    programs, but they are not receiving the full attention they deserve
    due to staff limitations and other demands. Agency workload has
    dramatically increased due to new legislation, several Department-wide
    initiatives, and the fact that our programs have tripled in size and
    complexity since 1980. There is not enough staff to handle the
    increased workload or proactively respond to problems to head off a
    crisis, all of which is having an adverse affect on morale.
        The fiscal year 1998 budget requests a minimal increase to fund
    mandatory pay increases to support existing staff. Mandatory pay raises
    increase the cost of each staff year every fiscal year, requiring small
    increases in the FPA appropriation just to support existing staff. The
    cost of funding additional staff in the FPA appropriation or increasing
    the staff year ceilings in the Food Stamp and Child Nutrition accounts
    is millions of dollars less than the cost of increased fraud and abuse
    in our programs. The small amount of funding it will take to support
    our staff will provide programs that truly help those less fortunate,
    that respond appropriately and effectively to new needs and changing
    legislation, and that operate efficiently with savings to the taxpayer.
        Question. The prepared testimony indicates that the fiscal year
    1998 request includes no funds to update the agency's automated
    infrastructure which demands attention. What improvements are needed
    and how much is needed to address this problem?
        Answer. The FCS began its Agency Infrastructure Modernization (AIM)
    in fiscal year 1996. By that time, much of the Agency's computer
    infrastructure had aged to the point where it had exceeded its life
    expectancy. In fiscal years 1996 and 1997 the Agency was able to
    replace much of its antiquated microcomputer hardware and software
    base. However, FCS still needs to upgrade over 400 microcomputers.
    Also, the Agency's file servers, network operating systems, wiring
    plant, certain standard software and advance application hardware and
    software are in need of modernization. Additionally, the Agency has
    only been able to make limited progress in Internet and Intranet
    applications.
        The Agency's infrastructure modernization plan calls for the
    development or upgrade of these hardware and software tools in order to
    ensure a productive work environment for its employees. The plan is
    designed to upgrade all of this hardware and software by fiscal year
    2001, pending the availability of resources.
        The estimated cost for fiscal year 1998 is $4,000,000 which is
    currently unfunded. These funds would be used to complete the
    microcomputer modernization, upgrade the Agency's file servers, network
    operating systems and wiring plants at headquarters and seven regional
    offices, and provide end-user and technical training in the new
    standard software. Additional infrastructure areas that require
    modernization are planned for fiscal years 1999 through 2001. These
    areas will need to be funded during those fiscal years.
        Question. The fiscal year 1998 request for the Center for Nutrition
    Policy (CNPP) and Promotion is $2.49 million. The budget indicates that
    an additional $252,000 is needed above the fiscal year 1997 level to
    support ``unfunded staff.'' What do you mean by this?
        Answer. In fiscal year 1996, the Center for Nutrition Policy and
    Promotion (CNPP) was allocated $2,499,000 for salaries and expenses
    from the FPA appropriation. For fiscal year 1998, CNPP is requesting
    the same amount to fully fund current staff needs. CNPP believes, that
    at a minimum, it must have a critical core of 34 FTE's, mostly senior
    nutritionists and economists, to fulfill its mission and produce high
    quality nutrition policy analysis and deliver state-of-the-art
    nutrition education. This critical core staff is even more essential in
    fiscal year 1998 as CNPP is expected to provide most of the staff
    support for the Dietary Guidelines 2000. By tradition, USDA and the
    Department of Health and Human Services (DHHS) have rotated
    responsibility for staff and production costs incurred in producing the
    Dietary Guidelines. For the Fifth Edition of the Dietary Guidelines,
    due in the year 2000, USDA is responsible for staffing and production
    costs, most of which are expected to be provided by CNPP. In fiscal
    year 1997, CNPP is operating below its critical core need. In fiscal
    year 1998, CNPP needs to restore its resources to the critical core
    staff necessary for CNPP to fulfill its mission and produce the Dietary
    Guidelines 2000.
                   kentucky-iowa food demonstration projects
        Question. Would you please provide a summary report on the
    Kentucky-Iowa food demonstration projects?
        Answer. Since fiscal year 1989, Kentucky and Iowa have operated a
    demonstration project which allows for-profit child care centers to
    participate in the Child and Adult Care Food Program (CACFP) if 25
    percent or more of their enrollment qualifies for free or reduced price
    lunch under the Income Eligibility Guidelines. Normally, for-profit
    centers can only participate in CACFP if at least 25 percent of their
    enrollment or licensed capacity is subsidized with Title XX child care
    funds.
        Through fiscal year 1994, the centers participating in this
    demonstration project were treated as regular CACFP centers for funding
    purposes. Beginning in fiscal year 1995, the funding for the
    demonstration was classified as discretionary. A total of $3.7 million
    was apportioned for the demonstration for fiscal year 1995 and is set
    to remain at that amount through fiscal year 1998.
        The number of for-profit centers participating in the demonstration
    project in Kentucky increased from 77 centers in 1991 to 247 centers at
    the end of fiscal year 1994. Almost 90 percent of the participating
    centers would not have been eligible to participate in the CACFP due to
    the small number of Title XX beneficiaries attending these centers. The
    number of participating centers has declined slightly since that time
    as a result of the funding constraints established when the
    demonstration projects were classified as discretionary.
        In Iowa, there was no significant increase in the number of for-
    profit centers participating in the demonstration project. There were
    six centers participating in fiscal year 1991 and 10 by the end of
    fiscal year 1994. Of these centers, 60 percent had sufficient Title XX
    beneficiaries to meet the regulatory requirements for participating in
    the CACFP.
        During fiscal year 1996 there was an average of 180 sponsors, 170
    in Kentucky and 10 in Iowa, and 228 centers, 218 in Kentucky and 10 in
    Iowa, approved for participation in the demonstration project.
    Enrollment in centers participating in the project averaged 13,696 in
    Kentucky and 688 in Iowa. A total of 1.6 million breakfasts, 2.0
    million lunches, 1.0 million suppers, and 2.5 million snacks were
    served under the demonstration projects during fiscal year 1996.
                     school meals initiative/team nutrition
        Question. For fiscal year 1997, $10 million was provided for the
    school meals initiative. Of this amount, $4 million was provided for
    food service training grants to states; $2.5 million for in-school
    education materials; $2.3 million for technical assistance materials;
    $800,000 for cooperative agreements with the National Food Service
    Management Institute (NFSMI) for food service; and $400,000 for print
    and electronic food service resource systems.
        The Department reprogrammed $3.75 million of the fiscal year 1997
    funds provided for the school meals initiative to the Nutrition
    Education Program. The Committee was notified that no reduction would
    be made in the funds made available for food service training grants to
    states or for cooperative agreements with the NFSMI. Please explain
    from which other funded activities this $3.75 million was taken and why
    the activities for which funding was reduced were considered to be of
    lowest priority.
        Answer. That information is provided for the record. All fiscal
    year 1997 Schools Meals Initiative funding for nutrition education
    along with part of the training and technical assistance funding was
    used to support NET activities. The specific nutrition education
    activities not funded included the printing and distribution of Spanish
    translations of existing Team Nutrition materials. This funding
    reduction also slowed the developmental process for the middle school
    materials, since the Agency had to rethink the method for transmitting
    the nutrition education messages to this audience given the reduction
    in funding for this activity. The Agency was unable to follow through
    with all of our commitments to the Team Nutrition Schools. Currently
    fiscal year 1996 carry-over funds are being used for other nutrition
    education activities while we await fiscal year 1998 funds.
        The funding reduction for food service training and technical
    assistance prevented us from printing and distributing training and
    technical assistance support materials promised to program
    administrators. The Agency plans to fund these projects with fiscal
    year 1998 appropriations.
        [The information follows:]

                 School Meals Initiative: Activities Not Funded

                                                            Fiscal year 1997
    I. Children's Education Resources, In-School Education
        Materials...........................................      $2,500,000
    II. Food Service Training and Technical Assistance,
        Technical Assistance Materials......................       1,250,000
                        --------------------------------------------------------
                        ____________________________________________________
          Total.............................................       3,750,000

        Question. The explanatory notes indicate that $11.867 million is
    available for the school meals initiative. This would mean that $7.6
    million in funds provided in previous fiscal years have been carried
    over and are available for fiscal year 1997. For which specific
    activities is this additional $7.6 million being made available?
        Answer. The amount carried over from fiscal year 1996 and being
    made available for fiscal year 1997 has been revised to $5,590,377.
    This amount is being used to fund six School Meals Initiative
    activities.
        [The information follows:]

    Children's Educational Resources........................      $3,398,377
    Mass Communication......................................          75,000
    Public-Private Partnerships.............................         230,000
    Technical Assistance Materials..........................       1,000,000
    National Food Service Management Institute..............         250,000
    Evaluation/Administration...............................         637,000
                        --------------------------------------------------------
                        ____________________________________________________
          Total.............................................       5,590,377

        Question. The fiscal year 1998 request for the school meals
    initiative is $10 million. Please provide a detailed breakdown of this
    request, indicating the specific activities which would be funded--food
    service training grants to states; technical assistance materials;
    cooperative agreements with the National Food Service Management
    Institute, Children's Education Resources, Public-Private-Partnerships,
    Mass Communication and Evaluation, etc.--within the Nutrition Education
    and Training and Technical Assistance components of this initiative.
    Please provide a comparison of the funding made available for each of
    these specific activities in each of fiscal years 1995-1997.
        Answer. That information is provided for the record. The fiscal
    year 1997 allocations represent the current budget plan and the fiscal
    year 1998 allocations will be estimates.
        [The information follows:]

                             SCHOOL MEALS INITIATIVE: SPENDING BY CATEGORY AND APPROPRIATION
    ----------------------------------------------------------------------------------------------------------------
                                                                                   Fiscal year--
                                                             -------------------------------------------------------
                                                                                              1997          1998
                                                                  1995          1996       (estimate)    (estimate)
    ----------------------------------------------------------------------------------------------------------------
    I. Food Service Training and Technical Assistance:
        Technical Assistance Materials......................    $3,904,105    $1,910,734    $1,050,000    $1,000,000
        Print and Electronic Food Service Resource Systems..     1,097,720        97,755       400,000       400,000
        NFSMI Cooperative Agreement for Food Service........       424,659       250,000       800,000       500,000
    II. Children's Education Resources: In-school Education
     Materials and Community Education Materials............     7,884,363     4,821,785  ............     3,200,000
    III. Food Service Training Grants to States.............  \1\ 4,042,39
                                                                         1     1,920,665     4,000,000
                                                                                          \3\ 3,750,00
                                                                                                     0     4,000,000
    IV. USDA/FCS Direct Training and Education..............       744,652       400,000  ............  ............
    V. Children's Communications and Technology.............       328,130        75,000  ............       200,000
    VI. Team Nutrition Partnership Support: Resources for
     Team Nutrition Schools and Partnership Network Support.       106,717       247,061  ............       200,000
    VII. Evaluation.........................................     1,702,736   \2\ 777,000  ............       500,000
                                                             -------------------------------------------------------
          Total.............................................    20,235,473    10,500,000    10,000,000    10,000,000
    ----------------------------------------------------------------------------------------------------------------
    \1\ Includes 1995 Team Nutrition Grants plus partial funding for 1996 Team Nutrition Grants.
    \2\ Includes $140,000 for evaluation and $637,000 for Administrative expenses.
    \3\ $3,750,000 was reprogrammed to Section 6(a)(3) of the National School Lunch Act to provide grants to States
      to fund activities that would have otherwise been supported by the NET Program.
    \4\ Includes administrative expenses and evaluations.

        Question. Management Institute, Children's Education Resources,
    Public-Private-Partnerships, Mass Communication and Evaluation, etc.--
    within the Nutrition Education and Training and Technical Assistance
    components of this initiative. Please provide a comparison of the
    funding made available for each of these specific activities in each of
    fiscal years 1995-1997.
        Please provide detail on the food service training grants awarded
    to states in each of fiscal years 1995-1997, identifying the state, the
    amount of the grant, and a brief description of the project for which
    the award was made. For each fiscal year, please provide this same
    information for grant requests received by states for which no award
    was made.
        Answer. The information is provided for the record.
        [The information follows:]
                      1995 Team Nutrition Training Grants
    Arkansas Department of Education--$185,875
        The Arkansas Team Nutrition Training Project was designed to build
    teams of effective leaders who could maximize the use of available
    resources to provide healthful school meals that an increasing number
    of Arkansas students would enjoy. There were three objectives: increase
    the number of managers, assistants, directors, and State agency staff
    who are prepared to accept this leadership role; expand the number of
    school-wide teams of leaders prepared to share this role; and build a
    technology support system to help sustain leadership learning. The
    State held training workshops for managers, established technology
    support demo sites at schools and education cooperatives, and added
    Health Action Teams to the existing State network.
    Georgia State Board of Education--$199,000
        This project involved developing a curriculum for use by a cadre of
    trainers who conducted customized training based on the manager's
    choice of meal planning options. The project objectives were: to
    provide managers with customized training that incorporates the meal
    planning option they will utilize to implement the Dietary Guidelines
    in school meals by September 1996; to provide managers implementing the
    food-based meal planning option with an easy-to-use training tool, the
    interactive compact disc, to teach consistent, reliable information on
    meal planning; and to compile up-to-date training materials that can be
    integrated into the required Training-in-Depth curriculum and other
    training.
    Idaho State Department of Education--$399,930
        Consortium--Alaska, Idaho, and Nevada
        This project developed a training infrastructure for four States,
    one of which used its own funding for the implementation of the School
    Meals Initiative for Healthy Children. The consortium of States hired a
    coordinator to develop a three-tiered training program for food service
    authorities. The first tier dealt with menu standardization,
    modification, and substitutions; the second tier, nutrient standard
    menu planning or food based menu planning; and the third tier,
    marketing and merchandising. A cadre of trainers were established and
    trained in each State to carry out the training. The training program
    will be incorporated into each State's Nutrition Education and Training
    Program over the next few years.
    Illinois State Board of Education--$199,984
        This project focused on the support and marketing of a new training
    delivery system to be offered through community colleges. The training
    focused on developing a ``train-the-trainer'' session for instructors
    on implementation of the Department's nutrition requirements and the
    Dietary Guidelines and also on developing and implementing a marketing
    initiative to inform school administrators and food service
    professionals of the training delivery system. In addition, the project
    focused on training peer consultants who provide more advanced
    individualized training that food service managers need to implement
    nutrition requirements. Also, a teleconference to assist with menu
    planning issues was provided in an effort to reach a large number of
    food service personnel.
    Kansas State Board of Education--$160,307
        The Kansas State Board of Education developed a sustainable
    Statewide infrastructure to support the Kansas Comprehensive Training
    System (KCTS) for School Nutrition Professional Development. The Team
    Nutrition Training Grant objectives involved developing key components
    of KCTS including quality training resources, a computerized training
    resource catalog, a Statewide training resource center, formal
    training, in-service training, independent study, leadership
    development, and nutrition education integrated with elementary
    education.
    Louisiana Department of Education--$400,000
        Consortium--Louisiana, Oklahoma, and Texas
        The objectives of the Louisiana, Oklahoma, and Texas Team Nutrition
    Training Project were to determine through a training needs assessment,
    the curriculum needs of school food authorities to implement the
    revised National School Lunch Program and School Breakfast Program meal
    pattern regulations. Based upon the needs assessment, a common set of
    curricula for training school food service personnel were developed.
    The training was delivered using NETPRO style resource sharing, a
    Louisiana college center, and electronic communications.
    Maine Department of Education--$66,774
        The State agency coordinated with the Maine Technical College
    System to develop a sustainable training program for school nutrition
    personnel statewide. The program offered three levels of training. The
    first level included basic nutrition, sanitation, and safety, which
    provided basic knowledge and skills. These courses offered as
    interactive computer programs, and classes met three times during a
    semester. Grant funds were used to computerize the nutrition component.
    The sanitation and safety components developed at the Department of
    Agriculture were used. The second level used technical college faculty,
    school nutrition directors, State agency staff, local chefs, and other
    appropriate individuals to train school nutrition staff on
    implementation of the Dietary Guidelines. This training was broadcast
    over the Interactive Television Network to assure reaching the maximum
    number of individuals statewide. A Maine School Nutrition Certificate
    was awarded at completion of this level. Level three will be an update
    offered annually and will result in certificate renewal every three
    years. Grants were made to eight schools to become Team Nutrition
    Schools. Teams from these schools received training and served as
    models for other schools Statewide.
    Minnesota Department of Education--$199,868
        This project provided school food and nutrition programs personnel
    with the education, training, and resources necessary to provide school
    meals that are consistent with the Department's nutrition requirements
    and Dietary Guidelines for Americans. The Team Nutrition Training Grant
    project included needs assessments, promotional information, resource
    development, training delivery systems, evaluation, and follow-up
    training and technical assistance. The project was done in
    collaboration with an advisory group involving partnerships with the
    education community, health organizations, local agriculture groups,
    and school food and nutrition programs personnel.
    Mississippi State Department of Education--$400,000
        Consortium--Mississippi, Florida, and Kentucky
        The Teaching Nutrition Techniques (TNT) project expanded the
    current training infrastructure in Florida, Kentucky, and Mississippi
    by providing an effective ``train-the-trainer'' network empowered to
    deliver user friendly training to site-based child nutrition (CN)
    employees, the personnel responsible for the quality of meals prepared
    and served. Through TNT, CN personnel in 5,500 schools in the three
    States were motivated, empowered, and trained to implement the
    nutrition principles of the Dietary Guidelines for Americans through
    use of quality food preparation methods for menu items. The consortium
    worked with outside sources to develop TNT Train the Trainer and
    Package modules which were used to train trainers and CN personnel.
    Missouri Department of Elementary and Secondary Education--$107,240
        This project provided in-depth training for State staff on school
    lunch computer software and expanded training programs for school food
    service personnel to a year-round effort at multiple sites throughout
    the State, providing more technical and hands-on training in addition
    to basic training such as Healthy Edge. Teleconferences reached 9,841
    food service personnel plus school administrators. Workshops targeting
    specific issues and skills followed the teleconferences. The training
    and teleconferences covered computers, healthy food production and
    introduction to Nutrient Standards, healthy cuisine for kids, and
    nutrient standard menu planning.
    Montana Office of Public Instruction--$291,916
        Consortium--Montana and Wyoming
        The main focus of this joint projected was maintaining the health
    of school-aged children in Montana and Wyoming by strengthening the
    infrastructure of the nutrition education and school food service
    training efforts for teachers, school food service personnel, and
    community educators. Interrelated activities of the project encompassed
    components to enhance the infrastructure for delivering training on the
    implementation of the Dietary Guidelines in schools, to enhance the
    infrastructure of teacher training at the pre-service and inservice
    levels, to establish a ``Team Nutrition School'' concept in a rural
    state, to increase interest in shared healthy meals through a child's
    cooking program, and to integrate healthy school meals and nutrition
    education into school health programs. The States accomplished this by
    conducting training sessions on using fresh produce, recipe
    modification, three new menu planning systems and establishing a
    child's cooking program and the Team Nutrition School Model.
    Nebraska Department of Education--$57,100
        The purpose of this project was to provide food service directors
    and managers with the knowledge, skills, and encouragement necessary to
    provide healthy meals that appeal to their students and meet the
    department's nutrition requirements through 22 Statewide mini-meetings.
    They started establish an infrastructure of trainers for school
    programs. Pre/post tests and assessment questionnaires were utilized to
    determine Dietary Guidelines implementation as a result of the mini-
    meeting. Registered dietitians interested in becoming State trainers
    were invited to attend one of the meetings. This project was
    accomplished by developing instructional material, pre/post tests, and
    assessment questionnaires; by collecting, testing, and analyzing
    recipes; and by scheduling and implementing the mini-meetings to
    disseminate the information.
    New Hampshire Department of Education--$80,000
        New Hampshire provided an inexpensive, effective method for
    planning and providing children's meals that meet the Dietary
    Guidelines. It also provided the resources and expertise needed to help
    children gain the nutrition knowledge and skills necessary to make
    decisions for healthy lifestyles. Additionally, the State trained
    school food service personnel to provide training beyond the grant year
    and to set up a network for them to share solutions and solve problems.
    The State provided demonstrations and training in various approved
    software packages, established a resource library, trained personnel in
    various methods of menu planning, conducted needs assessments and
    workshops, and provided an electronic bulletin board for food service
    personnel.
    New Mexico State Department of Education--$199,542
        New Mexico, faced with such issues as a diverse population, great
    geographic distance, and cultural and language differences, planned to
    form partnerships with nonprofit commodity groups, government agencies,
    and industry to help make its programs better. It has established a
    Team Nutrition Training New Mexico Ad Hoc Advisory Committee to address
    these needs. The State developed a culturally-appropriate menu cycle;
    identified available resources which support the Healthy Meals
    Initiative; set up a 1-800 help line, a newsletter, a lending library,
    and a catalog of local resource people and organizations; established
    five model demonstration school food authorities to pilot New Mexico
    Menus and the Healthy Meals Initiative; conducted workshops for food
    service personnel; and developed a long range training plan for
    implementing the Healthy Meals Initiative at the district/school
    levels.
    North Dakota Department of Public Instruction--$49,378
        The training project utilized three approaches to design
    sustainable infrastructures to support the training of school nutrition
    personnel. The approaches were: (1) develop and broadcast two satellite
    training seminars on the implementation of the Dietary Guidelines for
    Americans in school meals; (2) organize a cadre of training
    professionals and conduct initial training of cadre members; and (3)
    enhance efforts to train local personnel on the use of the team
    approach to implementing the Dietary Guidelines for Americans in school
    meals, and to encourage participation in the developed training series
    plan, ``Pathways to a Quality Future.''
    Rhode Island Department of Elementary and Secondary Education--$66,330
        The Team Nutrition Training Grant Project collaboration established
    a Statewide training system that provided the means to convey
    information that is relevant to the time, consistent with the goals,
    and practical to implement. The State of Rhode Island had three goals
    in this project: to provide school nutrition and food service personnel
    with the education, motivation, training, and skills necessary to
    provide healthy meals that appeal to the children served and meet the
    Department's nutrition requirements; to transform the cafeteria
    environment to a learning laboratory that encourages healthful eating
    habits through the marketing of healthful choices; and to establish a
    collaboration between school food services and Johnson & Wales
    University to enhance the image of the school food service profession.
    Utah State Office of Education--$156,708
        The focus of this project was to create a network of professionals
    that possess the capability of training school food service staff
    throughout the State. This network used professional teachers and
    dietitians to instruct food service employees on how to use the Dietary
    Guidelines for Americans in making modifications in their menus and
    food preparation. The network used the same cadre of trainers to train
    the local school food service employees in the use of the NuMenus
    planning systems in their districts. The trainers were contracted from
    various regions throughout the State and were available to address the
    needs of the local districts. Their close proximity ensured that
    employees received proper training. The cadre provided training in
    areas identified by a needs assessment tool developed by the State
    Office of Education.
    Vermont Department of Education--$61,417
        Building its current professional development system, Vermont
    planned a year's worth of seminars, workshops, and activities designed
    to (1) prepare schools to consistently offer meals that meet the
    Dietary Guidelines, (2) increase student participation in school meal
    programs, and (3) develop a sustainable body of material to use in
    future training and establish a support network. The State accomplished
    this through seminars, training sessions, mentor programs, nutrition
    education for students, and a model-school program.
    West Virginia Department of Education--$94,713
        This project provided a comprehensive integrated approach to
    attaining nutrition integrity in West Virginia schools. Training and
    nutrition education opportunities addressed planning, preparing, and
    promoting healthy meals, and creating a school environment that
    enhances nutrition learning. Food service personnel, educators,
    students, and parents were provided team building opportunities. This
    was accomplished by strengthening the infrastructure (through
    collaboration, staff development, policy, and training network);
    providing district food service workshops; providing college courses
    for school managers; adapting point-of-choice training models; training
    and supporting school teams; and developing/distributing materials.
                               states not funded
        Below are the 12 Team Nutrition Training Grant applications that
    were not funded in 1995.
        New Jersey--A collaboration between Pennsylvania Department of
    Education, New Jersey Department of Education and Penn State University
    would have been established to create a Statewide campaign to provided
    the immediate training needed for compliance with the new Federal
    regulations as well as establish a system for continuing education
    opportunities. This campaign was to include four components: 1) central
    to the educational campaign was to be a two day, Statewide, interactive
    satellite conference for all school food service directors--The Team
    Nutrition Training (TNT) Satellite Conference; 2) leading up to the
    conference--a pre-conference education and promotional component; 3)
    the establishment of an infrastructure within the State for electronic
    communication network; and 4) a sustainable infrastructure for
    continuing education. $73,307
        Ohio--This training program for local district staff would have
    included two levels of training. The first level focused on the
    understanding of the Dietary Guidelines for Americans and the
    integration of those principles into menu planning, recipe
    modification, and food preparation skills. The second level training
    focused on the skills necessary to accomplish nutrient analysis of
    menus and nutrient standard and food based menu planning. $200,000
        Oregon--The training project would have utilized an existing
    statewide training structure (NETPRO Oregon) to deliver Nutrient
    Standard Menu Planning training for healthy school meals to schools
    throughout Oregon. A comprehensive training program would be developed
    using multimedia equipment to effectively deliver training to schools
    on site and at state-wide workshops. Additionally, funds would be used
    to study the nutrient content of meals as selected and consumed by
    students in a choice-based meal service system. $145,000
        Pennsylvania--A collaboration between Pennsylvania Department of
    Education and Penn State University would have been established to
    create a statewide campaign to provided the immediate training needed
    for compliance with the new Federal regulations as well as establish a
    system for continuing education opportunities. This campaign consisted
    of four components: 1) central to the educational campaign--a two day,
    statewide, interactive satellite conference for all school food service
    directors--The Team Nutrition Training (TNT) Satellite Conference; 2)
    leading up to the conference a pre-conference education and promotional
    component; 3) to establish an infrastructure within the state for
    electronic communication network; and 4) a sustainable infrastructure
    for continuing education would be established. $200,000
        Puerto Rico--Train school food service personnel using the 10 hour
    course ``Healthy E.D.G.E. curriculum, in order to incorporate the
    Dietary Guidelines for Americans in the preparation and service of
    appealing school meals for Puerto Rico's younger population. $200,000
        Colorado--Target 35 rural school districts to provide training,
    assistance and resources to incorporate the Dietary Guidelines in
    school menus. Objectives were to: survey students to establish food
    preferences; standardize, modify and do a nutrient analysis of selected
    revised recipes; establish menus based on the Department's nutrition
    standards; and provide nutrition information resources for use in
    cafeterias and classrooms which would render nutrition information
    about the school meals. $98,943
        New York--Subcontract with Madison-Oneida Board of Cooperative
    Education Services (BOCES), for continuation of a contract providing
    for the development and delivery of a training program in the following
    areas: dietary guidelines; planning menus to meet the dietary
    guidelines; use of technology to support nutrient and food based menu
    planning; and using standardized recipes and food production records.
    BOCES would also conduct an introductory training session on the
    Dietary Guidelines in a computer lab for Master Instructors of the
    Statewide Training Network. $200,000
        Connecticut--Build and expand a sustainable infrastructure for
    statewide delivery of training. Through a combination of courses,
    workshops and support resources, the grant would provide the necessary
    training, skills and motivation for school food service personnel to
    implement the Dietary Guidelines in school meals. $199,997
        Delaware--A collaboration between Delaware Department of Public
    Instruction and Penn State University would be established to create a
    statewide campaign to provided the immediate training needed for
    compliance with the new Federal regulations as well as establish a
    system for continuing education opportunities. This campaign would have
    four components: 1) central to the educational campaign--a two day,
    Statewide, interactive satellite conference for all school food service
    directors--The Team Nutrition Training (TNT) Satellite Conference; 2)
    leading up to the conference a pre-conference education and promotional
    component; 3) to establish an infrastructure within the State for
    electronic communication network; and 4) a sustainable infrastructure
    for continuing education would be established. $62,527
        Michigan--Develop and implement a train the trainer program for
    child nutrition and comprehensive school health educators, develop
    training modules on implementation of the Dietary Guidelines, and
    create an instructional video to be used with the modules. $200,000
        Maryland--Provide a train the trainer model course for the piloted
    C.H.E.F.S. program (Culinary and Healthful Enhancement of Food in
    Schools) in Maryland. Each school system would form a training team to
    train their employees in local settings and to engender the support of
    the professional chefs in their area to work with school nutrition
    personnel and instruction personnel to teach the course. $98,057
        Massachusetts--Develop a school nutrition training program based on
    a yearly plan with integral and comprehensive goals and objectives. The
    goal of the project was to entwine the Dietary Guidelines in areas
    related to and overlapping school food service programs. The training
    would target school food service directors, managers, workers, school
    teachers, health educators, parents, students and the community.
    $194,664
                      1996 Team Nutrition Training Grants
    Illinois State Board of Education--$160,275
        The Illinois State Board of Education plans to provide three major
    activities to assist school food service professionals in preparing
    healthy school meals. The first activity includes a director's and
    manager's conference held in two locations, providing participants with
    the chance to develop advanced skills in food service management.
    Training will include information on Federal program regulations, food
    purchasing, sanitation practices, and use of the Internet. The second
    activity planned is a teleconference targeted toward school food
    service production staff. The teleconference will provide information
    on the importance of standardized recipes, recipe components, recipe
    modification, and measuring student acceptance of menu items.
    Videotapes of the teleconference will be mailed to each school district
    to be used as a training tool for future staff development. The
    activity will culminate in a ``cook-off,'' where school food service
    professionals will be given an opportunity to enter their recipes and
    menus. Twelve finalists will be selected and videotaped, showcasing the
    learned skills while promoting the National School Lunch Program. A
    winner will be selected by a panel of judges consisting of school food
    service personnel, students, media representatives, and parents. A CD-
    ROM will be developed showcasing the professionals demonstrating food
    preparation techniques. The third activity planned is the formation of
    an ad hoc advisory committee consisting of representatives from various
    National, State, and local agencies already involved in training. Their
    discussions on strategies and available resources will result in the
    goal of providing quality staff development for school food service
    personnel.
    Massachusetts Department of Education--$144,116
        The Massachusetts State Department of Education will provide
    training and technical assistance for their school food service
    professionals. One project will be teaching nutrition requirements and
    the Dietary Guidelines for Americans through a traveling interactive
    workshop called Dietary Guidelines on the Move. Free Internet access
    will be offered to all public schools in the State, and a nutrition web
    page will be established on the State DOE Web Site as a sustainable way
    to communicate and transfer information. The State agency plans to
    offer food service directors of Team Nutrition Schools the opportunity
    to become members of a peer resource group. This group will submit
    newsletter articles on their efforts, develop school nutrition goals
    for schools, and act as a telephone resource for new approaches to
    introduce the Dietary Guidelines into school meals and the nutrition/
    health curriculum. Massachusetts also plans to complete a Cafeteria to
    Classroom Nutrition package using materials, curriculum, and cycle
    menus from the State Heart Association and from the Stalker Institute.
    Additionally, the State agency plans to provide training for Nutrition
    Education Health Teams, consisting of school food service directors,
    health teachers, nurses, guidance counselors, and home economics
    teachers.
    Wyoming Department of Education--$129,607
        The Wyoming State Department of Education proposes a two-phase
    project. The first phase involves plans to develop five model schools
    in the State to implement Healthy School Meals. These schools will be
    the center of a post-project, self-guided, area-support network. On-
    site training will be provided by project leaders, consultants, and
    extension educators to school food service personnel, administrators,
    teachers, and other school or community representatives on successful
    implementation of the TN plan. A video will be produced on training
    issues, strategies, and results from the model schools, and will be
    used to help build partnerships with other organizations around the
    State. Training workshops on National Food Service Management
    Institute's Healthy Cuisine for Kids will be presented in five
    locations throughout the State for interested schools.
    Michigan Department of Education--$196,710
        The Michigan Department of Education intends to target their high-
    need, larger school districts that serve about 70 percent of the
    students in the State. They plan to provide training and technical
    assistance for school food service personnel in two components. The
    first component will involve training 420 two-person teams (the
    director/supervisor and the head cook/manager) of school food service
    personnel to prepare and serve healthy meals meeting the Dietary
    Guidelines, using hands-on Healthy Cuisine for Kids curriculum
    developed by the National Food Service Management Institute. Once
    trained these teams will train their employees at the local level,
    resulting in 4,200 additional trained school food service personnel.
    The second component is designed to build partnerships at the local
    level to support and enhance TN Schools. They plan to develop and
    distribute video packets as a technical assistance piece designed to
    help food service personnel networking with county extension personnel,
    build community partnerships to support and foster implementation and
    expansion of TN School activities.
    Colorado Department of Education--$82,225
        The Colorado Department of Education plans to target all Colorado
    school districts to provide training, assistance, and resources to
    implement the Department's Healthy School Meals Initiative (HSMI).
    Their efforts will begin with a student survey to determine their food
    preferences. The information will be used as a basis for creating menus
    which meet the HSMI using USDA standardized recipes, Tool Kit recipes,
    and local district standardized recipes. They also plan to provide
    training, technical assistance, and resources to school food
    authorities to help them incorporate USDA recipes with quality food
    preparation techniques. The training will include Culinary Techniques
    for Healthy School Meals, Trimming the Fat, and nutrient analysis
    software. They will also provide assistance and technical training to
    school district personnel that will help school food service personnel
    and educators provide information to students, parents, and the
    community about nutrition and the HSMI guidelines. TN curricula, menu
    templates, and other resources will be distributed, and presentations
    by the Junior Chefs will also be given to students in classrooms.
    Idaho State Department of Education--$399,588
        Consortium--Alaska, Idaho, and Nevada
        The consortium of Alaska, Idaho, and Nevada will expand the
    training infrastructure for their States and the State of Washington
    using their own funds for the implementation of the Healthy School
    Meals Initiative (HSMI). They will compile available resources and
    develop supplemental materials for the train-the-trainer workshops.
    Training will take place in each State. The consortium will also
    develop training materials for residential child care institutions
    (RCCI's), to include an analyzed and tested cycle menu which will
    include smaller sized recipes and food items commonly served in their
    programs. They also plan to develop a training tool for school food
    service personnel (servers, cashiers, part-time employees and
    substitutes) to provide education, motivation, training, and other
    skills necessary to provide healthy meals. Additional HSMI materials
    will be used, and offer versus serve materials expanded especially for
    cashiers. They want to promote HSMI through nutrition education in the
    classroom, community, and cafeteria by providing five Regional
    presentations. State and local partnerships will be developed, and
    training offered to teachers, principals, parents, and students on the
    importance of healthy school meals. At least five mini-grants will be
    awarded to schools for development of model programs to support healthy
    school meals. Food and Nutrition Information Center will deliver
    training to the trainers on the Healthy Meals Resource System, in turn,
    the trainers will go back to their States to deliver training on
    meeting the new regulatory requirements and the Dietary Guidelines.
    Louisiana Department of Education--$195,403
        The Louisiana Department of Education plans to expand on their
    previous efforts by strengthening their training infrastructure. The
    first project they plan to undertake is the review and revision of the
    State agency's current food service technician and manager training
    program to reflect the changes in the Federal regulations and the
    National School Lunch and School Breakfast Programs. They plan to
    expand their pool of NETPRO trainers from 10 to 20, and work with the
    State Cooperative Extension Service and Office of Public Health to
    train State agency officials and key leaders in the State on the
    revised meal pattern regulations, allowing them the chance to serve as
    valuable resources to the local school food authorities. Louisiana also
    plans to expand the use of electronic networking among school food
    authorities by 50 percent. This will improve communications and support
    the access to information on nutrition, food preparation, and the
    changing requirements.
    Minnesota Department of Children, Families and Learning--$188,236
        The Minnesota Department of Children, Families, and Learning plans
    to sustain the created training infrastructure by completing a
    multitude of projects. They plan to combine the activities of their
    established Team Nutrition (TN) Training network with the initiation of
    a mentorship program throughout the State. The mentors will be school
    food service personnel who have met the goals of the Healthy School
    Meals Initiative and who can provide leadership and support to those
    school food authorities that are striving to meet the Dietary
    Guidelines. Specialized TN trainers will be activated to promote and
    train food service personnel on NuMenus and the revised Minnesota
    LunchPower Menus. Minnesota will design training opportunities based on
    the learning style and educational needs of their food service
    personnel. The training opportunities will include mini-promotional
    workshops and regional carnivals. They also plan to show school food
    service personnel how to market their programs by using TN materials, a
    marketing guidebook, and student posters and newsletters. Finally, they
    plan to collaborate with communities by continuing their TN Partnership
    Advisory group and foster a collaboration with the Minnesota Extension
    Service to provide promotional training sessions.
    Mississippi Department of Education--$200,000
        The Mississippi State Department of Education, in conjunction with
    the University of Southern Mississippi, plans to implement a database
    system called Mississippi MiniMax Menus (4M). Using this database,
    Child Nutrition Program personnel in over 950 school sites will plan
    and serve meals that meet the nutrition standards of USDA and appeal to
    students. Recipes will be modified and standardized, and two sets of
    menus (for elementary and secondary schools) will be developed. All of
    the menus in the 4M database will be analyzed by USDA-approved nutrient
    analysis software programs. Mississippi will also develop menu
    modification matrixes (exchanges) and print recipes that school food
    service personnel can use to create their meals in response to student
    preferences. Training manuals for 4M will be developed, and training
    established on 4M for the State's school food service administrators
    and managers, who will, in turn, train their own people.
    Montana Office of Public Instruction--$186,515
        The Montana Office of Public Instruction, using the foundation
    established from the 1995 Team Nutrition Training Grant, will continue
    to expand statewide training opportunities for school food service
    personnel and educators in the implementation of the Dietary Guidelines
    for Americans to shape healthy eating habits in children. Montana plans
    to distribute their video What is a Team Nutrition School? as a
    marketing tool for promoting Team Nutrition. They will purchase
    multimedia equipment to be used to train school food service staff
    throughout the State during Regional training sessions and annual State
    conferences. Training subjects will include menu planning, procurement,
    food preparation and services, and nutrient analysis. They will also
    provide training to teachers on nutrition education during their
    Regional in-service and summer training sessions. Montana will continue
    their USDA recipe adaptation project, as well as complete and publish
    the student acceptance of meals research project findings. Finally,
    they will initiate a mini-grant program to establish new Team Nutrition
    Schools.
    New Hampshire Department of Education--$70,554
        The New Hampshire Department of Education plans to provide
    additional training for the school food service professionals in their
    State with the help of their sister State, Vermont. They plan to
    provide training for food service directors in both States by pooling
    resources for high quality training on management issues. New Hampshire
    will contract with their State School Food Service Association (NHSFSA)
    to create training focusing on production team skills, teamwork, and
    the new regulations and will offer training in the Keys to Excellence,
    helping the NHSFSA move toward a peer review program in the State. They
    will also form a partnership with the State chapter of the American
    Culinary Federation to connect their members with school food service
    directors. They will offer NuMenus computer analysis training sessions
    for 150 school food service professionals and one basic Internet
    training. In addition, they will obtain assistance with computerized
    nutrient standard menu analysis for State staff. They will also
    contract with the National Food Service Management Institute for a
    Nutrition Education and Training Program needs assessment.
    New York State Education Department--$150,000
        The New York State Education Department plans to contract with the
    Madison-Onieda Board of Cooperative Educational Services (BOCES) to
    provide training for the State's school food service personnel. BOCES
    will provide nutrient analysis computer training using a ``traveling
    computer lab'', as well as open a resource/informational telephone line
    for technical assistance once the training is completed. They will
    deliver the train-the-trainer programs on production records and
    standardized recipes to 30 master instructors. The master instructors
    will also receive training in the planning and preparation of meals
    that meet the Dietary Guidelines for Americans (DGA) from the Culinary
    Institute of America. The instructors will, in turn, go back to their
    areas and train the local food service directors and staff, teachers,
    and parents in the preparation of healthful, attractive school meals
    that will meet the DGA and that are appealing to children.
    Rhode Island Department of Elementary and Secondary Education--$104,168
        The Rhode Island Department of Elementary and Secondary Education
    plans to expand and build upon the core training program established
    during the 1995 Team Nutrition Training Grant period. They will offer
    two-day training sessions to multi-level school food service staff,
    chefs, and other sponsors such as residential child care institutions
    (RCCI's). Training will cover topics such as low-fat cooking, the use
    of commodities, food safety, the Dietary Guidelines for Americans, and
    equipment purchasing. Rhode Island also plans to create a Team
    Nutrition Training (TNT) Institute at Johnson & Wales University. Upon
    its inception, chefs and nutritionists will attend one-day annual
    training sessions at the TNT Institute. They will be given updates on
    school meal issues and training on how to access resources. A resource
    center with a lending library is planned, along with an electronic
    access system, including the Internet. A multi-media TN Resource kit
    will be assembled using resources already developed. A Team Nutrition
    core team will plan nutrition activities for schools. Finally, a school
    food community service component will be added--in-kind service hours
    will be provided by culinary students at Johnson & Wales University.
    These students will provide technical assistance to the schools with
    on-site visits.
    Pennsylvania Department of Education--$192,641
        The Pennsylvania Department of Education plans to deliver training
    in response to needs assessments. The training will be in the form of a
    series of workshops for school food service personnel. An advisory
    council and training cadre have been selected, and training has been
    held on choosing menu planning options and food production. A training
    workshop on documentation requirements for menu planning options will
    be offered in three five-hour sessions. Additionally, a Skills Training
    teleconference for school food service directors will be held in July
    1997, providing the skills necessary to implement the Healthy School
    Meals Initiative. They also plan to train the cadre in computerized
    menu planning and analysis, who will then train directors at the local
    level.
    South Carolina Department of Education--$167,708
        The South Carolina Department of Education plans to set specific
    standards for entry into the school food service field to ensure the
    service of quality meals served to students. They plan to establish a
    food service training resource center with mini-grants to districts or
    schools to acquire the needed technology to access and use these
    resources. They will also formulate three guidance books for district
    supervisors and site managers, giving them information on how to train
    their personnel on the Dietary Guidelines for Americans and how to
    implement Healthy School Meals Initiative (HSMI) in their cafeterias.
    The guidance books will be field tested and revised as necessary.
    Additionally, they will establish and advertise a training delivery
    system designed to deliver the majority of small group training in the
    State. Three training centers in different locations in the State will
    be used by local school food service personnel to train on HSMI.
    Vermont Department of Education--$83,418
        The Vermont Department of Education's project plans to hold a
    series of training activities addressing how to manage and accomplish
    changes in food service programs, as well as integrating those programs
    with nutrition education efforts. The State will expand the nutrition
    education program by creating a plan for schools and teachers, offering
    them a day-long conference and mailing on how to implement nutrition
    education and how to access resources. They plan to increase the skills
    of food service managers by waging an extensive campaign to address the
    technological barriers schools face in implementing nutrient standard
    menu planning. They will contract out training centers at two State
    technical schools or colleges and offer training in word processing,
    spreadsheets, nutritional analysis and the Internet. They will also
    hold a technology fair, advertising it via brochure and by a State
    school meals web site. The State plans to expand an on-going technical
    assistance project specifically targeted toward 1/3 of the school food
    authorities that have 150 or fewer students. The Small School Survival
    Strategies training will cover program management and menu planning.
    Additionally, other efforts will focus on consolidating the management
    of as many as 13 separate small School Food Authority's under food
    service managers. They will also offer, in conjunction with the New
    Hampshire Department of Education, a repeat session of Planning for
    Change. Vermont Interactive TV (VIT) will air a ``newsletter'' for
    school food service directors to get updated Healthy School Meals
    Initiative information and other classes, such as Prep'niques and
    Trimming the Fat.
    West Virginia Department of Education--$59,756
        The West Virginia Department of Education plans to build on their
    efforts toward achieving nutrition integrity in their schools. Under
    this project, all district menu planners and food service directors
    will be required to measure and validate the attainment of their
    nutritional goals for their meals. A six-hour workshop on computer
    analysis will be developed, along with four regional workshops in
    school computer labs. All directors and menu planners in the State will
    be afforded the opportunity to attend one of these trainings. The State
    will also provide technical assistance to school food authorities who
    want nutrient standard menu planning or food-based evaluations, and six
    State agency staff will get a workshop and at least one site visit to
    test field monitoring procedures, ensuring the transition into the new
    Healthy School Meals Initiative regulations progress smoothly.
                               states not funded
        All Team Nutrition Training Grant applications were funded in 1996.
                      1997 Team Nutrition Training Grants
        On January 8, 1997, all State agencies that administer the National
    School Lunch Program and/or Nutrition Education and Training (NET)
    Program were invited to compete for a Team Nutrition Training Grant.
    Applications to apply for a grant are due to FCS April 16, 1997 and
    grant awards will be announced on July 31, 1997.
        Question. Last year, Secretary Haas indicated to this Committee
    that Team Nutrition had entered into agreements with over 200 partners
    as part of the agency's efforts to leverage public resources.
        Would you please provide a list of these agreements and the federal
    funding, by fiscal year, which has been provided for each.
        Answer. Team Nutrition supporters receive no federal funds directly
    for being a supporter; however, some Team Nutrition funding is used to
    provide supporters with material designed to keep them up-to-date on
    Team Nutrition activities and to encourage them to become involved at
    the local level. A list of current Team Nutrition Supporters is
    provided for the record. The total exceeds 300 organizations. These
    Supporters have provided the Agency with a statement indicating their
    support of Team Nutrition's Mission and Principles. In return they are
    listed in publications as supporters and are kept informed of Team
    Nutrition activities and opportunities for their participation in Team
    Nutrition Schools. Supporters play a key role in the success of Team
    Nutrition. Their involvement multiplies the resources available to Team
    Nutrition Schools. They may be volunteers for activities or they may
    provide food or other supplies in direct support of activities. As a
    result, for a small federal investment Team Nutrition leverages its
    limited funds to benefit all participants.
        Some organizations included in this listing received Team Nutrition
    funding through cooperative agreements or contracts for specific
    product development beyond their role as a supporter. These include the
    following groups and funds listed by funding year:

    ----------------------------------------------------------------------------------------------------------------
                                                                                       Fiscal year--
                                                                     -----------------------------------------------
                                                                           1994            1995            1996
    ----------------------------------------------------------------------------------------------------------------
    The Walt Disney Company.........................................        $200,000        $195,000  ..............
    Scholastic, Inc.................................................         299,538       1,496,814        $737,313
    ----------------------------------------------------------------------------------------------------------------

        Many of these Supporters have been involved in Team Nutrition from
    the beginning through Leadership Forums. Supporters play an important
    role in mobilizing the community in support of improved child nutrition
    and these Leadership Forums provide the opportunity for all those
    interested in children's health to discuss how they can work together.
    Through Supporter involvement, Team Nutrition has taken hold locally
    and its principles will be sustained for years to come assuring a
    healthier future for our children.
        [The information follows:]

        These organizations support the Mission and Guiding Principles of
    Team Nutrition: \1\

    ADVOCAP, Inc.
    Agricultural Women's Leadership Network
    Agenda for Children
    Albany Park Community Center
    Alivio Medical Center
    American Academy of Pediatrics
    American Alliance for Health, PE. Rec. & Dance
    American Association of Family & Consumer Sciences
    American Bakers Association
    American Cancer Society
    American College of Physicians
    American College of Preventive Medicine
    American Culinary Federation, Inc.
    American Dietetic Association
    American Farm Bureau Federation
    American Federation of School Administrators
    American Federation of Teachers
    American Fine Foods
    American Health Foundation
    American Heart Association
    American Heart Association, MD Affiliate
    American Institute for Cancer Research
    American Institute of Wine & Food
    American Meat Institute
    American Medical Association
    American Medical Student Association
    American National Cattlewomen, Inc.
    American Nurses Association
    American Oat Association
    American Psychological Association
    American Public Health Association
    American School Food Service Association
    Archer Daniels Midland Company
    Archway Cookies
    Arkansas Poultry Federation/Egg Council
    Association for Child Development
    Associated Churches Food Bank System
    Association for Children of New Jersey
    Association for the Advancement of Health Education
    Association of Maternal & Child Health Programs
    Association of State & Territorial Public Health Nutrition Directors
    Auglaize Mercer CAC
    Aurora Project, Inc.
    Beef Products
    Bennington-Rutland Opportunity Council (BROC)
    Better Baked Pizza, Inc.
    Big Brothers/Big Sisters of America
    Blue Diamond Growers
    Boy Scouts of America
    Bread for the World
    Brooks Foods
    Bumble Bee Seafoods, Inc.
    California Apricot Advisory Board
    California Beef Council
    California Department of Education
    California Food Policy Advocates
    California Fresh Carrot Advisory Board
    California Prune Board
    California Tomato Growers Association, Inc.
    Campaign for Food Literacy, The
    Camp Fire, First Texas Council
    Cancer Research Foundation of America
    Careers Through Culinary Arts Programs
    Center for Environmental Education
    Center for Science in the Public Interest
    Center on Hunger, Poverty & Nutrition Policy/Tufts University School of
    Nutrition
    Cherry Marketing Institute
    Children's Action Alliance
    Children's Action Network
    Children's Defense Fund
    Children's Foundation, The
    Citizen's for Missouri's Children
    Citizens for Public Action on Blood Pressure & Cholesterol
    City of Columbus, Health Department
    City of Rockford (IL) Head Start Program
    Colorado PTA
    Community & Economic Development Assn. (CEDA) WIC Program
    Community Kitchen of Monroe County, Inc.
    Community Resource Center (OH)
    Comstock Michigan Fruit
    ConAgra, Inc.
    Congressional Hunger Center, The
    Consumer Federation of America
    Cooperative State Research, Education & Extension Service, USDA
    Corning Consumer Products Company
    Council of Agricultural Science & Technology
    Council of the Great City Schools, The
    Culinary Institute of America
    Curtice Burns Foods
    Diet Workshop
    DINE Systems, Inc.
    Dole Food Company, Inc.
    Draper-King Cole, Inc.
    Eastern Shore Seafoods Products
    Finger Lakes Packaging
    Florida State Department of Citrus
    Focus: Hope
    Food Bank of Oakland Country (MI)
    Food Chain
    Food Marketing Institute
    Food Research & Action Center
    Food Service System Management Education Council
    Food to Grow Coalition, The
    Furman Foods, Inc.
    Gehl's Guernsey Farms, Inc.
    General Mills, Inc.
    Georgia Department of Agriculture
    Gilroy Canning Company, Inc.
    Girl Scouts of the USA
    Girl Scouts--Mile Hi Council
    Gleaners Foodbank of Indiana, Inc., The
    Green Thumb, Inc.
    Health Matters!
    H.J. Heinz Company
    Hormel Foods Corporation
    House of Mercy Daycare
    Howard Foods, Inc.
    Hudson Specialty Foods
    Hunger Action Coalition
    Husman Snack Foods
    Illinois Community Action Association
    Illinois Department of Agriculture
    Illinois State Horticultural Society
    Indiana Agricultural Leadership Institute
    Indiana State Univ. Department of Family & Consumer Sciences
    International Apple Institute
    International Food Information Council
    International Food Service Distributors Association
    J.R. Simplot Co.
    James Beard Foundation/Dando & Company
    Jewish Healthcare Foundation of Pittsburgh, The
    Johnson and Wales University
    Kankakee County WIC Program
    Kelly Foods, Inc.
    Kent State University, School of Family and Consumer Studies
    KIDSNET
    Lakeside Foods, Inc.
    Land O'Lakes Custom Products Division
    LDS Church-Welfare Services
    Life Lab Science Program
    MAGNAtracker Company, The
    Maudester Farmer
    Marriott Management Service
    Maternal Child Health Center (IN)
    Marvel Entertainment Group
    Mello Smello
    Memorial Medical Center (IL)
    Michigan Apple Committee
    Michigan Asparagus Advisory Board
    Michigan Plum Advisory Board
    Michigan Red Tart Cherry Advisory Board
    Middlesex Co. Vocational Technical High School
    Mid-Ohio Foodbank
    Minnesota Cultivated Wild Rice Council
    Minnesota Food Education & Resource Center
    Minnesota Food Share
    Mothers & Others
    Muir Glen Organic Tomato Products
    Nalley's Fine Foods
    National 4-H Council
    National Alliance of Vietnamese American Service Agencies
    National American Wholesale Grocers Association
    National Association for Sport & Physical Education
    National Association of Elementary School Principals
    National Association of Meal Programs
    National Association of Psychiatric Treatment Centers for Children
    National Association of School Nurses
    National Association of School Psychologists
    National Association of State NET Coordinators
    National Association of WIC Directors
    National Black Child Development Institute
    National Black Nurses Association
    National Black Women's Health Project
    National Broiler Council
    National Cattlemen's Beef Association
    National Consumers League
    National Council of La Raza
    National Dairy Council
        Dairy Council of Central States
        Dairy Council of Mid-East
        St. Louis District Dairy Council
        Washington State Dairy Council
    National Dental Association
    National Dry Bean Council
    National Education Association
    National Extension Association of Family and Consumer Sciences
    National Farmers Organization
    National Farmers Union
    National Fisheries Institute
    National Fitness Leaders Association
    National Food Processor's Association
    National Food Service Management Institute
    National FFA
    National Gardening Association
    National Grange
    National Heart Savers Association
    National Medical Association
    National Osteoporosis Foundation
    National Pasta Association
    National Pork Producers Council
    National PTA
    National Puerto Rico Coalition, Inc.
    National Restaurant Association
    National Rural Electric Cooperative Association
    National School Health Education Coalition
    National Turkey Federation
    National Urban League
    New England Dairy Food Council
    New Hampshire Fruit Growers Association
    North Atlantic Sardine Council
    North Carolina Sweet Potato Commission
    Northeast McIntosh Growers Association
    Northwestern University Settlement
    Nutrition Council of Greater Cincinnati
    Nutrition Education Learning Lab
    Ocean Spray Cranberries, Inc.
    Ohio Hunger Task Force
    Orange County WIC/Child Health Project
    Ore-Ida Foods, Inc.
    Organization of Chinese Americans
    Our Daily Bread
    Pennsylvania Coalition on Food & Nutrition
    Perdue Farms, Inc.
    Physical Rehabilitation & Health Center
    Pomptonian School Food Service
    Post Bulletin (MN)
    Potato Board, The
    President's Council on Physical Fitness & Sports
    Procter & Gamble Company, USA
    Produce for Better Health Foundation (5-A-Day)
    Produce Business
    Produce Marketing Association
    Produce Productions, Inc.
    Project NOW Community Action Agency
    Public Voice for Food & Health Policy
    Pumpkin Circle
    Quaker Oats Company, The
    Randall Foods Products, Inc.
    RC Fine Foods
    Sabatasso Foods, Inc.
    Scholastic, Inc.
    Second Harvest Foodbank Network
        Second Harvest--St. Paul
        Second Harvest--Tri-State Food
          Bank, Inc.
    Seward Dairy, Inc.
    Shape Up America
    Share Our Strength
    Simpson Housing Services
    Snyder of Berlin
    Society for Nutrition Education
    Society of State Directors of Health, Physical Education and Recreation
    Soup Kitchen of Minnesota
    Southeast Alaska Health Consortium
    Southern Frozen Foods
    Soy Protein Council
    Squab Producers of California
    St. Francis Soup Kitchen (OH)
    Sugar Association, The
    Sunkist Growers, Inc.
    Sunshine Biscuits
    Sunshine Natural Market
    Texas Citrus & Vegetable Association
    Texas Produce Association
    Tim's Cascade Chips
    Tony's Food Service Division
    Tone's
    Townsend Culinary, Inc.
    Tree Top, Inc.
    United Soybean Council
    United States Department of Education
    United States Department of Health & Human Services
    United Way of Monroe County (IN)
    Urban Coalition, The
    University Extension, University of Missouri
    University Extension, Schuyler County
    University of Cincinnati Nutrition Program & Nutrition Learning Center
    University of Hawaii Cooperative Extension Service
    Urban Family Institute
    Urban Mission Ministries, The
    USA Dry Pea & Lentil Council
    USA Rice Federation
    USA TODAY
    Van Camp Seafood Company, Inc.
    Vegetarian Resource Group
    Virginia Apple Growers Association
    Voices for Children in Nebraska
    Walnut Hills/Over The Rhine Kitchen
    Walt Disney Company, The
    Warren County (OH) Head Start
    Wawona Frozen Foods
    West Virginia Association of Family & Consumer Science
    West Virginia WIC Program
    Wheat Foods Council
    Wisconsin Nutrition Project
    Wisconsin Rural Development Center, Inc.
    World Hunger Year (Kids Can Make A Difference)
    Wyoming Extension
    Zartic, Inc.

        \1\ As of March 17, 1997.

        Question. Last year, Secretary Haas indicated to this Committee
    that the Food and Consumer Service was working with the Economic
    Research Service to quantify the dollar value of private sector
    contributions to Team Nutrition; that the analysis was to be completed
    shortly and would be provided to the Committee. We did not receive a
    copy of that analysis. Would you please provide a copy for the record.
        Answer. A copy of the analysis quantifying dollar value of private
    sector contributions to Team Nutrition is provided for the record.
        [The information follows:]
      Team Nutrition Leveraging Federal Investment Through Private Public
                              Partnerships 7/10/96
        Public-private partnerships are critical to the success of Team
    Nutrition, to ensure that Team Nutrition messages reach children
    through the media they use, to provide multiple, reinforcing messages,
    and to leverage scarce Federal resources with private sector support.
    Team Nutrition has developed an extensive network of partners and
    supporters, including agreements with two-hundred-forty partners.
        USDA has focused on the leveraged value of public resources
    invested with private partner organizations through cooperative
    agreements with BVPD, Inc. (Disney) and Scholastic, Inc. Our analysis
    to date has focused on contributions from Disney associated with the
    production and airing of public service announcements (PSAs) and Team
    Nutrition materials developed and distributed by Scholastic, Inc.
                 disney--a wise investment in children's health
        Disney, in cooperation with Team Nutrition, has developed four PSAs
    featuring Disney characters from the movie The Lion King. Two of the
    four PSA's have been made available to all broadcast TV stations,
    networks and cable services for airing at their discretion. The third
    PSA will be released in June. Disney has also provided USDA with the
    rights to use Lion King characters on Team Nutrition materials. These
    images have been used on classroom and cafeteria posters and
    incorporated into publications to introduce grade school age children
    to the food guide pyramid concept and to highlight the importance of
    choosing foods that promote health.
      --In the first year alone, for every dollar we invested in Disney, we
            are leveraging ten dollars of private resources.
      --We conservatively estimate that the PSAs will receive at least $4
            million in free air time over the course of just one year.
      --USDA did not pay any money to license the Disney characters.
            Private sector firms would have to pay millions for these
            rights. Private-public partnerships are critical to leverage
            scarce Federal resources with private sector support.
      --USDA's $395,000 partnership with Disney is producing nutrition
            education and promotion materials that teach children to make
            food choices for a healthy diet.
      --The value of the PSAs alone exceed the cost of the investment. The
            production cost of one 30 second PSA ranges from $120,000 to as
            much as $300,000.
                          kids are getting the message
        USDA's partnership with Disney provides access to children in ways
    public investment alone could never achieve. One out of every two
    children in America has seen The Lion King. It allows USDA to reach out
    to children with universally recognized characters. Through Disney's
    cable network, broadcast television and video rentals we communicate to
    children through multiple, reinforcing channels, in a language they can
    understand and in ways they can relate to and accept.
      --The PSA's are shown 5 days a week on Disney Afternoons which is
            available in over 90 percent of the country.
      --The PSA's are shown every day on the Disney Channel which reaches
            15 million subscribers.
      --Disney estimates that every day at least 580,000 children between
            the ages of 2 and 11 are viewing Disney Afternoons when PSA's
            are shown.
      --Disney has also included the PSA's in three movie videos for rental
            throughout the country, each of which is expected to be viewed
            27 million times. Disney also included the PSA's on three Lion
            King cartoon videos.
      --USDA tested the PSA's and found that 90 percent of children liked
            them and most understood the messages to eat more fruits,
            grains and vegetables, and make healthy food choices.
      --The PSA's are reaching children--data from our Team Nutrition pilot
            communities indicate that nearly two-thirds (63 percent) of the
            children in four pilot sites had seen the PSA's.
                       scholastic--critical school access
        USDA entered into a cooperative agreement with Scholastic Inc., a
    leading publisher and distributer of educational materials, to develop
    Team Nutrition in-school curricula for pre-K to 12th grades. Scholastic
    estimates the value of services provided to FCS at $3.0 million. FCS
    paid $1.7 million.
      --The first 10,000 Team Nutrition Schools are receiving Scholastic
            Classroom Kits at no charge.
      --USDA negotiated a discounted price ($55) for Scholastic materials
            that will save schools half the normal cost of the package
            ($110). By facilitating the distribution of these kits at one-
            half their normal retail price, FCS will be leveraging its
            investment by $1.7 million over four years.
      --In addition to the services it has already provided, as part of its
            cooperative agreement with FCS, Scholastic has agreed to
            solicit sponsorship for the distribution of materials from
            corporations and associations in order to provide kits to low-
            income schools at no cost. Scholastic has estimated that this
            will create an additional $2 million in private sector support.
            The combination of donated services, discounted material
            prices, and private donations will provide USDA with a $3
            return for every Federal dollar invested.
                            use, reuse and repackage
        USDA is reinforcing Team Nutrition messages and stretching Federal
    investment by using materials developed by Disney and Scholastic, Inc.
    in multiple, reinforcing ways.
      --Nutrition education activities developed for classrooms have been
            adapted and repackaged to provide parents and community groups
            that reach children on a daily basis with active, hands-on
            learning activities.
      --Scholastic ``Take Out,'' a parent newsletter, provides parents with
            information to reinforce classroom messages.
      --Food, Family & Fun A Seasonal Guide To Healthy Eating, features
            activities developed by Scholastic, the Disney characters
            Pumbaa and Timon, and recipes adapted from school menus. The
            book provides family learning activities that make nutrition
            fun.
      --Disney PSA's have been incorporated into classrooms curriculums,
            reinforcing and expanding the messages that children see on
            television.
      --Scholastic articles in a wide array of publications targeting
            students, teachers, administrators and coaches feature Team
            Nutrition messages.
        Question. In its fiscal year 1997 report, the Committee encouraged
    the Department to establish a panel to review and evaluate food service
    training grant applications submitted by States to ensure the award of
    funds to the highest quality projects benefiting the maximum number of
    students and school districts. Have you done this?
        Answer. Yes, the FCS did establish a panel of headquarters and
    Regional office FCS employees to review and evaluate food service
    training grant applications. This panel followed evaluation criteria
    designed to ensure high quality projects that would benefit the largest
    possible number of students and school districts. However, FCS did not
    establish a panel of outside parties to review and evaluate Team
    Nutrition (TN) Training Grants for Healthy School Meals because it was
    determined that this could create a conflict of interest.
        Question. Please explain the Department's procedures for reviewing
    and evaluating food service training grant applications, including who
    participates in this process.
        Answer. All Team Nutrition (TN) Training Grant Applications that
    meet the published deadline for submission are screened for
    completeness and conformity to the requirements stated in the
    application package. Applications meeting the screening requirements
    are then reviewed competitively by a panel composed of FCS staff. The
    panel reviews and ranks each application based on the technical
    evaluation criteria outlined in the application package and provides
    explanatory comments based on the criteria. Based on the availability
    of funds the highest ranking applications are then awarded funding. In
    1996, all TN Training Grants were funded.
        Question. Please describe the cooperative agreements with the
    National Food Service Management Institute (NFSMI) funded with the
    $800,000 provided for fiscal year 1997. Of the $10 million requested
    for the school meals initiative for fiscal year 1998, how much is
    included for cooperative agreements with the NFSMI? What cooperative
    agreement work is planned for fiscal year 1998?
        Answer. Two Cooperative agreements were funded by the National Food
    Service Management Institute with the $800,000 provided in fiscal year
    1997. One is a National technical services project that the Institute
    will manage in cooperation with USDA/Food and Consumer Service and
    State Agencies. This project will provide one-on-one assistance to
    nearly 100 local schools on site with menu planning, quality food
    production, food procurement practices and nutrient analysis of menus.
    This project will target small to medium school systems across the
    Nation. Schools will request the service through their State Agencies.
    The Institute will be responsible for the training and assignments of a
    cadre of ``out-post'' nutrition and food service consultants who will
    respond to these requests. The second project will be the continuation
    of the Customer Service Help Desk into its third year. This project
    provides an 800 number phone line as well as an Internet address for
    the use of local school food service staff. Questions are answered and
    technical assistance and materials are provided in the areas of menu
    planning, nutrient analysis, food systems management, recipes, food
    production, Dietary Guidelines for Americans, marketing of healthy
    meals and quantity food service equipment, etc. Currently the Institute
    is receiving an average of 150 questions per month including phone and
    Internet requests.
        In fiscal year 1998, funding for the National Food Service
    Management Institute is planned at $500,000. Currently, the Agency is
    providing a yearly sum of $250,000 for the ongoing services of the
    Customer Service Help Desk. Projects other than those discussed above
    have not yet been identified. The National Food Service Management
    Institute and USDA/FCS work together with the Institute's National
    Advisory Committee to determine major projects and priority needs. The
    National Advisory Committee is made up of representatives from State
    Agencies, Local Programs, professional organizations, universities,
    food industries and Federal Agencies. The National Advisory Committee
    met on March 21-23, 1997.
        Question. Please explain how the Team Nutrition in-school and other
    nutrition education materials which you have developed, produced and
    disseminated are being used by schools, teachers, parents, and
    communities to educate children to make healthy food choices.
        Answer. Scholastic, Inc., in cooperation with USDA, developed an
    in-school curriculum which is the centerpiece of the elementary school
    material. This curriculum incorporates nutrition education and
    information into other curriculum area such as math, science, social
    studies and health. With this approach, children can be provided with
    nutrition information throughout the year. The objective is to raise
    the children's awareness of nutrition to encourage them to make
    behavior changes. We want them to make food choices that result in a
    healthy diet. To date, more than 20,000 of these kits have been
    distributed. The kits cover pre-kindergarten to kindergarten, grades 1-
    2 and grades 3-5.
        Schools across the country have begun to use the Team Nutrition
    materials to engage children, eager to participate in hands-on
    activities. They are reinforcing positive nutrition messages through
    colorful posters displayed around the school--in classrooms and the
    cafeteria alike. In addition, they are conducting health, food or
    nutrition fairs which provide children the opportunity to taste test
    new foods, to learn how to read a nutrition label, plant a Team
    Nutrition garden, study the foods used in different regions of the
    Nation, assist food service staff in preparing a meal or any number of
    other activities which provide children the opportunity to experience
    and learn about food in fun ways.
        Parents are becoming involved by participating in these fairs and
    through the parent materials provided to them. Materials developed and
    distributed in cooperation with PTA include parent Tip Sheets and the
    Team Up At Home activity booklet which is filled with fun educational
    activities for parents to do with their children. These materials are
    designed to reinforce the positive nutrition education messages
    children are receiving at school.
        Communities are involved through the Cooperative Extension Service.
    The Community Nutrition Action Kit has received overwhelming positive
    response and is being utilized by Extension staff as well as public and
    private health professionals. All these efforts are directed toward
    educating children about the importance of the food choices they make.
    They are responsible for what they choose to eat which determines how
    healthy they are.
                            research and evaluation
        Question. The fiscal year 1998 request proposes $17 million to
    partially restore funding for research and evaluation in the food and
    nutrition assistance programs. As you are aware, funding for research
    and evaluation was reduced to $7.5 million for fiscal year 1997 in
    large part due to constraints on discretionary funding. However, there
    was also concern over the value and priority of the research work being
    conducted. What process is used to make sure that only priority work is
    funded, and to discontinue any ongoing work that may not be of
    particular value?
        Answer. Every year FCS follows a formal process to ensure that
    research studies are relevant to the concerns of Congress, policy
    officials, and other stakeholders. In doing so, FCS attempts to respond
    not only to current policy information needs, but also to anticipate
    emerging or future needs.
        In the planning process, the highest priority goes to the formal
    and informal mandates received from Congress, these studies are funded
    before any others are considered. If sufficient funds remain to address
    additional policy questions, FCS reaches out simultaneously to policy
    officials and operating managers of food assistance programs; officials
    in other government agencies including the Congressional Budget Office,
    Congressional Research Office, other Federal agencies, and associations
    and public interest groups with a stake in food assistance. FCS seeks
    not only areas of important policy information needs, but also
    opportunities to collaborate with others to leverage existing resources
    as much as possible.
        With these views in hand, the FCS prepares a 2-year Research &
    Evaluation Agenda, balancing the available resources with the most
    pressing policy information needs. The plan is reviewed by all
    operating divisions within the Agency, endorsed by the Agency
    Administrator, and submitted to the Under Secretary for Food,
    Nutrition, and Consumer Services for review and approval. Each project
    in the approved plan that requires advisory and assistance services--
    including virtually all research contracts--is individually reviewed
    and approved again by the Under Secretary before any funds are
    committed.
        The 2-year plan is revisited in mid-stream to ensure that
    previously identified plans are still policy-relevant and adjusted as
    needed to reflect current funding levels. The Agency also reviews our
    ongoing studies continuously to endure their continued relevancy and
    priority, again making mid-course adjustments if needed.
        FCS constantly seeks to improve this process to ensure that our
    work responds to the needs of all our audiences.
        Question. For each of the food assistance programs, please identify
    the amount of funding spent on research and evaluation in each of
    fiscal years 1993-97 and proposed for fiscal year 1998, identifying the
    study funded, its purpose, who is carrying out the study, its cost,
    whether it is considered a new or ongoing study, and the estimated
    completion date.
        Answer. The requested information for studies receiving funds in
    each of fiscal years 1993-97 is provided for the record. Because the
    procurement process for fiscal year 1997 studies is not final, some
    information on 1997 studies is still unknown.
        The fiscal year 1997 appropriation reduced the funds available for
    research and evaluation from $18.2 to $7.5 million. The President's
    budget request includes $17 million to partially restore these accounts
    to their previous levels. At the level requested for fiscal year 1998,
    FCS would use the funding to:
      --Help States identify effective and efficient ways to design and run
            programs using the new flexibility provided by welfare reform.
            What works best in moving clients to self sufficiency? Which
            State work programs are most effective in moving the able-
            bodied into work? How can States take advantage of new options
            to increase child support payments, encourage personal
            responsibility, and reward work?
      --Respond to Congress' mandate to study the effects of welfare reform
            on CACFP. Without these funds, FCS cannot address critical
            questions posed in the legislation.
      --Develop cost-effective ways to improve program integrity and reduce
            administrative costs, focusing on operational improvements to
            reduce error and fight trafficking. Additional funds would
            enable extensions of ongoing food stamp research on recipient
            and retailer trafficking to better target investigations and
            focus WIC research on improving program management and
            efficiency. For example, how can States most efficiently manage
            food package and administrative costs?
      --Respond to recommendations from the scientific community to
            strengthen the WIC Program, including development of tools to
            support eligibility determinations.
      --Continue development and evaluation of cost-effective EBT systems
            for WIC.
      --Sustain critical updates of the characteristics of food stamp and
            WIC participants and track compliance with Congressionally-
            mandated nutrition standards for school meals.
        [The information follows:]

        [Clerk's note.--The summaries of obligations for 1993-97 are not
    printed in the hearing record but are available for review in the
    subcommittee's files.]

        4Question. Last year the Economic Research Service indicated to
    this Committee that it had expanded and given elevated priority to work
    in the food, nutrition, and consumer service area. What specific work
    has the ERS carried out in each of fiscal years 1996 and 1997 at the
    request of or in collaboration with the Food and Consumer Service
    (FCS)? Is this work funded by the ERS, or by the FCS on a reimbursable
    basis? What work is planned for fiscal year 1998?
        Answer. FCS and the Economic Research Service (ERS) have a mutual
    interest in research and analysis of the domestic food and nutrition
    programs. The Agency has worked with ERS in recent years to make the
    most efficient use of common data and complementary expertise. Our
    collaboration has taken two forms.
        First, staff in FCS often consult with staff in ERS to draw on
    their professional expertise in particular areas. At the request of FCS
    in 1996, for example, ERS staff participated in an interagency working
    group on food security measurement, consulted on the design and
    analysis of two National surveys of Food Stamp Program participants and
    authorized retailers, served on an interagency expert panel on the
    feasibility of a rural food price monitoring system, and analyzed
    bidding procedures used to obtain WIC infant formula rebates. These
    consultations were funded by ERS.
        Second, on some occasions FCS has found it more cost-effective to
    reimburse ERS for services that might otherwise be provided by a
    contract or grant. In 1996, FCS and ERS negotiated a Food Stamp Program
    Research Agreement in which FCS provided ERS $250,000 in return for
    four basic research projects of mutual interest, including a comparison
    of food expenditure measures derived from the Food Security Supplement
    to the Current Population Survey with measures derived from the
    Consumer Expenditure Survey, an analysis of the relationship between
    food sufficiency and nutrient intakes, an analysis of measures of well-
    being collected as part of the Survey of Income and Program
    Participation, and a concept paper on issues, problems, data needs, and
    modeling approaches to develop comprehensive economic models of food
    assistance and agricultural programs. In addition, FCS provided ERS
    $25,000 to support purchase of a commercial data set of prices paid for
    food in supermarkets.
        With the reduction in appropriated funds for research in 1997, FCS
    was unable to continue the reimbursable agreement with ERS although the
    Agency continues to consult with them as appropriate. In particular,
    ERS staff are part of an interagency working group assembled to respond
    to the Congressional mandate for a study of the effects of allowing the
    purchase of vitamin and mineral supplements with food stamps. With
    funding at the level requested for 1998, FCS would again look for
    opportunities to coordinate and support research of mutual interest.
                                     ______

                     Questions Submitted by Senator Bumpers
                            wic caseload reductions
        Question. You indicate that without the supplemental request, WIC
    caseload would fall from 7.4 million to 7.0 million. What portion of
    this reduction would include removing current participants from the
    program and what portion of this reduction would include not replacing
    participants who are no longer eligible?
        Answer. It is not possible to estimate the incidence of one
    strategy over another for caseload reduction. Depending on their
    specific circumstances, States utilize a number of strategies to bring
    their caseloads down when the need arises, depending on their specific
    situations. FCS does not require reporting of such data, and have no
    basis for estimating this information.
        The expectation is that States will continue to do their best to
    carefully manage their caseloads and closely scrutinize and monitor
    their obligations, making adjustments to caseload as necessary, by not
    certifying persons, or by discontinuing benefits mid-certification.
    Most State data systems identify the certifications due for the
    upcoming month, so State agencies are aware of attrition rates for
    currently enrolled participants. Consequently, caseload reductions can
    be achieved effectively, and with least disruption to program
    participants, by either certifying only high priority individuals or by
    not doing any new certifications. However, if gradual attrition does
    not successfully achieve needed caseload reduction goals, State
    agencies may discontinue benefits mid-certification. This latter
    strategy is encouraged only as a last resort, when quick impact on
    caseload and expenditure levels is imperative.
                                wic immunization
        Question. Would you please provide an update on your activities to
    improve immunization services?
        Answer. One of the major public health challenges of this decade is
    to improve our Nation's capacity to deliver age-appropriate
    immunizations to infants and young children in need. Failure to
    vaccinate preschool-aged children resulted in a resurgence of measles
    cases during 1989-1991 with over 8,000 cases of measles and 29 deaths
    among children in this age group alone.
        The FCS and the Centers for Disease Control and Prevention (CDC),
    Department of Health and Human Services (DHHS), have an ongoing
    cooperative effort to increase immunization rates among preschool-aged
    participants in the WIC Program. Through a strong partnership, FCS and
    CDC, along with State cooperators, are working to improve the quality
    of services and the health status of children under 2 years of age who
    are in need of nutrition assistance and/or immunizations.
        As a result of this National initiative, numerous special
    immunization promotion activities are taking place.
        [The information follows:]
      --In an effort to deliver needed immunizations to preschool-aged
            children, FCS and CDC sent a letter to all State Health
            Officers (January 1995) to encourage State Health Departments
            to promote a continuing partnership between the WIC and State
            Immunization Programs.
      --FCS and CDC have developed a National Strategic Plan as a general
            guideline for States to consider using to facilitate an
            increase in immunization coverage rates among WIC participants.
            Many of the ideas advanced in the plan were adapted from State
            initiatives that employ creative service delivery and cost
            sharing approaches.
      --CDC, in conjunction with WIC State agencies, conducted
            demonstration projects in several cities to determine the most
            effective methods of increasing access to immunization through
            the WIC Program. Data from these projects show that intensified
            collaboration and resource sharing between State/local WIC and
            immunization programs improve the service delivery capacity and
            quality of both programs.
      --CDC and FCS supported the American Academy of Pediatrics and other
            organizations in producing a video which explains to low-income
            parents the importance of immunizations.
    Current Status
      --FCS is an active member of the Interagency Committee on
            Immunizations which is implementing an action plan to improve
            immunization services for preschool-age children and target
            resources to high-risk and hard-to-reach populations. FCS is
            also an active participant of the Immunization Education and
            Action Committee of the Healthy Mothers, Healthy Babies
            Coalition and the National Vaccine Advisory Committee.
      --Through the WIC Program and State and local program administrators,
            FCS cooperates with CDC and many other national organizations
            to actively promote the annual National Infant Immunization
            Week.
      --The National Association of WIC Directors (NAWD), the Association
            of State and Territorial Health Officials (ASTHO), CDC, and FCS
            co-hosted a WIC immunization promotion conference, entitled
            ``Working Together for Healthier Children,'' February 12 and
            13, 1997. The conference fostered positive communication at the
            State level between Immunization Programs and the WIC Program
            by increasing understanding of each programs' goals and
            objectives and highlighting win--win situations in State and
            local WIC and immunization partnerships. The conference also
            focused on State WIC Directors' and Immunization Program
            Managers' concerns.
      --FCS, CDC, NAWD, and ASTHO have formed the WIC/Immunization Research
            and Evaluation Subcommittee. The purpose of the this group is
            to coordinate research and evaluation activities directly
            related to immunization promotion efforts in WIC. The
            Subcommittee facilitates and reports on cost-effective
            strategies that improve vaccination coverage rates among WIC
            participants.
      --The Administration's Childhood Immunization Initiative provides
            funds to States to strengthen their immunization
            infrastructure. These funds make vaccination services more
            widely available by helping public programs buy more vaccines
            and improve community service and outreach efforts. Many States
            use the funds to extend clinic hours, hire more staff, increase
            education efforts, and help create a national tracking system.
        FCS has been active and supportive of strengthening State
    Immunization Information Systems as a major initiative to improve
    immunization status assessment and referrals among WIC children. To
    further promote this linkage, in fiscal year 1996 FCS awarded grants
    totaling $946,793 for State WIC/Immunization System Linkage Grants to
    nine WIC State agencies to design, develop, and implement information
    system linkages between State Immunization Information Systems and WIC
    data systems at the State and local levels. Made possible through
    funding from the Centers for Disease Control and Prevention's National
    Immunization Program, the purpose of this partnership is to enhance
    automation capabilities in WIC clinics to facilitate accurate and
    efficient assessment of the immunization needs of WIC infants and
    children. Grants were awarded to the following States: Massachusetts,
    Rhode Island, Florida, Texas, Chickasaw Indian Nation, Virginia, Iowa,
    Nevada and Alabama.
                              wic farmers' markets
        Question. In what ways has it supported rural economies?
        Answer. Approximately $9,070,553 (Federal funds plus matching funds
    from non-Federal sources) in WIC Farmers' Market Nutrition Program
    (FMNP) coupons were redeemed last year in 1,231 farmers' markets, many
    of which were in rural communities. The FMNP combines incentives for
    local agricultural producers with incentives for WIC participants to
    make healthy food choices. Based on the most recent survey data
    available, compiled from a 1995 survey of farmers participating in the
    program, 84 percent said that participation in the FMNP increased their
    sales. In addition, 35 percent increased fruit/vegetable production and
    32 percent stated that they plan to grow a wider variety of fruits or
    vegetables next year because of their involvement in the FMNP. The
    FMNP's emphasis on market development, including its provision of an
    additional 2 percent in administrative funds for this purpose, has
    increased the number of farmers' markets in rural areas.
        Farmers' markets have proven to be a valuable outlet for family
    farmers to directly market their produce, often providing the primary
    source of revenue for these farmers. The Department's 1996 National
    Farmers' Market Directory reports that significant data document the
    strategic marketing advantages that local producers gain by selling
    through these facilities, including improved profit margins. This
    improved profit margin for farmers translates into improved revenue for
    rural economies. The Directory goes on to state that this method of
    direct marketing experienced phenomenal growth nationally in the last 2
    years. The Directory documents 2,410 farmers' markets operating in the
    United States during the 1995 calendar year, an increase of 655 markets
    over 1994. This growth can be attributed in part to this program and
    its emphasis on market development.
        Question. In what ways has it improved the nutrition in-take of WIC
    participants?
        Answer. The WIC Farmers' Market Nutrition Program (FMNP) promotes
    the consumption of more vitamin and fiber-rich fresh fruits and
    vegetables. The FMNP's direct linkage of farmers and WIC participants
    has enabled low income people to become acquainted with where their
    food comes from, to meet the people that grow it, and to learn
    preparation tips from the growers. This is a valuable educational
    lesson for many of our FMNP participants who had never shopped at a
    farmers' market prior to their participation in the program. Based on
    1995 survey data provided by FMNP State agencies, 71 percent of
    recipients who responded to the survey said they ate more fresh fruits
    and vegetables during the FMNP season. In addition, 77 percent said
    they planned to eat more fresh fruits and vegetables all year round.
        Question. To what extent is the cost of this program, item for
    item, higher than expenditures for the regular WIC program?
        Answer. FCS can not provide an item for item cost comparison of WIC
    Farmers' Market Nutrition Program (FMNP) expenditures to WIC
    expenditures, either for the foods in the program or the administrative
    and services costs of the programs. Comparative data is not reported to
    the Department, and the Program requirements, in terms of foods
    provided, services offered and administrative responsibilities required
    are vastly different.
        With regard to foods provided, for example, the FMNP permits
    participants to select fresh fruits and vegetables up to a set dollar
    value on coupons used much like store coupons. The State defines which
    locally grown fruits and vegetables may be eligible for purchase. The
    FMNP foods are designed to complement WIC foods, which include an
    assortment of staple, versatile, readily available, and economical
    nutritious foods such as eggs, juice, cereal, and dry beans, peas or
    peanut butter. Using the most recent data, the Agency estimates that in
    fiscal year 1995, the WIC food package cost approximately $33 every
    month for a woman participant. The FMNP benefit, which includes both
    Federal and non-Federal share, averaged annually about $14 for fiscal
    year 1995, and may be provided on a participant basis or for an entire
    household, depending on State design of the FMNP.
        With regard to non-food expenditures, the FMNP and WIC are very
    different. For example, FMNP has a market development component which
    is unique to this program, while WIC has other unique and costly
    administrative responsibilities such as nutrition risk assessment,
    including tests for anemia; certification of eligibility; referrals;
    immunization assessment; drug, alcohol and tobacco use counseling;
    voter registration; and others. Total administrative costs for the FMNP
    cannot exceed 17 percent of the funds allocated for the program. WIC
    Program nutrition services and administration expenditures represent
    about 27 percent for fiscal year 1996 of total program expenditures,
    however, of course, WIC's programmatic requirements are different from
    those of the FMNP, as noted above.
                          commodity assistance program
    Program duplication
        Question. The request for the Commodity Supplemental Food Program
    includes $86 million in support of 123,900 women, infants, and
    children.
        Is this duplicative of the WIC program?
        Answer. The budget request for the Commodity Supplemental Food
    Program (CSFP) is not duplicative of funding for the Special
    Supplemental Nutrition Program for Women, Infants, and Children (WIC).
    Section 17(c)(3) of the Child Nutrition Act of 1966 prohibits
    recipients from participating simultaneously in the CSFP and WIC.
        In addition, the formula used to determine the amount of funds
    needed to support the WIC-eligible population excludes women, infants,
    and children participating in the CSFP. Therefore, the budget request
    for the CSFP in no way duplicated the amount requested for WIC. Also,
    over 60 percent of CSFP participants are elderly persons, and the
    elderly are categorically ineligible for WIC. While pregnant,
    breastfeeding, and postpartum women, infants and children participate
    in both programs, nonbreastfeeding women between 6 and 12 months
    postpartum and children between 5 and 6 years of age are categorically
    eligible for the CSFP, but not for WIC. Furthermore, CSFP sites serve
    some areas where WIC is not readily accessible.
        Question. In addition to the similarities of CSFP and WIC, in terms
    of beneficiaries, there appear to be other programs administered by the
    Food and Consumer Service that serve the same or similar populations.
        Can you provide information regarding duplication within various
    nutrition programs that could, at least potentially, serve the same
    clientele?
        Answer. The Food Stamp Program (FSP) and the Food Distribution
    Program on Indian Reservations (FDPIR) are designed to help a broad
    array of low-income households obtain nutritionally adequate diets.
    Most other FCS nutrition programs are targeted to meet the nutritional
    needs of specific population groups. The targeted programs include the
    Special Supplemental Nutrition Program for Women, Infants, and Children
    (WIC), the Commodity Supplemental Food Program (CSFP), the Nutrition
    Program for the Elderly (NPE), and the Child Nutrition Programs. The
    Child Nutrition Programs are the National School Lunch Program (NSLP),
    the School Breakfast Program (SBP), the Special Milk Program (SMP), the
    Child and Adult Care Food Program (CACFP), the Summer Food Service
    Program (SFSP), and the Homeless Children Nutrition Program. Targeted
    programs provide prepared meals or supplemental food packages and other
    nutrition services to specific population groups. Finally, The
    Emergency Food Assistance Program (TEFAP) is designed to supplement the
    diets of low income households with food items.
        It is possible in a limited number of cases that an individual may
    participate in food stamps as well as more than one targeted benefit
    program (i.e., WIC and CACFP). However, as these programs are designed
    to meet needs which are sufficiently different (i.e., nutritious
    supplemental foods for individual consumption and nutrition education
    in WIC versus nutritious CACFP meals in a child care setting), this
    should not be considered duplication.
        It is also possible that an individual who participates in a
    targeted program may also reside in a household participating in the
    FSP or FDPIR, e.g., a child living in a FSP household who also
    participates in the NSLP. However, these and other arrangements where
    individuals participate in both the FSP or FDPIR and a targeted program
    do not constitute duplication of benefits, as the programs are designed
    to meet different needs.
        Data from the 1977-78 National Food Consumption Survey (NFCS), the
    most reliable data available for this purpose, indicate that
    significant nutritional improvements can be made by supplementing the
    FSP with targeted programs. The NFCS found that only one in ten
    households with food expenditures comparable to the maximum FSP
    allotment consumed 100 percent of the Recommended Daily Allowance (RDA)
    of 11 key nutrients. NFCS also found that the proportion of households
    attaining this nutritional level increased rapidly with increased food
    expenditures: 1 in 3 households with expenditures one and one-half
    times the maximum FSP allotment and 2 in 3 households with expenditures
    two times the maximum FSP allotment attained this nutritional level.
    The NFCS data suggests that FCS's targeted programs complement the FSP
    and FDPIR and play an important role in helping individuals with
    special nutritional needs (such as children and the elderly) who reside
    in low-income households realize nutritionally sound diets.
        Question. Are there opportunities to consolidate any of these
    programs?
        Answer. A consolidation opportunity that FCS is currently pursuing
    within the Child Nutrition (CN) programs is combining the National
    School Lunch Program (NSLP) and the School Breakfast Program (SBP) into
    a unified School Nutrition Program. FCS is currently developing
    regulations to implement this consolidation. In addition, the Personal
    Responsibility and Work Opportunity Reconciliation Act of 1996 (Public
    Law 104-193), required that FCS develop a proposal to consolidate the
    NSLP, SBP and the Summer Food Service Program (SFSP). The Agency will
    be developing a proposal in accordance with the requirements of the law
    to integrate the portion of the SFSP which operates in schools into the
    consolidated School Nutrition Program.
        Although the CN programs serve similar constituencies and provide
    similar benefits, the opportunities for increased efficiencies through
    consolidations, other than those noted above, are minimal. A table
    which displays all the CN programs and their key characteristics is
    submitted for the record. It shows that the main difference between the
    various CN programs is the location where benefits are provided. The
    administrative network which schools belong to is very different than
    the administrative networks for day care centers and homes. The same is
    true of the networks for summer camps and homeless shelters. Other
    differences associated with location are the number of children being
    served, the amount of time the children are at the serving site each
    day, the cost associated with providing a meal, and the expertise that
    FCS can reasonably expect of the food service operators. These
    differences necessitate different regulations for reporting
    requirements, oversight and review requirements, nutrition
    requirements, site approval standards, accounting, etc. While Special
    Milk Program (SMP) benefits are provided in schools, as are NSLP and
    SBP benefits, the SMP operates only in schools without NSLP or SBP
    operations and provides students only with milk. In the case of the
    Summer Food Service Program (SFSP), the non-school SFSP sites, unlike
    NSLP/SBP schools, typically operate only a few months during the year,
    do not experience stable attendance, do not all have well developed
    administrative support structures, and do not have comparable food
    preparation expenses.
        [The information follows:]

    ----------------------------------------------------------------------------------------------------------------
                                                                         Benefits provided to   Location(s) benefits
                 Program                      Benefit recipients              recipients              provided
    ----------------------------------------------------------------------------------------------------------------
    National School Lunch Program      Elementary & secondary school    Prepared lunches......  School.
     (NSLP).                            students.
    School Breakfast Program (SBP)...  Elementary & secondary school    Prepared breakfasts...  School.
                                        students.
    Special Milk Program (SMP).......  Elementary & secondary school    \1/2\ pints of milk...  School.
                                        students in schools without
                                        the NSLP or SBP.
    Summer Food Service Program        Low-Income children, below age   Prepared meals........  Summer camps,
     (SFSP).                            18, living in low-income areas.                          schools, etc.
    Child and Adult Care Food Program  Children, below age 12, and      Prepared meals........  Day care homes & day
     (CACFP).                           disabled adults in day care.                             care centers.
    Homeless Children Nutrition        Homeless children in shelters..  Prepared meals........  Homeless shelters.
     Program.
    ----------------------------------------------------------------------------------------------------------------

        The other nutrition programs administered by FCS, in addition to
    the Commodity Supplemental Food Program (CSFP) and the Special
    Supplemental Nutrition Program for Women, Infants, and Children (WIC),
    are the Food Stamp Program (FSP), the Food Distribution Program on
    Indian Reservations (FDPIR), The Emergency Food Assistance Program
    (TEFAP), and the Nutrition Program for the Elderly (NPE). The FSP and
    FDPIR help a broad array of low-income families purchase nutritionally
    adequate diets, while TEFAP, NPE, and the CN programs provide targeted
    nutritional assistance to specific population sub-groups. The targeted
    programs complement, but do not duplicate, the nutritional support
    provided through the FSP and FDPIR.
        A table which displays the FCS programs, except WIC and CSFP, and
    their key characteristics is submitted for the record. Unlike the CN
    programs, in which the location where benefits are provided is key,
    this table shows there is no summary differentiating characteristic for
    these FCS programs. Rather, what distinguishes them is the benefit
    delivery system each program needs to meet its goal of providing
    specific nutritional assistance to its target population.
        For FDPIR the target population is low-income households on Indian
    reservations who do not have access to retailers accepting food stamps.
    Providing benefits to this population can require a distribution system
    capable of delivering food to places on Indian reservations far away
    from retail outlets. No other program in the table can provide benefits
    comparable to FDPIR for households on reservations.
        In the NPE the targeted population is the elderly who participate
    in Department of Health and Human Services programs. Many NPE
    recipients cannot prepare their own meals, and the NPE is the only
    program in the table designed to provide prepared meals to immobile
    elderly recipients. As you know, FCS has proposed in the past, and
    still support the consolidation of NPE with its much larger sister
    feeding program run by HHS. We recommend that these programs be
    consolidated.
        TEFAP a significant part of the targeted population is emergency
    feeding centers (e.g. soup kitchens). TEFAP is the only FCS program
    designed to provide bulk commodity shipments in support of emergency
    feeding centers. The focus of the FSP, FDPIR, CN programs, TEFAP, and
    the NPE are all different enough so as to require different benefit
    delivery systems. This diversity causes FCS to believe that further
    consolidation would not, at this time, produce noticeable savings or
    efficiencies.
        [The information follows:]

    ----------------------------------------------------------------------------------------------------------------
                                                                         Benefits provided to   Location(s) benefits
                 Program                      Benefit recipients              recipients              provided
    ----------------------------------------------------------------------------------------------------------------
    The Emergency Food Assistance      Emergency feeding centers &      Commodities...........  Emergency feeding
     Program (TEFAP).                   needy individuals.                                       centers &
                                                                                                 households.
    Nutrition Program for the Elderly  Elderly participating in         Prepared meals........  Group settings,
     (NPE).                             Department of Health and Human                           households.
                                        Services programs.
    The Food Stamp Program (FSP).....  Low-income households..........  Food coupons..........  Retail grocery
                                                                                                 outlets.
    Food Distribution Program on       Low-income households on Indian  Food packages.........  Indian reservations.
     Indian Reservations (FDPIR).       reservations.
    Child Nutrition Programs (CN)....  Children.......................  Prepared meals........  Various away-from-
                                                                                                 home locations.
    ----------------------------------------------------------------------------------------------------------------

        Question. Would such consolidation result in savings?
        Answer. The consolidation of the National School Lunch Program
    (NSLP) and the School Breakfast Program (SBP) into the unified School
    Nutrition Program is unlikely to result in more than minor savings for
    State and local program administrators. The consolidation rule will
    provide for some administrative efficiencies, but will not reduce
    nutrition benefits to children. The FCS is currently working on a
    proposed rule to consolidate the NSLP and SBP and has not yet completed
    its formal assessment of the savings, if any, that will result from
    this consolidation.
        Consolidation of the USDA and HSS components of NPE would not
    likely yield savings at the Federal level either. State and local
    agencies administering these important food programs for the elderly,
    including the unique meals-on-wheels program, would likely experience
    significant efficiencies although cost savings potential appears slim
    there too.
        FCS believes that opportunities for significant further
    consolidation do not exist at this time, and that such consolidation
    would not produce further savings.
                                     ______

                      Questions Submitted by Senator Kohl
                                 wic sugar cap
        Question. USDA is proposing to reopen the issue of the sugar cap
    for cereal eligible for the WIC program. For people who are
    nutritionally at risk, as WIC recipients often are, it is critical that
    opportunities are provided to maximize the nutritional value of all
    food consumed, it order to achieve a close to a balanced diet as
    possible.
        Given that goal, I am concerned that any increase of the sugar cap
    for WIC cereals above the current level will only increase intake of
    empty calories by WIC recipients, at the expense of the more nutritious
    foods that these WIC recipients so badly need.
        It is my understanding that the sugar cap has been reviewed
    numerous times in recent years, without significant change. Why is USDA
    reopening this debate?
        Answer. The Department is committed to ensuring that the Federal
    requirements and other guidelines for the WIC Program are based upon
    sound scientific evidence. The majority of contemporary studies fail to
    document an association between sugar consumption and an increased risk
    of developing the chronic diseases of coronary heart disease, diabetes
    mellitus, obesity and hyperactivity. Therefore, the Department sought
    public comment through a Federal Register Notice, published on March
    18, 1996, on whether a change in the current 6-gram sugar limit for
    WIC-eligible cereals was still warranted. FCS does not plan to change
    the limit, but the Secretary has called for a review of permissible WIC
    foods in total. So the sugar limits will be looked at again in concert
    with all permissible foods.
        Question. In December of 1996, in an effort to help bolster rapidly
    falling dairy prices, Secretary Glickman announced his intentions to
    increase the purchases of dairy products for the school lunch program
    and other USDA nutrition programs.
        Could you provide me with data to demonstrate how USDA increased
    use of dairy products for nutrition programs since December, by volume
    and value of product, relative to previous years?
        Answer. The accelerated purchases of cheese for National School
    Lunch Program (NSLP), for the period July 1996 through February 1997
    shows a total of 58.3 million pounds valued at $90.6 million. For the
    same period last year, July 1995 through February 1996, the total
    cheese purchases were 55.5 million pounds valued at $77.7 million. It
    cost FCS $8.6 million extra for current year purchases because of the
    price increases for cheese. In addition, an accelerated purchase of 2.8
    million pounds of cheese valued at $4.3 million was made, to support
    the dairy industry.
        In addition to the accelerated purchases of cheese for the NSLP,
    the Department purchased for the Commodity Supplemental Food Program
    (CSFP) $5 million in processed cheese for distribution in CSFP. The
    Department also plans to purchase 2.5 million pounds of cheese valued
    at $4.0 million to supply CSFP with sufficient product for the
    remainder of fiscal year 1997.
        The purchase and distribution of other dairy products is comparable
    to prior fiscal years.
                       farmers' market nutrition program
        Question. I have long been a supporter of Farmers' Market Nutrition
    Program (FMNP) and was pleased to see the Administration's request for
    an increase in that program in fiscal year 1998, to the $12 million
    level. The FMNP program has been very successful in the three Wisconsin
    sites where it has been implemented. However, it is my hope that more
    Wisconsin sites could be started in the near future. In that context, I
    have the following questions:
        If the Subcommittee is able to fund the FMNP at the increased
    levels proposed in the budget, how does USDA propose to distribute
    those increased funds?
        Answer. By law, the first priority for these funds is to restore
    State agencies to their previous year's funding level. Of the remaining
    funds, 75 percent would be allocated to currently participating State
    agencies that request expansion funding. A funding formula, designed by
    the Department in consultation with State agencies, is used to
    distribute expansion. Basically, this formula ranks State agencies
    according to their previous year's average FMNP grant per WIC
    participant. Expansion requests are funded in rank order, beginning
    with the State agency with the lowest FMNP grant per participant. The
    remaining 25 percent would be allocated to new State agencies that are
    seeking to initiate a WIC Farmers' Market Nutrition Program (FMNP). A
    ranking process, based on factors specified in the law, is used to
    allocate funds to new State agencies. The law requires allocation on
    the basis of factors such as prior experience with a similar program,
    State plans that have the greatest access to farmers' markets, the
    highest concentration of eligible persons and such other factors as
    determined appropriate by the Department.
        Question. There has been some concern about the practice of funding
    the FMNP as part of the WIC program. Given that concern, would USDA
    support funding for the FMNP through AMS, or another agency other than
    the FCS? Are there any reasons why such a transfer would be ill-
    advised?
        Answer. Because WIC participants or persons on a waiting list for
    WIC services are the only persons eligible to receive Federal benefits
    under the WIC Farmers' Market Nutrition Program (FMNP), it seems only
    natural that the funding for the two programs should be administered by
    the same Federal agency. FCS has worked closely with the FMNP State
    agencies to establish an infrastructure for the operation of the
    program, and is the only USDA agency with experience in the
    administration of both grant and entitlement Food Assistance Programs.
    AMS' strength is in administering direct marketing programs. As long as
    the FMNP and WIC continue to be linked legislatively to a shared
    population of recipients, FCS believes it is the best interests of both
    Programs to be administered and funded through FCS.
        The WIC Farmers Market Nutrition Program Association at one point
    thought such a transfer of program administration might overcome
    problems under current appropriations law regarding WIC and FMNP. Under
    this legislation, annual funding for FMNP has for the last two years
    been contingent upon the ability of WIC to sustain its current
    participation with funding provided. Under this construct, FMNP can
    only receive continued funding if not needed by WIC to sustain its
    participation levels. This problem cannot be solved with such a
    transfer of administrative responsibility to another USDA agency.
                         school meal dietary guidelines
        Question. The Healthy Meals for Children Act was passed last
    Congress to help provide flexibility in school lunch programs, while
    still focusing on nutritionally balanced meals. I have been contacted
    by school food service administrators in my state of Wisconsin, who are
    concerned about the time it has taken for USDA action on regulations
    for the law. This delay has an impact on their planning for the next
    school year. Can you provide an update on the status of the regulations
    and a timeline for implementation.
        Answer. A proposed regulation to incorporate the traditional meal
    pattern into the program regulations and to provide guidelines for
    authorizing other reasonable approaches to meal planning is in
    clearance. Since clearance procedures are quite extensive, it is
    difficult to predict exactly when the rule might be published, but the
    Agency anticipates that it will be available for public comment by late
    spring or early summer.
        In the meantime, it is worth noting that schools are already able
    to continue to use the traditional meal pattern if they so choose,
    since the Department issued guidance on this provision promptly after
    the enactment of the Healthy Meals for Children Act. In fact, schools
    currently have unprecedented ability to choose a meal planning system
    that is right for them. Schools may select from two food-based meal
    patterns as well as two methods of planning and preparing meals using
    nutrient analysis. The Department is committed to authorizing other
    reasonable approaches that can ensure the nutritional integrity of
    meals served to children and the best use of Federal dollars.
                                     ______

                      Questions Submitted by Senator Leahy
                     wic farmers' market nutrition program
        Question. I am a very strong supporter of the WIC farmers' market
    nutrition program since it helps farmers, it helps communities set up
    farmers' markets, and provides fresh farm products to WIC families. The
    President requested a funding increase to $12 million for fiscal year
    1998--which I support.
        While Vermont participates in this program, I want to make certain
    that additional states are able to participate in this program. Will
    you work, if Congress appropriates sufficient additional funding, to
    help make sure that the benefits of this program reach more states?
        Answer. Yes, FCS will continue to work with the National
    Association of Farmers' Market Nutrition Programs and our Regional
    offices to provide information on the program to nonparticipating
    States. FCS conducts a State Plan workshop every year at a National
    farmers' market meeting in order to provide guidance to potential new
    States on applying and completing a State Plan for the program.
    Additionally, the Agency works with our Regional offices in order to
    assist States in the application process. When FCS participates in
    Departmental meetings or conferences regarding farmers or nutrition
    with individuals not familiar with the program, the Agency provides
    information about the program and encourages individuals to generate
    State support in order to apply. FCS realizes outreach is very
    important to potential new States and use many opportunities to promote
    this effective program.
        Question. One preliminary report issued by USDA some years ago
    raised some concerns about the WIC farmers' market nutrition program.
    Are you now convinced that this program is a good investment for
    farmers, for WIC participants and for rural communities?
        Answer. The Department is very supportive of the WIC Farmers'
    Market Nutrition Program (FMNP). The FMNP supports local agricultural
    economies consisting primarily of small resource farmers. At the same
    time, the FMNP promotes the consumption of more vitamin-and fiber-rich
    fresh fruits and vegetables. The FMNP couples incentives for local
    agricultural producers with incentives for WIC participants to make
    healthy food choices. The FMNP's direct linkage of farmers and
    consumers has helped participants become acquainted with where their
    food comes from, to meet the people that grow it, and to appreciate new
    and different types of fresh produce. FCS believes the FMNP is a win-
    win situation for both farmers and WIC participants.
                           wic infant formula rebates
        Question. For each year starting in 1987 please list the amount of
    dollar savings (in effect, additional funds for use by the WIC program)
    generated by WIC infant formula cost containment procedures which were
    put in place because they were either permitted or required under
    federal statutory law (1987 and 1988) or were required by federal
    statutory law (1989 through present). Also, please estimate how many
    additional persons were able to be served through these recaptured
    funds for each year.
        Please break this down on a yearly basis and please do not include
    cost containment savings for other WIC food items such as cereals.
        Answer. Infant formula rebates received reduce the cost of infant
    formula, thereby allowing the program to serve additional participants
    per month within its annual appropriation. Provided for the record is a
    break down of the infant formula rebates the WIC Program has received
    since fiscal year 1988 and the additional participation the program was
    able to serve. The amounts reflect rebates for all WIC foods earning
    rebate dollars as infant formula rebates are not tracked separately.
    However, the vast majority of rebate savings are associated with
    contracts for infant formula.
        [The information follows:]

    ------------------------------------------------------------------------
                                                                Estimated
                                                              participation
                 Fiscal year                   Rebates       increase due to
                                                                 rebates
    ------------------------------------------------------------------------
    1987................................           ( \1\ )  ................
    1988................................       $32,000,000            61,658
    1989................................       293,000,000           548,945
    1990................................       510,000,000           876,800
    1991................................       656,000,000         1,087,715
    1992................................       755,000,000         1,223,970
    1993................................       880,000,000         1,407,139
    1994................................       997,000,000         1,553,474
    1995................................     1,051,000,000         1,620,981
    1996................................  \2\ 1,180,000,00
                                                         0         1,792,012
    ------------------------------------------------------------------------
    \1\ Not available.
    \2\ Rebates reported by State agencies as of 2/24/97.

                             food stamp ebt systems
        Question. For years I have supported the elimination of the use of
    paper food stamp coupons in favor of electronic benefits transfer
    systems. I know USDA is making progress in this area. However, I think
    more effort needs to be made or more incentives need to be offered to
    states to get them to use EBT.
        What concrete steps will USDA take to more greatly promote the use
    of EBT instead of food stamp coupons?
        Answer. FCS does not believe that a greater promotional effort for
    use of EBT is needed at this time as most States are already well
    positioned to have systems in place by the end of fiscal year 1999--the
    Vice President's goal for EBT implementation. However, the Agency will
    continue to provide technical assistance to these States, as well as
    the remaining States, to assist in the meeting of the 1999 goal. The
    Agency will approach the committee at a later time if any unforeseen
    difficulties are encountered in realizing this goal.
        Question. While I voted against the welfare reform cuts in
    nutrition programs, I want to make certain that they are implemented
    properly by the states.
        Do you need additional research funds to make certain that states
    implement these changes correctly and properly? If your answer is
    affirmative, please indicate what amount of funding would permit you to
    determine and monitor whether the state agencies are in compliance with
    the new rules?
        Answer. Yes, additional research funds are needed to help States
    put programs in place that not only comply with the new rules but which
    also most effectively promote personal responsibility, reward work, and
    improve nutrition and health.
        FCS plans to use some of the funds appropriated for 1997 to begin
    to address the policy information needs raised by welfare reform, but
    much more could be done. Continued funding at the fiscal year 1997
    level will limit the Agency's ability to provide solid, policy-relevant
    information to the States and to Congress. The research funding
    requested in the President's budget will enable FCS to address a
    broader range of policy information needs.
        For example, with the requested funds, FCS would be able to help
    States identify effective and efficient ways to design and run programs
    using the new flexibility provided by welfare reform. FCS would like to
    know what works best in moving clients to self-sufficiency, which State
    work programs are most effective in moving the able-bodied into work,
    how States can take advantage of new options to increase child support
    payments, encourage personal responsibility, and reward work. There is
    also a need to understand how these changes affect the nutrition status
    of people the programs are intended to serve.
        In addition, with the requested funding, FCS would be able to
    respond more fully to the Congressional mandate to study the effects of
    welfare reform on the Child and Adult Care Food Program. Without these
    funds, FCS will not be able to address many critical questions posed in
    the legislation. Moreover, FCS will not be able to address key
    questions about the availability of care in targeted areas and the
    importance of this program in supporting the transition from welfare to
    work.
                      food program administration missions
        Question. You made some very strong arguments for additional staff
    to administer the nutrition programs and carry our your many missions.
    I am very concerned about the cuts which were made in your staff while
    your responsibilities greatly increased.
        You are responsible for over 70 percent of the USDA budget
    expenditures yet you represent a very small fraction of the total USDA
    staff.
        I am worried that this will interfere with your ability to prevent
    or investigate fraud, to carefully monitor State and store compliance
    with the rules, to properly implement program changes, and to carry out
    other functions.
        Please advise us about any potential needs you have for increased
    appropriations for staff.
        Answer. FCS needs to maintain its current staffing level. Our
    fiscal year 1998 budget request only asks for a minimal increase to
    fund half of the mandatory pay increases to support existing staff. In
    recent years, the President has requested more staff and funding than
    the Agency received in the appropriations, and this reduction in
    resources has put the Food Assistance Programs at increased risk.
        Staffing levels have diminished from 2,762 in 1980 to 1,750 today.
    During the same time, demands on FCS staff have dramatically increased.
    FCS certainly understands how important downsizing is to the Federal
    government, especially to balance the budget, and the Agency is
    committed to the National Performance Review and the Vice President's
    goals of reducing the Federal workforce. To that end, FCS has been
    diligent in implementing efficiencies, such as eliminating unnecessary
    operations and overlap, capitalizing on information technology,
    encouraging teamwork, and paring back services to employees to the
    minimum necessary.
        Despite all this, the cuts to FCS have been significant. The Agency
    reached its fiscal year 1999 streamlining target 3 years ago. Since
    fiscal year 1995, FCS has had to reduce its staff by 60 to 80 staff
    years every fiscal year due to funding reductions in the Food Program
    Administration (FPA) account. This has had an impact on FCS in two key
    areas.
        First, reductions are affecting the Agency's ability to properly
    monitor and oversee the Food Assistance Programs and provide technical
    assistance to State agencies. Due to funding reductions, FCS has
    curtailed efforts that are crucial to monitoring sites and maintaining
    Federal presence in the field. Staffing reductions have placed highly
    labor-intensive activities such as store investigations and maintaining
    program integrity at risk--a reduction in the National Food Stamp error
    rate of just 1 percent can result in savings of over $230 million,
    which is much more than paying for the staff needed to provide the
    proper oversight. FCS feels that the cost of funding additional staff
    in the FPA appropriation is millions of dollars less than the cost of
    increased fraud and abuse in the programs. Meanwhile, external audits
    from GAO and OIG have consistently cited insufficient staff to exert
    proper oversight of State administrative costs and debt management
    practices. If Congress does not maintain funding for the current
    staffing levels, these important activities will suffer further.
        Second, the reductions in staff are affecting FCS' ability to
    adequately respond to program changes. FCS employees are forced to
    react as crises arise, rather than look ahead and plan for the future.
    The Agency is too busy attempting to remedy predicaments as they occur
    and has little or no time to foresee potential problems and address
    them early on to head off a crisis. Implementing new legislation, such
    as Welfare Reform and the Healthy Meals for Healthy Americans Act,
    impose significant, new, and ongoing administrative burdens on FCS.
    These new laws effect comprehensive program changes and are extremely
    important to the Food Assistance Programs. The CFO Act, the Government
    Performance and Results Act (GPRA), and Nationwide implementation of
    EBT are other examples of program changes to which the Agency is
    required to devote resources.
        FCS asks that you at least maintain our current staff level.
    Mandatory pay raises increase the cost of each staff year every fiscal
    year, so maintaining current staff levels requires small increases in
    the FPA appropriation. If FCS must absorb the cost of increased
    salaries, the only option is to further reduce staff. Eighty-five
    percent of the FPA appropriation is for salaries alone, leaving us
    little flexibility in absorbing new costs. The remaining 15 percent is
    used for travel, training, and other expenses, such as rent, computer
    support, and supplies, all of which have been reduced to the minimum
    necessary. FCS wants to administer the programs as Congress has
    intended, meet mission goals, properly respond to new initiatives, and
    protect government funds from fraud and abuse.
        The results of your support to the FCS staff will benefit all
    involved--the needy, American children, taxpayers, as well as Congress.
    The minimal funding it will take to support the staff will provide
    America with programs that truly help those less fortunate, that
    respond appropriately and effectively to new needs and changing
    legislation, and that operate efficiently with savings to the taxpayer.

                              Subcommittee Recess

        Senator Cochran. This will conclude our hearing today. We
    appreciate the attendance of all witnesses.
        Our next hearing will be on the budget request of the
    Department of Agriculture's Natural Resources Conservation
    Service, the programs and activities under that agency. That
    hearing will be at 10 a.m. on Tuesday, March 18.
        At 2 p.m. on Thursday of this week, we will have a special
    hearing to explore alternatives to the dairy pricing system.
    Those hearings will be held in room SD-138 of the Dirksen
    Senate Office Building.
        Until then, the subcommittee stands in recess.
        [Whereupon, at 11:46 a.m., Tuesday, March 11, the
    subcommittee was recessed, to reconvene at 10:11 a.m., Tuesday,
    March 18.]

    AGRICULTURE, RURAL DEVELOPMENT, AND RELATED AGENCIES APPROPRIATIONS FOR
                                FISCAL YEAR 1998

                                  ----------

                            TUESDAY, MARCH 18, 1997

                                           U.S. Senate,
               Subcommittee of the Committee on Appropriations,
                                                        Washington, DC.
        The subcommittee met at 10:11 a.m., in room SD-138, Dirksen
    Senate Office Building, Hon. Thad Cochran (chairman) presiding.
        Present: Senators Cochran and Bumpers.

                           DEPARTMENT OF AGRICULTURE

    STATEMENT OF JAMES R. LYONS, UNDER SECRETARY, NATURAL
                RESOURCES AND ENVIRONMENT
    ACCOMPANIED BY DENNIS KAPLAN, DEPUTY DIRECTOR, OFFICE OF BUDGET AND
                PROGRAM ANALYSIS

                     Natural Resources Conservation Service

    STATEMENT OF PAUL W. JOHNSON, CHIEF
    ACCOMPANIED BY:
            GARY A. MARGHEIM, ACTING ASSOCIATE CHIEF AND ACTING DEPUTY
                CHIEF, SCIENCE AND TECHNOLOGY
            THOMAS A. WEBER, DEPUTY CHIEF, MANAGEMENT
            LAWRENCE E. CLARK, DEPUTY CHIEF, PROGRAMS
            CAROLE JETT, ACTING DEPUTY CHIEF, SOIL SURVEY AND RESOURCE
                ASSESSMENT
            FEE BUSBY, DEPUTY CHIEF, SCIENCE AND TECHNOLOGY
            ROBERT K. REAVES, DIRECTOR, BUDGET PLANNING AND ANALYSIS
                DIVISION

                                Opening Remarks

        Senator Cochran. The subcommittee on appropriations for the
    Department of Agriculture and related agencies will come to
    order.
        This morning we continue our hearings, reviewing the
    President's budget request for the Department of Agriculture
    and other agencies that come under the jurisdiction of this
    subcommittee.
        This morning we are happy to have representatives of the
    Natural Resources Conservation Service [NRCS]. James Lyons, the
    Under Secretary for Natural Resources and Environment is here,
    along with Paul Johnson, Chief of the Natural Resources
    Conservation Service and others.
        We welcome you, and we thank you for your cooperation with
    our committee, and for the statements that you have submitted,
    along with other materials from the President's budget that are
    helpful to us.
        And, Mr. Lyons, we ask you to proceed after I first yield
    to my colleague, the distinguished Senator from Arkansas, who
    is ranking member of this subcommittee for any comments that he
    would have to make.
        Senator Bumpers.
        Senator Bumpers. Thank you, Mr. Chairman. In the interest
    of expediting this, I will forgo an opening statement.
        Senator Cochran. Mr. Lyons, you may proceed.

                    Opening Remarks by Under Secretary Lyons

        Mr. Lyons. Well, thank you very much, Mr. Chairman and
    Senator Bumpers, it is a pleasure to be here this morning.
        I am joined today by, of course, Paul Johnson, Chief of the
    Natural Resources Conservation Service, Dennis Kaplan, and his
    staff. And also with me, I want to mention Larry Clark, Deputy
    Chief of Programs; Bob Reaves, from the NRCS budget shop; and
    Tom Weber, the Deputy Chief of Management who works with me on
    conservation issues.
        Mr. Chairman, NRCS, of course, is an agency that has a long
    and, I think, successful history of helping farmers, ranchers,
    and local communities change the face of this land; helping
    them to practice conservation and manage their operations as
    stewards to protect the natural resources that we all care very
    dearly about.
        Several things have made this success possible, not the
    least of which has been the support of this committee, which
    has given cause to conservation and I think demonstrated true
    commitment to protecting the productivity and the stewardship
    of the Nation's private lands. We appreciate your leadership in
    that regard.
        But perhaps the most important reason for the success we
    have realized within NRCS is really attitude, a principle that
    the agency's focus should be aimed high on the objective of
    doing what is needed to help farmers, ranchers, and communities
    produce as many environmental benefits as they can while
    meeting the Nation's, in fact, the world's needs for food and
    fiber.
        Mr. Chairman, that is exactly what the budget we are here
    today to discuss is about. What resources does it take? With
    today's changing technologies and challenges, for NRCS to be
    able to work effectively and in partnership with conservation
    districts and our other Federal, State, and local partners, to
    help agriculture produce not only food and fiber, but clean
    water, productive and high-quality soils, ample wildlife
    habitat, and many of the other environmental benefits that we
    in this country care about.
        What does it take to help American private lands fulfill
    their promise, as Chief Johnson has said, to make them truly a
    geography of hope? These are key questions we had in mind as
    this budget was put together, and that we encourage this
    committee and the Congress to remember as you work out the
    details of our 1998 budget.
        We believe that this budget, structured and constrained as
    it is, due to our joint commitment to balance the budget,
    answers many of these questions.
        The budget retains its emphasis on conservation operations
    as the key to getting conservation on the land, asking for
    increases to cover some of our pay costs, and in particular to
    increase the level of work on private grazing lands, increase
    the rate at which we are converting our operations to
    geographic information systems, and to enhance our ability to
    provide watershed-based planning assistance.
        It is through conservation operations that our people are
    able to join with the conservation districts throughout the
    country to work on the national resource concerns and
    challenges that people at the local level care about and need
    to see addressed.
        In today's budgetary world, which demands performance-based
    programming, it will be through conservation operations that we
    anticipate seeing the greatest benefit from NRCS' locally led
    conservation initiative, which is intended to energize and
    focus our efforts with our local partners and allow us to
    report to you and the country on exactly how our partnership is
    doing over time.
        It is also through conservation operations that we will do
    the critical work of implementing the conservation compliance
    and swampbuster provisions of the Food Security Act.
        NRCS' locally led initiative also will do something else.
    It will help guide and shape to the fullest extent possible
    every USDA conservation program activity at the State and local
    level.
        This is our intent with the Small Watersheds Program, the
    new Environmental Quality Incentives Program, the Conservation
    Reserve Program's continuous signup for buffer and filter
    strips; the Wetlands Reserve Program, FIP, as well as the new
    Wildlife Habitat Incentives Program and the Farmland Protection
    Program.
        All of these programs are either up and running or close to
    it. We are moving aggressively to prepare rules for EQIP, WHIP,
    and the other programs that have been authorized by the 1996
    farm bill.
        We are excited about the opportunity to work in partnership
    with the conservation districts and other local conservation
    leaders to put these programs to use.
        Mr. Chairman, I think the 1996 farm bill was not only a
    historic farm bill, but probably the first ever conservation
    farm bill of its kind. Conservation clearly led the charge, and
    was the driving force to enactment of that legislation. Of
    course, you and Senator Bumpers played a critical role in that.
        We see the conservation title as affording us a much
    broader toolkit than we have ever had before, to do the kind of
    work that we need to do across the landscape, to help farmers
    and ranchers and others in the community meet their needs and
    protect the resources they care dearly about.
        Conservation operations is the key to ensuring that we have
    the people on the ground, the resources available to put that
    toolkit to use and to work closely with landowners and others
    to meet their overall conservation goals.
        Another prime example of a program that makes effective
    local action possible is the Resource Conservation and
    Development Program, or the RC&D Program.
        Federal contribution to the RC&D Program is small, simply
    the salaries of local coordinators. But this investment gets
    this country much in return in the form of local initiative and
    a commitment of funds to develop and enhance economic
    activities.
        This budget asks for an increase for RC&D of $18 million,
    designed to help this program make a much greater contribution
    in watersheds needing assistance for work such as salmon head
    habitat recovery work in the Pacific Northwest. We stand ready
    to work with you on this proposal and to shape it to meet our
    overall needs and objectives.
        One of the things that is so amazing and exciting about all
    of this is the fact that USDA and NRCS can even conceive of
    helping to make locally led conservation happen at the State
    and local level.
        Agriculture has created a State and local delivery system
    that is the envy of all the other Federal agencies and a model
    for the world. When it comes time to get real work done on the
    ground on private lands, whether it is in times of emergency
    and crisis such as the floods we are seeing now, or in the
    times of normal need, it is this delivery system that people
    turn to.
        This is truly a national asset of tremendous value, Mr.
    Chairman. And I believe we all owe a debt of great gratitude to
    those that came before us in Congress and in agriculture that
    have made it possible.
        Mr. Chairman, as I said before, in all of this we have
    sought to create a budget that can really help agriculture on
    this country's private lands, realize the promise of a
    geography of hope.
        I am sure that this is a goal that you and the members of
    the committee can support. We certainly look forward to working
    with you over these next several weeks and months as you
    finalize the budget and seek to make reaching this objective
    possible.
        Thank you, Mr. Chairman, again for the opportunity to
    appear before you today, and we will certainly do our best to
    answer any questions you may have.

                               Prepared Statement

        Senator Cochran. Thank you, Mr. Secretary. We have your
    complete statement, and it will be made part of the record.
        [The statement follows:]
                      Prepared Statement of James R. Lyons
        Mr. Chairman, Members of the Committee. It is my pleasure to
    outline for you the fiscal year 1998 budget request for the Department
    of Agriculture's Natural Resources Conservation Service (NRCS).
        In the past month, Secretary of Agriculture Dan Glickman conveyed
    to each of you and all other members of Congress a copy of a new
    publication from NRCS. This publication, ``America's Private Land, A
    Geography of Hope,'' articulates a new view of private land in America,
    most of which is in an agricultural use, and what we might refer to as
    our ``working land.'' As the introduction of the publication suggests,
    people's relationship to the land has changed. Few Americans now live
    and work on farms and ranches. Most of us live in cities and suburbs.
    But what happens on our private land remains crucial to our economic
    and environmental well-being. We are reminded of our connection to the
    land every time we buy a loaf of bread, turn on the tap for a drink of
    water, or admire a flock of ducks or geese heading south in the fall.
        Seventy-percent of the land in the United States, exclusive of
    Alaska, is held in private ownership. About half of this land--907
    million acres--is cropland, pasture, and rangeland. The stewardship of
    these particular acres lies in the hands of fewer than 5 million
    individuals, which means the care of 50 percent of our land is in the
    hands of less than 2 percent of our citizens.
        We rely on these fellow citizens and neighbors to produce the food
    and fiber we need, which they do exceedingly well. Our food prices
    remain the lowest in the industrialized world, and our agricultural
    industry contributes significantly to export revenues. But these
    farmers and ranchers, through their care of private land, produce much
    more than food and fiber. The products of their land also include safe
    drinking water, healthy soil, clean-flowing streams, valuable wildlife
    habitat, and scenic landscapes. We don't buy these commodities in the
    supermarket, and their prices are not listed on the Chicago Board of
    Trade, but most Americans value them just the same.
        Realizing the importance of protecting private land and private
    landowners, our nation's policy-makers have made significant
    commitments over the years to conservation. Those commitments began in
    the 1930's in response to the devastating Dust Bowl. Today, in spite of
    important conservation gains over the past decade in particular, soil
    erosion remains a threat on 1 in 3 acres of cropland, water quality and
    supply problems confront many communities, and we have grown
    increasingly concerned about the loss of wildlife habitat and the
    conservation of biodiversity.
        Fortunately, we have a number of new, voluntary, incentive-driven
    tools in the 1996 farm bill that should allow us to extend the
    important conservation gains of the past decade. To do so, however,
    will require a continued, if not renewed, commitment to private land
    and private landowners. We cannot afford to tell landowners that
    stewardship is their concern alone. Stewardship involves a shared
    responsibility between public and private interests alike.
        The following budget request, therefore, strives for a balance in
    spending that will provide farmers and ranchers with sufficient
    financial incentives for conservation work, including targeted land
    retirement, while ensuring that sufficient resources are made available
    to USDA and NRCS for conservation operations generally and technical
    assistance in particular. A budget of this magnitude will allow us to
    continue to work cooperatively with state conservation agencies, local
    conservation districts, and our agency's many other public and private-
    sector partners in assuring an adequate measure of conservation on our
    Nation's working land.
        The following table shows the major items in this year's budget
    request and contrasts them with the comparable figures from the two
    prior fiscal years.

                                                [In thousands of dollars]
    ----------------------------------------------------------------------------------------------------------------
                                                                                       Fiscal year--
                              Appropriation                          -----------------------------------------------
                                                                           1996            1997            1998
    ----------------------------------------------------------------------------------------------------------------
    Conservation operations.........................................         629,794         619,961         722,268
    Wetlands Reserve Program........................................          77,000  ..............  ..............
    Watershed and flood prevention operations.......................         180,514         164,036          40,000
    Resource conservation and development...........................          29,000          29,377          47,700
    Watershed survey and planning...................................          14,000          12,381  ..............
    Colorado River Basin Salinity Control Program...................           2,681  ..............  ..............
    Forestry Incentives Program.....................................           6,625           6,325           6,325
    Outreach for socially disadvantaged farmers.....................             N/A       \1\ 5,500           5,000
    ----------------------------------------------------------------------------------------------------------------
    \1\ Includes $4.5 million allotment from the Fund for Rural America.

        Now, let me describe how NRCS differs from other federal agencies
    and summarize for you the agency's role. I will also outline the major
    programs NRCS administers and describes not only some of the things we
    have achieved with the help of our partners at state and local levels,
    but also some of what have planned.
         strategic assets of the natural resources conservation service
        NRCS provides natural resources conservation assistance primarily
    on private lands. More than 70 percent of the land in the contiguous
    United States is privately owned, including virtually all of the
    Nation's agricultural lands. It is on the private lands where millions
    of individual decisions are made by farmers and ranchers, that the
    ultimate success of the majority of our natural resource efforts will
    succeed or fail in helping meet the twin goals of productive
    agriculture and an economically and environmentally sustainable future.
        NRCS is the only Federal agency whose major purpose is to provide
    consistent technical assistance to private landusers across the
    country. The agency's focus is on helping landowners and users achieve
    natural resource and environmental goals while maintaining productive
    and profitable operations and economically viable rural communities.
    NRCS has had some significant successes in the past, and the structure
    is designed to continue that success in the future. Let me describe
    some of the agency's assets in light of the implementation of the USDA
    Reorganization Act of 1994, including the Department's Field Office
    Streamlining efforts.
      --Delivery system. NRCS has a nationwide network of professionally
            staffed local offices that provide conservation technical
            assistance to owners and users of privately-owned land. This
            nationwide delivery system is based on a partnership that
            combines a federal natural resource presence at the local level
            with locally sponsored and controlled conservation districts
            and their employees. This conservation infrastructure is
            interwoven and interconnected at the local, State, and Federal
            levels with complex relationships and program support systems
            that are interdependent. Local service will be continued, but
            with the reorganization and consolidation of field offices,
            this operation will be more efficient and enable our field
            staff to provide the kind of site-specific technical assistance
            individual private landowners need and want.
      --Technical skills. NRCS' natural resource specialists are trained to
            deliver technological support to groups and individuals
            quickly, efficiently, and consistently nationwide. By
            regionalizing NRCS, our technical staff will be able to apply
            their knowledge of soil science, engineering, landscape
            architecture, agronomy, biology, range management, economics,
            geology, and other fields with a much greater degree of
            sensitivity to local conditions. NRCS field offices and staff
            working in partnership with the local conservation districts
            are used as a primary source of help by local people--and often
            by people administering programs for other Federal, State, and
            local agencies. About 9,000 staff are located at these offices.
      --Technical excellence. Throughout government and private industry,
            NRCS specifications for soil and water conservation practices
            are the national standard. In addition, the agency is the
            leader in soil classification and soil mapping. Recently, in
            recognition of the vital importance of soil quality, NRCS has
            made a commitment to better understand and emphasize the
            fundamental role of soil quality.
      --Natural resource planning experience. NRCS has vast experience in
            broad-scale planning in watersheds and other areas and site-
            specific planning on farms and ranches to address natural
            resource concerns. Effective natural resource planning in the
            future will require this type of planning process to develop
            effective solutions that meet the needs for a sustainable land
            and its people. NRCS is now serving as a catalyst by providing
            coordination to bring local people together with skilled
            technical people to develop and implement meaningful solutions.
            These planning efforts are provided through the Watershed
            Survey and Planning Program, the Resource Conservation and
            Development (RC&D) Program, and Coordinated Resource planning
            provided through Conservation Operations.
      --Partnerships and volunteerism. Since its creation, NRCS has
            operated through voluntary cooperative arrangements with
            individuals, the private sector, and Federal, State, and local
            governments. The value of NRCS technical assistance is
            recognized by local and State partners; equally, we recognize
            the invaluable contribution of volunteers, who contribute
            immeasurably to conservation efforts. Americans from all walks
            of life have freely and generously given of their time to the
            volunteer arm of NRCS, known as the Earth Team. In fact, in
            fiscal year 1996, some 14,748 NRCS Earth Team volunteers
            donated 530,854 hours to conservation efforts. As calculated by
            the Points of Light Foundation, this equates to an additional
            $6,400,000 in direct assistance to private landowners and
            national resource protection.
      --Local people as decision-makers. When NRCS delivers conservation
            and program assistance, the agency works under cooperative
            agreements with some 3,000 conservation districts that are
            established under state law. About 17,000 local conservation
            district supervisors provide the agency with invaluable
            guidance. The NRCS cooperative team structure is an established
            and practical example of how Federal programs can be managed
            with local guidance at the local level. It is crucial to
            remember that the agency's approach is a voluntary one. Our
            professionals provide options for problem-solving--developed in
            conjunction with customers, but it is the customers who make
            the final decisions.
      --Leverage. State and local governments contribute substantially,
            with both people and dollars complementing NRCS technical
            assistance. In fiscal year 1997, State and local governments
            spent over $500 million on conservation--a considerable
            increase from the $247 million spent a decade ago. Without NRCS
            technical assistance, which greatly enhances the value of State
            and local efforts, these funds almost certainly would not have
            been spent on natural resource protection. In a sense, this
            cooperation constitutes a two-way leveraging: State and local
            programs and NRCS benefit from each other's involvement.
                              usda reorganization
        A major goal of this Administration has been to ``reinvent
    government'' so it works better and costs less, cutting waste and
    reducing bureaucracy. The National Performance Review (NPR) process,
    challenging all areas of the Federal Government to do a comprehensive
    bottom-up review of operations, resulted in innovative and creative
    ideas on how we ourselves could make necessary and appropriate
    improvements in the way our agencies do business. Taking these good
    ideas and incorporating additional improvements, Congress authorized
    USDA reorganization in the ``Federal Crop Insurance Reform and
    Department of Agriculture Reorganization Act of 1994''. With this
    action, NRCS was given the green light to develop an implementation
    plan for these exciting new ideas.
        In December of 1994, after extensive public input, NRCS unveiled
    its far reaching reinvention plan which is targeted for full
    implementation by 1999. In addition to the field office closings and
    consolidations previously announced by former Secretary Espy, the plan
    called for major restructuring above the field office level. The
    proportion of NRCS staff at the field office level will increase from
    the current 70 percent to 80 percent; operational functions are being
    delegated to the lowest level possible; headquarters operations are
    being reduced by over 50 percent; science and technology will be
    focused on areas important to our mission through the establishment of
    more than six NRCS Institutes which will improve our capabilities in
    areas such as grazing lands, natural resource inventory, wetland
    science, social science, watershed science, and soil quality; the
    ability of NRCS to address multi-state natural resource and program
    delivery issues is being improved through the establishment of regional
    offices; technical support functions are remaining strong and becoming
    better focused by being moved closer to where programs are carried out;
    and administrative and other support activities are being thoroughly
    reviewed for continued improvement in efficiency and better focused to
    support a modernized agency.
        By October 1, 1995, all areas of the NRCS reorganization plan were
    in full implementation. This included all agency personnel knowing
    their new role, Regional Conservationists in place and operational,
    technical functions reassigned closer to the field, and the transfer of
    programs such as the Wetlands Reserve Program and Forestry Incentives
    Program completed, as provided in the 1994 Act. Further, NRCS field
    office streamlining efforts were fully under way with the Department,
    as we begin the multi-year process of moving from the historical field
    offices to field service centers.
        This has not been an easy process, especially from the standpoint
    of the agency's most important resource--our employees. I am pleased we
    have been able to use the tools necessary, including authorities from
    Congress, to meet our goals without overly impacting our employees and
    their careers. I am indeed proud of how NRCS employees have embraced
    this change and have committed to seeing this reorganization
    completed--successfully. However, any change this massive cannot be
    without its bumps and mistakes.
        We have learned a lot from the reorganization process as well, and
    have made further needed adjustments as identified. On January 30,
    1997, further adjustments of the NRCS National Headquarters structure
    were approved by the Department. The changes are the result of
    recommendations and appraisals made one year after the agency-wide
    reorganization and from recommendations of our strategic planning and
    reports. Our new headquarters structure includes an increased emphasis
    on strategic planning and soil and natural resource assessment.
    Reflected in this, are a new Deputy Chief for Soil Survey and Resource
    Assessment and several realigned Divisions. We are encouraged by the
    results of the agency-wide reorganization and are equally optimistic
    that our present adjustments will render the agency better equipped
    than ever to tackle the mission ahead.
        Now I will describe our programs and plans for fiscal year 1998.
            program effects and the fiscal year 1998 budget request
        Many programs provided by NRCS are a catalyst for local investment
    and as a result, enhance local economic activities. Other programs
    provide services that are voluntary in nature, and not available or
    provided by other government or private entities. These programs and
    activities are an essential component of the conservation fabric of the
    Nation. I will briefly highlight several for you.
        Conservation operations is the foundation for most of the agency's
    activities. These activities are carried out through the conservation
    infrastructure, a complex array of local, State, and Federal agencies
    and organizations and local people working together for natural
    resource protection. The relationships are complex and NRCS is an
    integral part of these local, State, and Federal interdependent program
    support systems. Many grassroots programs and initiatives are funded by
    conservation operations. Several are described below.
        Conservation Technical Assistance is the cornerstone for most
    agency activities. The fiscal year 1996 appropriations were
    $538,904,000; and the fiscal year 1997 comparable appropriations are
    $528,892,000, and the fiscal year 1998 budget request is $549,241,000.
    As stated previously, this difference over fiscal year 1997 is due in
    large part to uncontrollable costs from inflation and pay costs, and
    costs to relocate NRCS operations to the USDA Service Centers, and the
    increased program responsibilities associated with implementation of
    the conservation programs of the Federal Agricultural Reform and
    Improvement Act of 1996 (1996 Act). During 1998, the Natural Resources
    Conservation Service will continue to provide technical assistance on
    prior year projects as needed for the Colorado River Basin salinity
    Control Program and ongoing activities of the Great Plains Conservation
    Program.
        Conservation technical assistance provides assistance to private
    land users, communities, units of State and local government, and other
    Federal agencies for planning and implementing solutions to natural
    resource problems. This technical assistance is the cornerstone for
    locally-led conservation efforts that are conducted in partnership with
    state, local, and tribal governments, including conservation districts;
    private groups of farmers and ranchers; and environmental groups. In
    the past decade, major strides have been made in reducing erosion;
    improving soil and water quantity and quality, air quality, pasture and
    range conditions; improving and conserving wetlands and woodlands;
    enhancing fish and wildlife habitat; and reducing upstream flooding.
    This assistance is based on voluntary local landowner cooperation and
    recognizes the value of educational, technical, and financial
    assistance. These principles apply as we are responding to individual
    needs, local goals, and to nationally determined priorities. Still,
    more remains to be done. Also, because neither agriculture nor the
    environment is static, and both are constantly changing, the agencies
    and programs need also to be constantly evolving.
        During fiscal year 1996, NRCS assisted approximately 814,000
    private landowners in preparing conservation plans and implementing
    conservation systems , as well as providing assistance to units of
    government in developing area wide conservation plans and goals. This
    resulted in conservation treatment on over 100 million acres of land,
    including cropland, rangeland, pastureland, woodland, and other land.
        Urban Conservation is an additional area for which we are
    particularly proud. It is an area for which I have taken particular
    interest and believe that we are making significant gains. While, much
    of my remarks have focused upon rural land to this point, it is the
    mission of NRCS to provide assistance to all of our nation's private
    land including urban, and suburban communities. Four years ago, the
    Department of Agriculture initiated an Urban Resources Partnership
    (URP). This is an effort which NRCS is co-leading to provide
    conservation assistance to the communities that need it most--urban and
    urbanizing areas. We are proud to report that over 4,000 non-profit and
    community-based organizations receive financial support and technical
    educational assistance from URP. Communities are responding with
    enthusiasm and have matched federal financial assistance with over
    fifty percent matches. We have eight major metropolitan cities under
    the program including New York City, Chicago, and Los Angeles. In these
    pilot cities, NRCS field staff provide assistance in a diverse range of
    projects from community gardening and forestry, to education of youth
    about soil science and the urban watersheds in their community.
        But our work in this area only begins here. NRCS employees support
    numerous urban pilot cities and provide agency expertise on urban
    resource concerns. As many of you know, the nation's most productive
    farmland is located in our near urbanizing areas. NRCS staff address
    issues of ``farming on the fringe'' and help mitigate some of the
    difficult concerns that arise when agrarian and community interests are
    at odds. Through the Land Evaluation and Site Assessment system, NRCS
    staff provide advice to local government officials on land-use and
    zoning decisions. In addition, we provide planning support to
    landowners to remediate air and water quality concerns of their
    neighboring community. These services are all provided as part of the
    conservation technical assistance available to everyone.
        Highly Erodible Land Conservation (HELC). Since 1985, the Agency
    has devoted a significant portion of its technical assistance resources
    to helping farmers and ranchers meet the highly erodible land
    conservation provisions. With NRCS technical assistance, more than 1.7
    million plans have been prepared covering about 142 million acres of
    highly erodible land, and 95 percent of those plans were implemented by
    the mandated deadline of December 31, 1994. Between 1985 and 1995,
    technical assistance was provided to an average of over a million
    decision-making land owners and users each year; one result is that
    soil erosion has been reduced by over a billion tons annually. By the
    end of fiscal year 1995, all the highly erodible plans were installed.
    The 1996 Act provided amendments that have reduced the burden of
    complying with the HELC provisions and have provided USDA with
    additional tools to use in working with producers. However, all
    producers who receive USDA program benefits must be fully applying a
    conservation plan on highly erodible land. Therefore NRCS assists
    producers in developing plans for land that they acquire and in making
    changes in their current plans so that their plan may reflect changes
    in cropping systems, weather conditions, and economic incentives. Our
    experience has shown that approximately 20 percent of producers will
    change their conservation systems each year. This figure may be
    slightly higher in the next few years as producers begin to respond to
    market signals as a result of the Agricultural Market Transition Act
    Program (AMTA). The 1997 enrollment in AMTA generated requests to NRCS
    for 137,234 highly erodible land determination on fields, 79,225 new
    conservation plans, and revisions on 146,239 conservation plans.
        Preliminary 1996 Status Review data show that approximately 48
    percent of farmers have conservation systems that are at sustainable
    levels of soil loss or levels that allow soil to be created at a faster
    rate than it is lost. With the amendments provided by the 1996 Act,
    NRCS will be ensuring that new conservation systems provided to farmers
    and ranchers result in a substantial reduction in soil erosion.
        Wetland determinations and certifications. On January 6, 1994, four
    Federal agencies with wetland protection responsibilities signed an
    historic Memorandum of Agreement recognizing NRCS as the lead Federal
    agency for wetland determinations on agricultural lands. Farmers now
    turn to NRCS for determinations that identify the extent of wetlands
    under both the swampbuster provisions of the Food Security Act of 1985
    and Section 404 of the Clean Water Act. This new responsibility brought
    increased commitment of staff resources to provide prompt, accurate,
    and effective service to our Nation's agricultural land owners and
    users.
        Both the 1990 and 1996 Farm Bills called for the Secretary to
    ``certify whether a map is sufficient for the purpose of making a
    determination of ineligibility for program benefits.'' This was
    interpreted to mean the review and certification of previously made
    wetland determinations. In 1991, the certification process was put on
    hold because of dialogue surrounding which version of the Corps of
    Engineers delineation manual was appropriate. Because of this debate,
    Congress commissioned the National Academy of Sciences to do a study
    and determine the appropriate definition of a wetland. In 1994, the
    National Academy of Sciences completed it's work and affirmed the 1987
    version best identified wetlands.
        However, in April of 1995, the Secretary decided it was necessary
    to suspend all wetland determinations unless specifically requested by
    the client, or when a potential violation occurs. This decision
    resulted from the prospect of legislative changes in the Food Security
    Act of 1985 (1985 Act). The legislative changes to the 1985 Act
    generally reduced the cumbersome elements of compliance, while
    protecting wetland functions and values. The Food Security Act also
    provided that certified wetland delineation's will remain in effect
    until such time as the landscape is changed by natural events. All
    current determinations are frozen and the process of providing
    wholesale wetland resource information to customers is on hold, unless
    a determination is specifically requested. Landowners have continued to
    request a number of certified wetland determinations and these requests
    are expected to increase as these issues continue to play themselves
    out in Congress. The enrollment in Agriculture Market Transition Act
    (AMTA) generated requests to NRCS for approximately 25,417 wetland
    determinations.
        The 1996 Act also required the Secretary to permit persons to
    secure technical assistance from approved sources, in addition to those
    services available through the NRCS. Other sources were not previously
    restricted; however, language in the 1996 Act now implies that a
    certification for measurement of crop residues and an approval process
    for conservation planning and implementation process are required.
    State Conservationists, in consultation with the State Technical
    Committee, are establishing methodologies for third parties to use to
    measure crop residue. NRCS and others will hold training sessions for
    interested persons in accordance with guidance. Upon completion of
    training, and after all requirements are met, third parties will be
    deemed ``certified.'' Producers may participate in training, but
    training is not required
        Certification or approval status only reflects that person(s) or
    groups have presented written assurances that they possess technical
    qualifications. Neither NRCS nor USDA will warrant or guarantee the
    quality of work done by third party providers of technical assistance.
    NRCS is, also, working with certification registries and associations
    to ensure that certification programs for approval of commercial
    sources of services reflect skill levels necessary to meet technical
    assistance needed.
        Grazing Land Conservation Initiative (GLCI). This grassroots-driven
    initiative has helped NRCS better define the resource needs and
    benefits generated when grazing lands are improved. NRCS has been
    requested by this group to continue technical assistance to livestock
    producers on private grazing lands. Grazing lands include rangelands,
    pasture, hayland, and grazed forestlands. The latest 1992 National
    Resources Inventory (NRI), shows that grazing lands--mostly rangeland
    and pasture--represent 642 million acres, or almost half of the non-
    Federal lands in the United States.
        The NRI analysis of range vegetation shows that over 15 percent of
    non-Federal rangelands are in poor condition; over 44 percent are in
    fair condition; 34 percent in good condition; and only 6 percent in
    excellent condition. The NRI indicates that 75 percent--nearly 299
    million acres--of non-Federal rangelands need conservation treatment.
    Properly managed grazing land represents a renewable resource for
    producing food and fiber. Vegetative cover on well-managed grazing
    lands contributes to: 1) increased water quality and quantity; 2)
    improved wildlife habitat; 3) reduced soil erosion and sedimentation;
    and 4) improved riparian areas. Conservation Operations will continue
    to support technical assistance for these unmet conservation needs and
    will provide additional assistance within current funding levels as the
    field level workload permits. In fiscal year 1997, NRCS was able to
    provide enough resources to this initiative to ensure each of the 50
    states has access to a Grazing Land Conservation Coordinator. This will
    enable us to provide multi-resource technical assistance to support
    grazing lands conservation and water quality improvement on rangelands
    and begin the process of rebuilding the agency's expertise in rangeland
    conservation, a capability demanded by our customers.
        Service Center Implementation, a customer-oriented initiative
    within USDA, will continue in 1997 within currently budgeted funding
    levels. It will improve delivery of services in USDA field-delivery
    programs through improved business process reengineering (BPR) and
    information systems integration. Service Center Implementation will
    coordinate planning, acquisition, development, implementation, and
    management of information technology resources. Service Center
    Implementation will benefit the agency and customer partnerships by: 1)
    providing one-stop shopping to multi-agency programs; 2) significantly
    reducing paperwork required of customers and employees; 3) facilitating
    data sharing; and 4) reducing repetitive requests for information.
        One of the areas where BPR has resulted in significant positive
    change in a core NRCS business process is in the design, construction,
    and implementation of the agency's Field Office Computing System
    (FOCS). This system, developed by reengineering the natural resource
    conservation planning model, steps away from the single resource plan
    used for Food Security Act compliance with its intensive record keeping
    requirements, and enables a much more holistic, natural resources
    oriented planning process for protecting and enhancing soil, water,
    air, plants, and animal resources while preserving agricultural
    profitability for farmers and ranchers. Literally hundreds of
    employees, customers, and partners were involved in this five year
    effort that is now coming to fruition. FOCS and the core conservation
    planning process it automates will be merged into the concept of the
    USDA Field Service Center within the Service Center Implementation
    interagency business and information strategic plan.
        New technology. Most of the natural resource information used by
    NRCS is referenced to a geographic location on the ground, and there is
    a need to put this data in digital form for more accessible use in a
    geographic information system (GIS) available at state and field
    offices. This budget proposed an increase of $10 million to accelerate
    the purchase of digital orthophotography and data digitization. This
    will improve customer service by providing more usable and accurate
    information for use in natural resource planning and decision-making,
    and for environmental assessments and evaluations. It will also reduce
    duplicative work done with the same customers in the USDA Service
    Center. Currently, about 200 NRCS field offices are using GIS. We are
    embarking on an important review of the information NRCS collects to
    assure that it meets the real resource information needs of farmers and
    ranchers. As part of this effort, we also are working on improving
    interagency cooperation, and the ways in which we share and display
    natural resource, economic, and other data so they conform to the
    national GIS database standards. Increasing the availability of such
    data is necessary for USDA reorganization and reinvention at the field
    level.
        Under the 1977 Resources Conservation Act (RCA), USDA, through
    NRCS, with the assistance of nine other Federal agencies, conducts and
    analyzes ongoing comprehensive inventories and assessments of the
    status, condition, and trends of America's natural resources on all
    non-Federal lands. This information is used by USDA, other Federal
    agencies, State and local governments, and other organizations to
    support agriculture and conservation policy development and program
    evaluation. NRCS is working to assure the RCA Appraisal addresses the
    distinct characteristics of the regions of the country. The agency also
    will be developing, in the next 18 to 24 months, the third National
    Conservation Program, also called for under the RCA.
        USDA Centers of Excellence initiative. USDA will continue to work
    in partnership with the 1890 Land Grant Institutions and Tuskegee
    University, to develop low cost conservation systems to improve water
    quality and reduce erosion. USDA is establishing Centers of Excellence
    at the 1890 schools. NRCS and the 1890 Institutions have a history of
    cooperative ventures that have provided knowledge and skills necessary
    to strengthen and broaden the application of technologies to the
    limited resource and socially disadvantaged farmers they serve. It is
    economical and efficient to support the Centers of Excellence with the
    universities than developing that capacity within USDA. The focus of
    the proposal is to develop and evaluate sustainable ecosystems that
    would improve and protect water quality and quantity. NRCS will
    continue the current level of support for this initiative.
        Assistance to American Indians, Native Alaskans and Pacific
    Islanders. Many of the more than 310 reservations covering more than 50
    million acres in the 48 contiguous states, four areas of trust land, 12
    Alaska Native Regional Corporations and 217 Alaska Native Villages have
    been requesting technical assistance. We estimate receiving 150
    requests to establish tribal land field offices each year. Staff in
    those offices provide basic technical assistance for resource problem
    identification and conservation planning and application. NRCS plans to
    provide technical assistance and capacity-building assistance needed on
    a full-time basis on Indian lands that have significant natural
    resource problems, within the current funding level as workload in the
    field permits. This assistance will begin the process of developing
    local capacity in natural resources management by establishing an
    internship/self reliance program similar to the one in operation at the
    Wind River Reservation in Wyoming. Tribal employees will be trained
    through on-the-job and educational experiences as a conservation work
    force on Indian lands. No additional funds are requested for this
    activity for fiscal year 1998, but additional assistance will be
    provided to this high priority activity to the extent possible within
    requested funding levels.
        Snow survey and water supply forecasts provide western states and
    Alaska with vital information on summer water supplies. The fiscal year
    1996 appropriations were $5,852,000; the fiscal year 1997
    appropriations are $5,835,000; and the fiscal year 1998 budget request
    is $5,888,000. NRCS field staffs provide necessary leadership,
    standardization of procedures, and automation to a partnership of
    Federal, State, and local personnel to collect snow-pack data from more
    than 1,200 remote high mountain sites. Data are collected with many
    partners, including Conservation Districts, Bureau of Indian Affairs,
    Bureau of Land Management, Forest Service, the National Weather
    Service, Army Corps of Engineers, Bonneville Power Administration, and
    many State and local entities both public and private. After compiling
    and analyzing the data, NRCS is able to provide snowpack estimates and
    water yield on a monthly basis throughout the snow melting period. The
    knowledge gained through this effort supports critical decisions on
    billions of dollars of agricultural production, municipal water supply,
    hydroelectric and industrial water supply, flood control, and water
    flow requirements for fish and wildlife. This modest program
    contributes substantially to the economic and environmental well-being
    of a very large part of the country.
        Soil Surveys provide the public with local information on the uses
    and capabilities of their soil resources. The fiscal year 1996
    appropriations were $76,163,000; the fiscal year 1997 appropriations
    are $76,409,000; and the fiscal year 1998 budget request is
    $82,248,000. Soil surveys are based on scientific analysis and
    classification of soils and are used to determine land capabilities and
    conservation treatment needs. The published soil survey for a county or
    designated area includes maps and interpretations with explanatory
    information that is the foundation of resource policy, planning and
    decision-making for Federal, State, county, and local community
    programs. Homeowners and landowners also use soil survey information
    when making decisions. Soil surveys are conducted cooperatively with
    other Federal agencies, land grant universities, State agencies, and
    local units of government, many of whom contribute funds and staff.
        Soils information has been gathered over many years and is
    primarily contained in published soil survey manuscripts and maps.
    There is a need for digital soils data for use in geographic
    information systems (GIS). NRCS has the leadership role for
    coordinating the development, maintenance, and distribution of a
    modernized digital soils data base. Geographically referenced digitized
    soil survey data, along with orthophotography will provide the accurate
    reference base needed for computer-assisted conservation, natural
    resource planning, and for geographic referenced data sharing. In
    addition, digitizing the soil surveys provides efficiency when updating
    and maintaining the soil survey data. This budget contains $5 million
    to support the updating of older soils information to current standards
    for digitization of soil surveys and the formation of a national
    database.
        Plant Material Centers assemble and test plant propagation and the
    usefulness of plant species for biomass production, carbon
    sequestration, erosion reduction, wetland restoration, water quality
    improvement, stream bank and riparian area protection, coastal dune
    stabilization, and to meet other special conservation treatment needs.
    The fiscal year 1996 appropriations were $8,875,000; the fiscal year
    1997 appropriations are $8,825,000; and the fiscal year 1998 budget
    request is $8,891,000. Plant materials represent inexpensive, long-term
    conservation solutions to many environmental and natural resource
    problems and their maintenance costs are usually low. Many landowners
    and managers willingly use plant materials, if available, to meet their
    conservation needs.
        The work at the 26 centers is carried out cooperatively with State
    and other Federal agencies, commercial businesses, and seed and nursery
    associations. Plant Materials Centers play an important research and
    development roles since most commercial nurseries will not develop new
    plant materials due to limited markets, but will grow and market the
    stock once a dependable plant has been developed. After species are
    proven, they are released to the private sector for commercial
    production.
        Watershed and Flood Prevention Operations is the first and only
    national program that helps local organizations plan and install
    watershed-based projects on private lands. It provides site-specific
    technical expertise and locally based watershed planning and financial
    assistance for plan implementation. The Watershed Program provides a
    process to solve local natural resource problems and avoid excessive
    regulation. The fiscal year 1996 appropriations for Public Law 534 and
    Public Law 566 were $180,514,000; the fiscal year 1997 appropriations
    are $164,036,000; and the fiscal year 1998 budget request is
    $40,000,000 plus $60,000,000 in Conservation Operation for technical
    assistance. Therefore, the total funding this budget requests is
    $100,000,000. The authorized purposes of watershed projects include
    watershed protection, flood prevention, water quality improvements,
    soil erosion reduction, rural, municipal and industrial water supply,
    irrigation water management, sedimentation control, fish and wildlife
    habitat enhancement, wetland creation and restoration, and public
    recreation. The program empowers local people as decision-makers,
    builds partnerships and requires local and State funding contributions
    and ownership.
        The program has been subject to what we view as legitimate
    criticisms in recent years. However, we do not agree with those who
    would attempt to end the program. While I agree fundamentally with
    those who have criticized the historical use of large dams, reservoirs,
    and channelization to achieve flood management as destructive to many
    natural processes and functions in treated watersheds, I do not believe
    the program as currently administered should be scrapped. Judicious use
    of physical works to protect and manage watersheds can be
    constructive--both to natural systems and for protecting farm land from
    serious harm. For instance, the 1994 Galloway report on floodplain
    management shows that during the 1993 Midwest Flood, the Small
    Watershed Program was credited with avoiding $400 million of damages to
    population centers, agriculture, and industry. USDA farm program
    disaster payments were significantly less in watersheds that had been
    treated with conservation measures through this program. This was also
    the case with Tropical Storm Alberto in parts of Florida, Alabama, and
    Georgia. Any project approved by the program for flood prevention will
    yield very high benefit/cost results.
        The agency administers this program by authorizing local sponsoring
    organizations to begin the development of a plan. In fiscal year 1994
    through fiscal year 1996, of the planning starts authorized, most were
    requested primarily to improve water quality from agricultural sources
    and to benefit fish and wildlife habitat. The remainder identified
    water quality as secondary purposes. Proposed project actions include
    agricultural waste management, nutrient and pesticide management, and
    other land treatment measures. An example is in Alaska where the first
    watershed project authorized under this program is improving water
    quality to protect critical salmon spawning habitat. This project is
    important because it protects salmon as a subsistence food source for
    Alaskan Natives and for the fishing industry on the coast.
        Early in fiscal year 1995, the agency completed a Phase I review of
    authorized projects. With the agreement of everyone involved, including
    project sponsors, more than 500 dams and 1,800 miles of stream channel
    modifications were deleted and many other projects had previously
    planned measures replaced with more up to date and environmentally
    sound measures for watershed restoration. We are currently completing
    Phase II of this review during which the remaining projects are being
    given a more rigorous review, using the team approach, at the local
    level. This second phase review has, to date, deleted an additional 135
    dams and 930 miles of stream channel. This brings the total to 635 dams
    and 2,730 miles of stream channel modification removed from current
    watershed plans, while maintaining the overall goals of those plans. It
    is important to note as well, that the process has identified and
    appropriately closed out 76 projects with additional projects being
    review for closing with the local sponsors.
        The agency has undertaken a comprehensive effort to reevaluate the
    program and is in the process of refocusing it to approach watersheds
    in a more comprehensive, ecosystem-based fashion, involving all local
    people with a stake in the outcome, in the broad range of land use and
    conservation issues. Priority will be given to watersheds where local
    people have identified the need for natural resource restoration, water
    quality improvement, restoration of fish and wildlife habitat, flood
    damage reduction emphasizing non-structural measures, and where local
    sponsor support is strong. Watersheds located in agricultural and rural
    community settings with low-income and socially disadvantaged farmers,
    as well as those serving Native Americans also will receive priority.
    NRCS will ensure that assistance to local leaders through the Small
    Watershed Program is supported by appropriate Federal partnerships, is
    compatible with national natural resource issues and complements State
    and local priorities. The 1998 budget proposal would provide no
    additional funds for flood prevention work under the authority of
    Public Law 534, but would continue work on the remaining high priority
    projects that would qualify for assistance under the authority of the
    Small Watershed Program (Public Law 566). Additionally, technical
    assistance for these program activities would be combined (along with
    Watershed Surveys and Planning) into a single new line item for water
    resources assistance requested under the Conservation Operation
    appropriation.
        The Emergency Watershed Protection (EWP) program provides
    assistance to reduce hazards to life and property in watersheds damaged
    by severe natural events. An emergency is considered to exist when
    floods, fires, droughts, or other natural disasters result in life and
    property being endangered by flooding, erosion, or sediment discharge.
    In the latter part of 1995, October through December, $98,800,000 was
    used for emergency work, with the last $35,500,000 originating in
    previously appropriated supplemental funds. EWP was utilized during the
    Midwest Floods in 1993, western wildfires, and Tropical Storm Alberto
    in 1994, and floods in California and the Southeast in 1995. In fiscal
    year 1996, an $80,514,000 supplemental appropriations was appropriated
    to repair damages to waterways and watersheds resulting from flooding
    in the Pacific Northwest, the Northeast blizzards and floods and other
    natural disasters. An additional $63,000,000 was provided for fiscal
    year 1997 to repair damages from Hurricanes Hortense and Fran.
        During the past eight years, the program has been needed and used
    in an average of 26 states per year. Technical and financial assistance
    under the EWP program is available for small-scale, localized disasters
    not necessarily declared as national in scope. Among the emergency
    activities, generally performed with temporarily employed local labor,
    are disaster cleanup and subsequent rebuilding; restoring stream
    corridors, wetland and riparian areas; establishing quick vegetative
    cover on denuded land, steep land, and eroding banks; opening
    dangerously restricted channels; repairing diversions and levees, and
    assisting the Federal Emergency Management Agency when it plans and
    relocates communities away from floodplains.
        Resource Conservation and Development (RC&D) is a program initiated
    and directed at the local level by volunteers. The fiscal year 1996
    appropriations were $29,000,000; the fiscal year 1997 appropriations
    are $29,377,000; and the fiscal year 1998 budget request is
    $47,700,000. The increase over the fiscal year 1997 appropriations will
    fund pay costs and local, non-Federal watershed and rangeland
    coordinators to assist in watershed planning and rangeland
    conservation.
        Each RC&D area encompasses multiple communities, various units of
    government, municipalities, and grassroots organizations. The RC&D's
    represent an unusual approach for helping citizens address multi-
    jurisdictional natural resource and community development issues. NRCS
    provides coordination to the program which serves as a catalyst for
    these civic oriented groups to share knowledge and resources, and it
    leverages public and private funds to solve common problems--including
    economic development--in a given area. Assistance is obtained from the
    private sector, corporations, foundations, and all levels of
    government. Historically, every dollar of NRCS technical and financial
    assistance from this program and applied directly to local projects,
    has been matched by about $13 from other sources. In fiscal year 1996,
    RC&D areas completed 2,342 projects and Council members and other
    volunteers donated 716,184 hours of time to these completed projects.
    There are currently 290 authorized RC&D areas involving 2,143 counties
    across the country. In addition, an increase of $18 million is
    requested to fund local, non-Federal watershed coordinators to assist
    in rangeland and watershed planning for a wide range of environmental
    purposes such as the salmon recovery efforts on the Pacific Northwest.
        Forestry Incentives Program. This program is authorized under the
    Cooperative Forestry Assistance Act of 1978, as amended by section 1214
    of the Food, Agriculture, Conservation and Trade Act (FACT) of 1990.
    The Forestry Incentives Program was re-authorized under the 1996 Act,
    which extended the program through the year 2002. Authorizing
    legislation for FIP expired on December 31, 1995.
        The FIP primary objective is to increase the Nation's supply of
    timber products from private non-industrial forest lands. The program
    encourages landowners to plant trees on suitable open lands or cut-over
    areas, and to perform timber stand improvements for the production of
    timber and other related forest resources. The program is carried out
    through annual and long-term cost sharing agreements with private
    landowners who improve a stand of forest tress or plant trees.
        The fiscal year 1998 budget will provide cost-share funding at the
    fiscal year 1997 appropriated level of $6.325 million. Program
    technical assistance will be provided by the Forest Service (FS).
    Forestry studies have indicated that over 30 percent of all tree
    planting on non-industrial, private lands is accomplished through FIP.
        Outreach to Socially Disadvantaged Farmers and Ranchers. The budget
    proposes to continue this program at $5,000,000. There was a direct
    appropriation of $1 million and a transfer of $4.5 million from the
    Fund for Rural America to this program in fiscal year 1997. The overall
    goal of the program is to increase service to small or limited resource
    and minority producers in order to improve the farm income of these
    producers. Objectives are to make grants and enter into agreements with
    community-based organizations and educational institutions to provide
    outreach and technical assistance. The Outreach to Socially
    Disadvantaged Farmers and Ranchers program was transferred from the
    Farm Service Agency to NRCS in October 1996.
                     commodity credit corporations programs
        NRCS also administers, on behalf of the Commodity Credit
    Corporation (CCC), several cost-share programs, key among these being
    the programs set forth in the Federal Agriculture Reform and
    Improvement Act of 1996 (1996 Act) and also provides technical
    assistance to individuals and groups participating in the Conservation
    Reserve Program, which is administered by the Farm Service Agency. The
    new conservation programs provided by the 1996 Act, which NRCS
    administers on behalf of CCC, includes the Environmental Quality
    Incentives Program (EQIP), Wildlife Habitat Incentives Program (WHIP),
    Farmland Protection Program (FPP), and Conservation Farm Option (CFO).
    The 1996 Act also amended the Food Security Act of 1985, to the
    continued implementation of the Wetlands Reserve Program (WRP) which
    NRCS administers on behalf of CCC.
        The Environmental Quality Incentives Program (EQIP) provides in a
    single, voluntary program, flexible technical, financial, and
    educational assistance to farmers and ranchers who face serious threats
    to soil, water, and related natural resources on agricultural land and
    other land, including grazing lands, wetlands, forestland, and wildlife
    habitat. Assistance will be provided in a manner that maximizes
    environmental benefits per dollar expended, to help producers comply
    with Title XII of the Food Security Act of 1985, as amended, and
    Federal and State environmental laws
        Funds of the CCC will be used to fund the assistance provided under
    EQIP. The program was funded at $130 million in fiscal year 1996, of
    which program authorities for the ACP were used to obligate $99 million
    and the program authorities of the GPCP and CRBSCP were used to
    obligate $31 million. For fiscal year 1997, $200 million has been
    apportioned to implement the EQIP. Of that amount 10 percent was
    apportioned by the Office of Management and Budget to pay the cost of
    assisting producers in developing conservation plans, engineering
    conservation systems, and following-up to successfully apply the
    systems called for in the EQIP contract. Fifty percent of the funding
    available for the program will be targeted at practices relating to
    livestock production.
        The program will primarily be available in priority conservation
    areas throughout the Nation. The priority areas will be watersheds,
    regions, or areas of special environmental sensitivity or having
    significant soil, water, or related natural resource concerns. For
    fiscal year 1997, 65 percent of the EQIP financial assistance funding
    will be provided within priority areas. The process for selecting these
    priority areas begins with the local conservation districts convening
    local work groups, which are a partnership of the conservation
    district, NRCS, Farm Service Agency, Farm Service Agency county
    committees, Cooperative Extension Service, and other state, local, and
    tribal entities with an interest in natural resources conservation.
    They develop proposals for priority areas, develop ranking criteria to
    be used to prioritize producer's applications for EQIP, make program
    policy recommendations, and other related activities. The priority
    areas recommended to NRCS by the local work group are submitted to the
    NRCS State Conservationist, who with the advice of the State Technical
    Committee and concurrence of Farm Services Agency, sets priorities for
    the program, including approval of priority areas.
        State Conservationists, with the advice of the State Technical
    Committee and concurrence of Farm Services Agency, may also determine
    that program assistance is needed by producers located outside of
    funded priority areas that are subject to environmental requirements,
    or who have other natural resource priority concerns. For fiscal year
    1997, 35 percent of EQIP financial assistance funding will be provided
    for these significant statewide concerns.
        Wetlands Reserve Program (WRP) is a voluntary incentive program to
    assist owners of eligible lands to restore and protect wetlands and
    necessary adjacent upland areas. The 1996 Act re-authorized the WRP and
    provided for funding through the CCC beginning in fiscal year 1997,
    extended the duration of the program to 2002, added cost-share
    agreements, and restructured the contract payment terms and length.
        WRP preserves, protects, and restores valuable wetlands mainly on
    marginal agricultural lands where historic wetlands functions and
    values have been either totally depleted or substantially diminished.
    Wetland restoration of such marginal lands provides landowners with a
    financial alternative to continued attempts to produce agricultural
    products on such high risk lands. Program delivery is designed to
    maximize benefits to wildlife, to provide for water quality and flood
    storage benefits, and to provide for general aesthetic and open space
    needs. Many of the WRP project sites are within areas that are
    frequently subjected to flooding and the flood storage being provided
    will lessen the severity of future flood events. The WRP is making a
    substantial contribution to the restoration of the nation's migratory
    bird habitats, especially for waterfowl.
        The WRP is a mandatory program from a budget perspective but is
    offered to program participants on a strictly voluntary basis. Under
    the WRP, the Secretary of Agriculture acquires permanent easements and
    30-year easements, enters into restoration cost-share agreements/
    contracts, provides for overhead costs associated with the cost of
    purchasing an easement or establishing an agreement, develops wetland
    restoration plans, cost-shares the restoration, and monitors the
    maintenance of the easements and agreements. Close cooperation with
    other Federal and State agencies and private conservation entities is
    an integral aspect of program delivery. The State Conservationist, in
    cooperation with the State Technical Committee, is responsible for WRP
    implementation and operations.
        Fiscal year 1996 was the final appropriation under the old program
    and provided $77,000,000 to enroll approximately 93,000 acres. The
    fiscal year 1997 program will provide $106,000,000 in CCC financial
    assistance funds to enroll approximately 130,000 acres. In fiscal year
    1998, we propose to enroll an additional 212,000 acres. Technical
    assistance funding for fiscal year 1997, and fiscal year 1998 will be
    funded from fiscal year 1996 unobligated appropriated funds under the
    old WRP account due to the limitation on CCC reimbursements.
        From inception of the program in 1992, through 1996, interest in
    the program has been exceptional, providing approximately 313,174 acres
    enrolled in the program through the end of fiscal year 1996, and
    coupled with the fiscal year 1997 and fiscal year 1998 program sign-
    ups, approximately 655,174 are expected to be enrolled by the end of
    fiscal year 1998. Historically there have been more than five fold as
    many acres offered than the program could enroll. The fiscal year 1997
    sign-up is the fourth that has occurred under WRP since fiscal year
    1992. Unlike previous sign-ups, the fiscal year 1997 effort provides
    landowners with the continuous opportunity to seek enrollment in the
    program. States periodically rank all unfunded offers and seek
    allocation of funding for the highest ranked offers. By following this
    process the maximum opportunity for landowner participation is provided
    and the WRP is assured of having the best possible list of ranked
    offers available for funding during the year.
        In response to the 1996 Act and fiscal year 1997 Agriculture
    Appropriations Act, the fiscal year 1997 sign-up is separated into
    three components: permanent easements, 30-year easements, and cost-
    share agreements. Enrollment is targeted to achieve a balance, to the
    extent practicable, of each component. The level of enrollment
    established for 1997 is 130,000 acres with a requirement that the
    initial 43,333 acres of easements be limited to 30-year duration. Thus
    far approximately 46,000 acres of 30-year easements have been enrolled.
    This enrollment was completed before the enrollment of permanent
    easements was initiated. The 46,000 acres represents approximately 50
    percent of the 30-year easement offers that have been received.
    Approximately 41,000 acres of permanent easements have been enrolled.
    This represents approximately 25 percent of the permanent easement
    offers. Approximately 9,000 acres of restoration cost-share agreements
    have been enrolled. This represents approximately 90 percent of cost-
    share agreement offers.
        One aspect of the 1997 WRP is the authority provided by the 1997
    Appropriations Act to incorporate non-Federal contributions into WRP
    projects and to augment the 130,000 acre enrollment cap for fiscal year
    1997 by an acreage amount equal to the value of such contributions.
    Thus far approximately $9,000,000 of such non-Federal participation has
    been identified and should eventually enable us to enroll an additional
    11,000 acres. In most instances arrangements are made for the
    contributors to directly handle the funding aspects of those projects
    for which they wish to participate so that the Department does not
    become involved in handling of contributed funds. The primary sources
    of these contributions are private foundations, non-governmental
    conservation organizations, State agencies, and landowners.
        The Wildlife Habitat Incentives Program (WHIP) provides for
    implementing wildlife habitat practices to develop upland wildlife
    habitat, wetland wildlife habitat, threatened and endangered species
    habitat and aquatic habitat. WHIP provides a significant opportunity to
    restore native habitat, help landowners understand how to best meet
    their own needs while supporting wildlife habitat development, and to
    develop new partnerships with State wildlife agencies, nongovernmental
    agencies and others.
        During fiscal year 1997, WHIP implementation plans and ranking
    criteria have been developed, with advice from the State Technical
    Committee. We expect to allocate $20 million of the $50 million in CCC
    funds that were sanctioned for use by Congress through 2002, to
    reimburse participants for installing these practices during fiscal
    year 1997. We anticipate accessing $30 million in funds to continue the
    implementation of WHIP plans during fiscal year 1998.
        The Farmland Protection Program (FPP) protects prime or unique
    farmland, lands of State or local importance, and other productive
    soils from conversion to nonagricultural uses. This program is
    preserving our valuable farmland for future generations.
        During fiscal year 1996, the $14.5 million in CCC funds were
    provided to 17 states, who also provided their own funds, to purchase
    development rights from farmers and ranchers. That allocation led to
    the protection of at least 50,000 acres of valuable farmland, on 203
    farms in 17 states. Qualifying farmland had to: 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 and have adequate infrastructure and agricultural support
    services; and have surrounding parcels of land that can support long-
    term agricultural production.
        For fiscal year 1997, $2 million was approved by Congress for use
    from CCC funds to purchase development rights from farmers and
    ranchers. $18 million will be accessed in fiscal year 1998 to continue
    the critical process of protecting valuable farmland for the benefit of
    future generations.
        The Conservation Farm Option (CFO) pilot program provides producers
    of wheat, feed grains, cotton, and rice who are enrolled in AMTA one
    consolidated USDA conservation program payment, in lieu of the many
    conservation programs that are available. Producers must implement a
    conservation plan that addresses soil, water, and related resources,
    water quality, wetlands, and wildlife habitat. The statute provides
    broad discretion in designing CFO pilots, and provides the opportunity
    to tap local agricultural initiatives and innovations for improving
    environmental quality.
        We envision CFO as an opportunity to test the feasibility of
    innovative program delivery processes and innovative solutions to
    environmental concerns. We look to the locally-led effort to provide
    the ideas for innovative pilots. The innovations tested through the CFO
    may well be the basis for changes in statutory authorities for
    conservation programs into the 21st century. In fiscal year 1997,
    pilots will be determined through a Request For Proposal in the Federal
    Register. The fiscal year 1997 funding is $2.0 million. For fiscal year
    1998, we are requesting authority to use $15 million in CCC program
    funds.
                                   conclusion
        In his opening message in ``America's Private Land, A Geography of
    Hope,'' Secretary Glickman wrote: ``In my view, our next great
    environmental goal is conserving our private land. To achieve this
    goal, we must accept stewardship on private land as a shared
    responsibility between public and private interests. The public funds
    we spend for private land conservation is one of our government's
    wisest investments, achieving multiple conservation benefits from
    modest expenditures on research, technical and financial assistance,
    and targeted land retirement.''
        As a Nation, we should continue to make wise investments in
    research, which underpins every form of assistance we provide to the
    owners and managers of private land. The 1996 farm bill also provided
    for significant investment in financial assistance through such new
    programs as the Environmental Quality Incentives Program, Wildlife
    Habitat Incentives Program, Farmland Protection Program, and Flood-risk
    Reduction Program. Targeted land retirement was also provided by the
    reauthorization of the Conservation Reserve Program and the Wetlands
    Reserve Program. Remaining to be addressed for fiscal year 1998,
    however, is funding for technical assistance, a primary objective of
    the budget proposal I've outlined.
        The innovative programs in the 1996 farm bill and the financial
    assistance levels established for these programs offer the opportunity
    between now and the year 2002, when the farm bill expires, to not only
    maintain many of the important conservation gains achieved by our
    Nation's farmers and ranchers over the past 12 years but to add
    significantly to those gains over the life of the new farm bill. We can
    continue to reduce soil erosion over and above the substantial gains
    made under the sodbuster and conservation compliance policies and the
    Conservation Reserve Program. We can begin to help farmers and ranchers
    address water conservation and nonpoint-source water quality management
    problems on a scale heretofore not possible. Wildlife habitat
    enhancement, for the first time, has become an explicit goal of several
    national agricultural conservation programs. Likewise, air quality is
    recognized as a pressing conservation problem requiring attention in
    certain areas of the country.
        But these policy and financial commitments become moot unless the
    Department of Agriculture and NRCS, its lead conservation agency, have
    sufficient resources to deliver the technical assistance that farmers
    and ranchers time and again say they need to take advantage of the
    conservation opportunities now confronting them. Our partners in state
    and local governments and the private sector, responding to widespread
    public support for environmental protection efforts, have increased
    their financial commitments to conservation on private land in recent
    years. At the same time, they look to the federal government for a
    continuing commitment to technical assistance for private land and
    private landowners, not the diminishing commitment in real dollars that
    has been the trend over the past two decades. It is this technical
    assistance that, when coupled with the contributions of our many public
    and private-sector partners, will allow us to realize the full promise
    of the 1996 farm bill.
        We are all in this together. The task is enormous and complex. But
    we now have the opportunity in fiscal year 1998 to begin to create the
    conservation legacy that Secretary Glickman suggested in A Geography of
    Hope will likely determine our Nation's economic and environmental
    well-being for years to come.
        That concludes my statement. I am looking forward to working with
    you in the months ahead to review the proposal and work together to
    maximize service to our customers and help them be good stewards of the
    land. I will take any questions that members of the committee might
    have.
                                     ______

                             Biographical Sketches
                               lawrence e. clark
        Lawrence E. Clark is the Deputy Chief for the Natural Resources
    Conservation Programs for the Natural Resources Conservation Service
    (NRCS). He has been in this position since October of 1996. Larry began
    his career with the Soil Conservation Service in 1967 as a student
    trainee in Morgantown, West Virginia, and has held numerous positions
    with the agency in Indianapolis, Indiana; Washington, D.C.; Portland,
    Oregon; Phoenix, Arizona; and Raleigh, North Carolina. Originally from
    Scotland Neck, North Carolina, Larry went to the North Carolina
    Agricultural and Technical State University and received his B.S.
    degree in Agricultural Economics. He also holds a master's degree in
    Public Administration from the J.F. Kennedy School of Government at
    Harvard University and a master's degree in Regional Planning from the
    University of North Carolina. Larry is married and the father of two
    children.
                                     ______

                                  carole jett
        Carole Jett is the Acting Deputy Chief for Soil Survey and Resource
    Assessment for the Natural Resources Conservation Service (NRCS). She
    has been in this position since October of 1996. Carole began her
    career with the Soil Conservation Service in 1975. She has held several
    positions within NRCS including State Conservationist in Michigan;
    Assistant State Conservationist, State Soil Scientist, State Soil
    Correlator, and Soil Scientist in California; and Soil Survey Party
    Leader in Nevada. A native of Reno, Nevada, she received a B.S. degree
    in Soil Science from the University of Nevada, as well as doing post-
    graduate work with minor course work in Hydrology and Range Science.

                          Statement of Paul W. Johnson

        Senator Cochran. Are there others on your panel who have
    opening statements?
        Mr. Lyons. If I could, I'd like to let Chief Paul Johnson
    say a few words.
        Senator Cochran. You may proceed, Mr. Johnson.
        Mr. Johnson. Thank you, Mr. Cochran, Senator Bumpers, for
    the opportunity to be here with you today.
        I would like to make a couple of other introductions. Since
    the last time I met with you, we have four new Deputy Chiefs.
    We actually have four Deputy Chiefs within our agency, and they
    are--although some were here a year ago, they are in a new
    position today.
        Larry Clark is our Deputy Chief for Programs; Tom Weber for
    Management; Carole Jett for Soil Science and Resource
    Assessment; and Fee Busby, just on board as of yesterday, our
    new Deputy Chief for Science and Technology.
        Mr. Bumpers, we stole him from Windrock. Thank you very
    much. I think he's been trained well and is ready to go.
        Gary Margheim is also with us today. He is our new Acting
    Associate Chief.
        Most of you know Pearlie Reed has been asked by the
    Secretary to become the new Assistant Secretary for
    Administration. So he is in that position now. Gary Margheim is
    acting in his place and is with us today.
        This is my fourth appearance before you. And as you know,
    huge changes have occurred. I was counting up our State
    conservationists that are different today than what they were 3
    or 4 years ago, and we have over 40 new State conservationists
    out of 52. We have six new regional conservationists.
        I want to add right away that this should not be a cause
    for alarm. Every single one of these persons has come through
    our system from the ground up and knows the agency well. They
    all have many, many years of experience. And it just happens
    that this is their time to take their place.
        It is a very professional agency, as you know. I think we
    probably have fewer political appointees than just about any
    agency in Government. And we have about 12,000 employees. As I
    have told you before, it is a national treasure, and there is a
    terrific amount of strength within our agency.
        Over the past 4 years, we have reduced our agency by over
    1,500 people. And that is not because we did not need them. I
    would say right up front that I think we could use twice the
    people that we have today. The work is certainly out there.
        We have continued to streamline our agency, and to get a
    higher percentage of our people in the field. Through an
    external review process, we have completely--or are beginning
    to revamp our information technology and our strategic planning
    efforts.
        I think our partnerships with districts, with RC&D's, State
    agencies, and the private sector have never been stronger. We
    are very, very pleased with the support that is out there
    today, and our ability to work together.
        As Jim Lyons mentioned, we have a very good set of programs
    in the new farm bill. And I think that this is very important.
    We thank you for giving us those tools to work.
        Briefly, the Farmland Protection Program is up and running.
    And I believe the AFT will be issuing a report within the next
    couple days on farmland protection in this country. And I would
    urge us all to take a look at it.
        I think that we have some serious problems facing us as we
    sprawl out across the countryside, whether it be prime land--or
    landscapes in the West are changing very rapidly. And it is
    probably something that we ought to be paying attention to.
        WRP, the new program, is up and running. And we are in the
    midst of the usual very heavy signup on that. CRP, as you know,
    we are in the middle of a very, very busy month. And from my
    understanding of it, the signup is huge.
        But there are important things going on out there. We never
    before have had so many people come together to help out in a
    program as this one and what is happening today.
        We have people from State fish and game agencies. We have
    foresters. We have volunteers. The Farm Service Agency and
    NRCS, the conservation districts are all putting very large
    numbers of people to work on this. I do not think we have ever
    had a Federal program where we have had so much effort from so
    many people. And I think that is a real good sign.
        Along with that, we have introduced the new buffer
    initiative. And we are suggesting the possibility of up to 2
    million miles of buffers by the year 2000. These are vegetative
    buffers that include buffers, contour buffer strips, field
    borders, and the like.
        For farmers who are going to bring their land back into
    production, we are going to be working with them to try to
    maintain some vegetative buffers on that land. As we are
    telling them, farm the best and buffer the rest. And we think
    we have some terrific opportunities there.
        EQIP rules, the final rules, are going to OMB within the
    next few days. The allocations are out, and our people are
    already thinking and working with farmers on that.
        Compliance is still working. Our reports are, through our
    status reviews, that farmers are still maintaining their
    systems that they put in place over the last 10 years.
        Within the agency, we have new technical institutes that
    are up and running and producing the tools that we need to do
    the job.
        The grazing lands conservation initiative [GLCI], is now in
    almost every single State in the country. And there is a
    terrific amount of enthusiasm for it from the grassroots
    levels.
        Our State technical committees are functioning. We think
    that this is an exciting part of the last farm bill, and the
    opportunity for State and Federal agencies and interest groups
    to come together to help guide our programs. And the feedback I
    am getting is that these are working in very good fashion.
        Locally led conservation has been mentioned over and over
    again. It is really cranking up. It is not our locally led
    conservation. It is locally led conservation by people at the
    local level. Conservation districts, RC&D's are coming together
    on it, watershed coalitions and so on.
        And briefly, what they are doing is assessing where they
    are, setting goals for themselves, and then using our programs
    and our technical assistance as tools to achieve those goals.
        We think it is an exciting approach. It is one that we
    began 60 years ago and are renewing our efforts along those
    lines today.
        Our watershed program continues, although we have, as you
    know, had concerns over the years that perhaps support for it
    is not as great as it used to be. And we are working together
    with a broad range of people to reach consensus on it.
        And we are finding that there is a huge amount of interest
    in our watershed program. And we will continue to work with you
    on that.
        We did get out, as you know, the new publication,
    ``Geography of Hope.'' The idea there is to try to get the
    American public to better understand the important contribution
    that private lands make to the health and well-being of our
    Nation. We have it out across the country right now, and we are
    getting very good response from it.
        What is happening on the ground? Our status reviews, as I
    have said, are showing we are at least maintaining the status
    quo there. We are not slipping.
        We just did what we call the mini-NRI, where we went out
    and took a snapshot of soil erosion, a statistically valid
    sample on our croplands in this country. We are finding that
    erosion rates are about the same as they were the previous
    year.
        So even with Freedom to Farm, we do not feel we are
    slipping backward. On the other hand, we all know that we have
    got a long way to go before we hit a sustainable level.
        We still have problems, though. And I would be remiss to be
    in front of you today and not mention some of those. We still
    have cropland eroding at fairly high rates in some parts of the
    country, whether it be the west Texas, central plains of
    Colorado, the fields of Iowa. We still have erosion rates that
    in some cases exceed four times what we consider a sustainable
    level.
        So we should not lull ourselves into thinking that the
    great progress that has been made in the last 10 years is all
    that we need to do. We still have a long way to go.
        Even with our remarkable progress of the past 10 years, 44
    million acres of highly erodible land still erode at more than
    two times the tolerable level, if we are looking at a
    sustainable level over the long haul. Over----
        Senator Bumpers. Mr. Johnson, with the chairman's
    indulgence, and before I forget it--and I am also going to have
    to leave for a few minutes--let me ask you a specific question.
        How many arable acres of land in this country are under
    cultivation?

                          Cultivation of Arable Acres

        Mr. Johnson. If you look at what we call cropland, it is in
    the neighborhood of, I think, about 430 million acres. You add
    another 600-and-some million acres in grazing land, and we are
    over 1 billion acres, or close to 1 billion acres.
        Senator Bumpers. I would like to stick with cropland for
    just a moment, 430 million acres?
        Mr. Johnson. Just about that, yes.
        Senator Bumpers. And how much do we lose a year to urban
    sprawl, that is, housing developments and shopping centers,
    highways?

                        Loss of Cropland to Urban Sprawl

        Mr. Johnson. It is slowed somewhat from previous years,
    although, as I mentioned, there is a concern of an explosion of
    that sprawl again taking place right now. But I think that the
    Farmland Trust and, in fact, our numbers show that we are
    probably losing in the neighborhood of 1 percent. That is
    probably close.
        Senator Bumpers. So that would be, roughly, a little over 4
    million acres.
        Mr. Johnson. Three million, somewhere in that neighborhood.
        Senator Bumpers. Three million is the figure I had heard.
        Mr. Johnson. Yes, right.
        Senator Bumpers. But these things are rather alarming when
    you look at them. I have been watching this for years, but I
    just wanted to nail that down for the record, and for my own
    edification. Thank you, Mr. Johnson.
        Mr. Johnson. I think beyond that, we need to look at some
    of the sprawl that is taking place in the West as well. So it
    may not be what we would consider prime farmland, or good
    cropland, but it certainly is changing the landscape of the
    West.
        There is a great deal of concern about that among ranchers
    and farmers, and people who are in the West because of those
    grand landscapes that are now being chopped up. So I think it
    is something that we should be concerned about.
        Senator Bumpers. It is obvious that when you have an
    acreage of the country, the arable acreage planted to cropland
    going down and the population going up, you have got a real
    train wreck.
        Mr. Johnson. Yes.
        Senator Bumpers. It is not going to happen in my lifetime,
    but obviously that cannot go on forever.
        Mr. Johnson. I talked to a person in Chicago yesterday. In
    that area, between Chicago and Madison and Milwaukee, some of
    the best farmland in the country today is going under concrete,
    very, very rapidly, in fact.
        In continuing in the needs and the concerns that we have,
    we have been working more over the past many years on sheet and
    real erosion.
        But we also need to focus much more on gully erosion. We
    are finding in looking at that closely that erosion is
    considerably more serious than we thought. We think that the
    new CRP vegetative buffer initiative will certainly help with
    that.
        Most waters in the United States are graded close to OK,
    although there are serious concerns. We need to understand and
    recognize the fact that agriculture is a major contributor to
    our surface water and ground water problems. And we should not
    close our eyes to that.
        Ground water over drafting is still serious. If you look
    into the West, particularly, but even in the East, we are
    seeing places where we are drawing far more water than is being
    replaced. We know that cannot go on forever.
        Twenty-one States are reporting saltwater intrusions into
    freshwater aquifers, something to seriously be concerned about.
    And over 60 percent of our rangelands have serious ecological
    problems, still. This includes noxious and exotic weeds and
    serious erosion problems.
        We need to make sure that we understand where we are on
    these things. Although the budget that we submit to you by some
    has been called aggressive and even unrealistic, we believe
    very strongly that it is not.
        In fact, if we look to balancing our budgets, and we know
    we have to do that on the financial end, we need to tell you
    that we are not doing it on the natural resources end right now
    on private lands, in spite of the progress that we have made.
    But it is something that we must be aware of and pay attention
    to.
        Our budgets are small compared to what they have been in
    the past. If you look at our 1937 contribution to conservation
    on private lands in this country, it was twice what it is
    today, in real dollars.
        It is .17--seventeen one-hundredths of 1 percent of our
    total Federal budget is going to the Federal effort to provide
    conservation on over 70 percent of the land in this country.
        People have chuckled at me when I have said that this
    effort probably needs to be twice the size of what it is today.
    But I call your attention to that. And I realize what we are up
    against, but I think it is very, very important that we pay
    attention to that.
        I would like to close with a statement that we made at the
    end of our ``Geography of Hope.''

        As we move into the next millennium, our Nation must strive
    for a state of harmony. We can no longer be satisfied with
    slowing erosion, water pollution, and other forms of land
    degradation.
        Harmony will demand that we set our sights higher, to
    improve the land upon which our destiny rests by restoring
    those places that are damaged, by enhancing those places whose
    condition is merely adequate, and by protecting those areas
    that remain pristine.
        Achieving the ideal may well prove impossible, but helping
    farmers, ranchers, and others try is the fundamental mission of
    the Natural Resources Conservation Service. Only then will
    private land become an integral part of our Nation's Geography
    of Hope.

        Thank you, Mr. Chairman. And at this time, we would take
    questions.

                                  CCC Funding

        Senator Cochran. Thank you, Mr. Johnson.
        Thank you, Mr. Secretary, for your statements.
        In looking at the budget request, one question strikes me
    as we start. Some of our programs this year, because of the
    passage of the farm bill last year are mandated by law to
    perform with no discretion in the amount of money to be
    appropriated. So the jurisdiction of this committee has changed
    somewhat by that law which Congress passed and the President
    signed.
        Among the programs that are now mandated at specific levels
    of funding in the Authorization Act are the Wetlands Reserve
    Program, the Conservation Reserve Program, the EQIP Program,
    the Wildlife Habitat Incentives Program, and others, the
    Conservation Farm Options and the Farmland Protection Program.
        My question is: In your statement--I guess this is the
    Secretary's statement--on page 3, there is a list described in
    a table showing the major items in this year's budget request,
    and it contrasts them with the comparable figures from the 2
    prior fiscal years.
        Included are some of these mandatory programs, the Wetlands
    Reserve Program, for example. It is pointed out that in fiscal
    year 1996, there was $77 million in the budget for that
    program, and in 1997 and 1998, there are no funds in the
    budget.
        Why would you not put money in the budget, recognizing that
    those were funds that were going to be spent under the
    operation of the farm bill?
        Mr. Lyons. Mr. Chairman, we simply broke those out because,
    of course, those programs, by statute, are funded out of the
    CCC account, so they are broken out separately, identified as
    expenditures out of CCC.
        Senator Cochran. The Conservation Reserve Program is not
    listed at all. Are there funds requested for any of those
    programs in your budget request?
        Mr. Johnson. The Conservation Reserve Program is probably
    under the Farm Services Agency's budget. We will be needing
    funds out of the Conservation Reserve Program to service it,
    the technical assistance part of it. Otherwise, it is CCC right
    now.
        And I believe that our technical assistance is probably
    going to be coming from carryover from the previous couple of
    years. So CRP is now CCC, as well.

                                  Funding EQIP

        Senator Cochran. There is a specific request, somewhere in
    here I saw, for the EQIP Program, or maybe it is an estimate
    that you included in the budget submission, showing the number
    of contracts and how much they would cost.
        It is estimated, for example, that the Service will award
    5,143 contracts, costing approximately $170 million over fiscal
    years 1997 and 1998.
        What will be the impact of this estimate on the
    appropriated accounts that we will have to approve?
        Mr. Johnson. I believe you might be referring to WRP, but I
    am not----
        Senator Cochran. Well, let me read the whole question here
    that my staff has given me some background on.
        They say the Department of Agriculture announced on March
    10, 1997, preliminary State funding allocations for the
    Environmental Quality Incentives Program.
        Mr. Johnson. Yes.
        Senator Cochran. The Department allocated $170 million for
    State priority areas. The remaining $30 million would be
    allocated to the States when their final needs for technical,
    financial, and educational assistance are determined.
        How did the NRCS decide on the number of contracts and the
    cost?
        Mr. Johnson. The total number, the $30 million that is
    there will be technical assistance to service those contracts.
    The actual contract numbers--maybe I could refer to Larry Clark
    on that, who is Deputy Chief of our programs, and let him give
    you specifics on it.
        Mr. Clark. Mr. Chairman, the $170 million that was
    allocated to the States using a formula that we developed in
    partnership with a host of other agencies.
        Not included in that amount is $20 million of technical
    assistance. We also set aside $5 million in the allocations to
    deal with native Americans' concerns and social disadvantaged
    producers.
        We also are holding on to a small reserve in that amount to
    deal with unforeseen circumstances as States begin to implement
    the program.

                              Allocation of Funds

        Senator Cochran. One complaint that I had in a meeting with
    conservation district representatives and others who came to
    see me this week was that because of some of these new
    programs--EQIP was one of them that was mentioned--there is
    less money being allocated for some of the traditional
    functions of the Natural Resources Conservation Service.
    Watershed was one area mentioned. Surveying and planning was
    another.
        The actual money that is being given to the States to use
    as they choose is getting less and less because of these other
    programs that have come along, and are requiring the funds.
        Is that an accurate assessment, or was my impression
    inaccurate?
        Mr. Clark. If I can try to answer that, the allocations
    that we make to the States, first, are based on appropriated
    funds, the amount that the Congress appropriates to the
    agencies.
        The second part of the allocation deals with these
    mandatory programs. And those allocations are based on our
    estimations of how much we will earn in carrying out those
    programs. So it is somewhat variable.
        In the CRP example, we assume that we will earn so much of
    that reimbursable amount based on an estimated level of signup.
    And the same thing goes for WRP and so on.
        Mr. Johnson. I might add that there are some changes in
    this budget that perhaps as people have read it do not really
    recognize the Watershed Program. For example, if you put the
    financial assistance and technical assistance and planning
    together, in the past that was under the 08 and 06 budget
    lines, I believe.
        This budget is putting the technical assistance and
    planning up into our conservation operations, so it looks like
    there is only $40 million left for financial--or for the Small
    Watershed Program.
        There is still $100 million. It is just that it has been
    divided out. And it could be that in reading that they felt
    that there is no longer $100 million going into the Small
    Watershed Program. That could be one of the issues.
        Another, of course, is there used to be ACP, which went out
    pretty much like a blanket across the country. Every district,
    just about, received some ACP funds.
        The new EQIP Program will be divided this year into a 65-35
    mix, 35 for priority concerns, which will be out across the
    States in most--well, I think most districts will be able to
    have access to some of that.
        And so, I think the districts are saying, ``We had this
    money before; now we do not.''
        I think they will see that it will be there, but it is
    probably coming under a different title.
        Mr. Lyons. We should not lose sight of the fact, though,
    Mr. Chairman, that while we have certain mandatory accounts,
    authorized levels of expenditures that were associated with the
    farm bill, that the remainder that is in our discretionary
    accounts is declining over time. And that is reality.
        So certainly to some degree, there is less money to go
    around. That has been felt by conservation districts and other
    partners in terms of the work we have been able to do on the
    ground, and the support for things like technical assistance.
        You know, just looking at the 1996 and 1997 reductions, we
    went from $725 million down to $706 million for conservation
    operations. We have asked for a little more money because we
    have much more demand.
        You know, there is a lot of excitement across the landscape
    about the conservation tools that are out there. The key is we
    need the people out there to deliver the services.
        So we have asked for a small increase, but, you know, we
    are constrained, as are you, in terms of what we can ask for,
    and what you can possibly provide us. So we should not lose
    sight of the fact that discretionary accounts decline, and they
    are declining.
        Mr. Johnson. And I do not want to leave you with the
    impression that ACP is still there. The law changed that, of
    course. And it is now multiyear contracts.
        But it is priority concerns, which may be water quality in
    a State, and then there are priority areas which focus on much
    more than that.
        On the other hand, with the new CRP and the continuous
    signup, the opportunity for districts and for local county
    committees to be working with farmers on many, many more farms
    than we did before, I think is much greater.
        So I think if we utilize that continuous signup on CRP, we
    are going to see that an awful lot of districts will still have
    a fairly strong program. And those vegetative buffers are very
    important throughout the landscape.

                          Conservation Reserve Program

        Senator Cochran. You mention that the Conservation Reserve
    Program is actually administered by another agency, and that
    you provide technical assistance.
        Was it your assistance that led to a new emphasis in the
    kind of land that will be eligible for enrollment in this next
    year, as contrasted with previous years?
        Mr. Johnson. That really came out of 10 years of
    experience, and a CRP that came about in 1985 under different
    conditions than today. We have learned a great deal about it.
        We went out across the country and asked farmers and
    ranchers and conservationists. They suggested that it ought to
    be targeted more toward environmental benefits and not a land
    retirement program, as such.
        And so, together with the Farm Services Agency, but
    primarily with the advice of farmers and ranchers across the
    country, and, of course, the Secretary as well being very
    supportive of this, the new CRP is probably focusing on more
    environmental benefits than we did the first time around.
        Senator Cochran. I am told that one of the major results
    that has been noticeable, and very clear, is the wildlife
    habitat enhancement that has flowed from the Conservation
    Reserve Program.
        Particularly in our State of Mississippi, we have noticed a
    tremendous amount of acreage now that is attractive for
    wintering habitat for water fowl that migrate through the lower
    Mississippi River Valley. Many other species of wildlife seem
    to have been nurtured, although now they are being drowned, I
    am afraid, or run up to higher ground, and will be under a lot
    of pressure because of flooding in our area right now.
        Is this considered to be an important aspect of the
    Conservation Reserve Program, and will you continue to try to
    identify areas as eligible that will have a wildlife habitat
    enhancement factor?

                            CRP--Mississippi Flyway

        Mr. Lyons. Mr. Chairman, I would mention that--and I am
    proud to say in partnership with you and some others, who have
    worked on these issues over the years, that wildlife is taking
    a prominent role in guiding programs like CRP.
        In the environmental benefits index that we used to
    determine eligible acres, soil erosion, water quality, and
    wildlife habitat have, in essence, equal standing.
        And there has been tremendous benefit associated with the
    CRP program. Yesterday, for example, Secretary Glickman was the
    keynote speaker at what is called the North American Wildlife
    and Natural Resources Conference, which is probably the
    Nation's biggest meeting of professional land managers,
    wildlife biologists, agencies such as Forest Service, Fish and
    Wildlife Service, et cetera.
        I cannot remember having a Secretary of Agriculture being
    the keynote speaker at that conference. Highlighting the
    success stories associated with CRP, we can point to species--
    two species of birds that faced extinction that were--that
    extinction was curbed, or at least there is hope for recovery
    as a result of CRP.
        Twenty or so species of birds in the Mississippi flyway, in
    particular, their declines have been arrested as a result of
    CRP.
        We now have a tremendous opportunity to use those programs
    to benefit wildlife, to protect water quality and, as we have
    traditionally done, to focus on soil erosion. And we are seeing
    the benefits. CRP probably gets the most focus, but through
    WRP, the WHIP Program, I think, affords us exciting
    opportunities to do some things to protect wildlife resources.
        I can remember meeting in this room as a member of the
    staff of the House Agriculture Committee, along with my deputy,
    who was then staff to the Senate Agriculture Committee, talking
    about wildlife in 1990.
        And unfortunately, wildlife was equated with endangered
    species by a lot of people, and seen as a threat, as opposed to
    what it has now come to be realized as a tremendous value, and
    a tremendous opportunity for landowners.
        I am pleased to have been a part of that, and I am
    certainly grateful to you for the leadership you have
    demonstrated, going back to 1985 farm bill, and making that an
    important priority.

                                  WHIP Program

        Senator Cochran. Well, I thank you for that observation,
    Mr. Secretary. I know the WHIP Program was authorized in the
    recently passed farm bill. It calls for the Department to issue
    regulations.
        I submitted some comments, hoping that they would be
    considered. I wonder when we can expect the regulations to
    actually be implemented.
        Senator Bumpers. This is good. We are going to pin him down
    on this one. [Laughter.]
        Senator Cochran. It has not been published yet, I do not
    think. So we probably ought to start with that question, first.
    When will they be published?
        Mr. Johnson. They are in the Department for review right
    now. And I think we are going to see them out within a month or
    two. So they are coming along. You need to know that.
        Senator Cochran. But the sooner they get published, you
    know, the sooner we will get the program underway. We have
    money in this budget, I understand, of $22.5 million for
    implementing the WHIP Program.
        Will you have the ability to manage this program so that it
    will get started, and some of those moneys will actually be
    used----
        Mr. Johnson. You bet.
        Senator Cochran. In this fiscal year?
        Mr. Johnson. Yes; we will. We can promise you that.

                             Safe Harbor Provision

        Senator Cochran. There is a safe harbor provision in the
    program providing cost share funds for landowners to create a
    habitat that is conducive for endangered species during the
    life of the landowners' contract.
        Are there safeguards being proposed or considered by the
    Department which will protect the landowner's long-term
    interest once his contract expires?
        Mr. Lyons. Mr. Chairman, we are working on developing an
    appropriate safe harbor mechanism, and working with the Fish
    and Wildlife Service to that end.
        I am certain that we will be able to address those concerns
    and ensure that landowners realize the benefit and are not
    penalized for improving wildlife habitat, which certainly was
    an important part of the discussion when WHIP was considered in
    the farm bill.

                              Yazoo Basin Project

        Senator Cochran. There is a demonstration erosion control
    issue in our State. The Yazoo Basin demonstration erosion
    control project was established in 1984. You may want to look
    at this for the record, so maybe I will just submit this for
    you to look at.
        We had an original funding level of $4.1 million. The Corps
    of Engineers is involved, and the Agriculture Research Service,
    with the NRCS, and are supposed to work jointly on a program to
    demonstrate the use of watershed system basis methods of
    reducing flooding, erosion, and sedimentation in six elected
    watersheds in the Yazoo Basin.
        This area has been increased now to include 16 watersheds.
    There has been direct funding for the program. I am curious to
    know whether you have any requests for funds, or consider
    carrying on this program in the future.
        This is a question that we have addressed to our State
    conservationist, and I am curious to know whether you intend to
    support this effort and allocate funds for this program in the
    future.
        Mr. Lyons. Yes, we do, Mr. Chairman. We intend to continue
    the program and the positive working relationships in the
    basin.
        Mr. Johnson. I think we can give you a more complete
    written answer on that as well to let you know exactly where we
    are right now.
        Senator Cochran. I am specifically interested in knowing
    whether you have gotten any money from the Corps of Engineers,
    whether funds have been allocated to the NRCS.
        Mr. Johnson. We have, and my understanding is that we are
    in the neighborhood of 95 percent complete on those funds to
    carry out what they were to do. But we will get you a written
    response on that to make sure that we get the numbers correct.
        Senator Cochran. Well, we want to be able to have some
    influence in the energy and water appropriations bill, too, on
    this subject. If we need to specify with language what we
    expect the Corps of Engineers to continue to do, we are
    prepared to do that as well.
        I just want you to know this is a high-priority area, and
    particularly with the flooding that we are experiencing now in
    this basin, it is a serious problem.
        [The information follows:]

                                                        MISSISSIPPI, YAZOO DEMONSTRATION EROSION CONTROL
                                                                     [Fiscal years 1985-96]
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                      Amount of
                                                                    technical and
                                                       Amount         financial
                                                   requested from    assistance      Amount NRCS
                     Fiscal year                      national      received for    received from                      Language reference
                                                    headquarters      DEC from     DEC from corps
                                                                      national
                                                                    headquarters
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    1996.........................................      $7,500,000  ..............  \1\ $1,785,000  Pg. 67, 1996 Committee Report.\1\
    1995.........................................       3,000,000  ..............   \1\ 4,430,000  Pg. 65, 1995 Senate Report 103-290.\2\
    1994.........................................      10,000,000     $10,000,000         660,000  Report not available.
    1993.........................................      10,000,000       8,500,000         115,000  1993 Senate Report 102-334.\3\
    1992.........................................      10,000,000       8,000,000         645,000  ( \4\ )
    1991.........................................      10,000,000       7,000,000  ..............  1990 Senate Report.\5\
    1990.........................................      10,000,000       7,000,000       1,619,000  ( \6\ )
    1989.........................................       5,000,000       5,000,000         120,000  ( \7\ )
    1988.........................................       5,000,000       5,000,000         100,000  ( \8\ )
    1987.........................................       5,000,000       5,400,000  ..............
    1986.........................................       5,000,000       5,000,000  ..............  .........................................................
    1985.........................................       5,000,000       4,100,000  ..............  .........................................................
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    \1\ These funds were received from Corps for a fiscal year 1994 agreement.
    \2\ Fiscal year 1996 Committee Recommendation: The Committee expects progress to continue on the Yazoo basin demonstration erosion control project.
    \3\ Fiscal year 1995 Committee Recommendation: The Committee expects progress to continue on the Yazoo basin demonstration erosion control project.
    \4\ Fiscal year 1993 Committee Recommendation: $10,000,000 needed by SCS.
    \5\ Fiscal year 1992 Committee Recommendation: Included within the Public Law 534 amount is $8,500,000 to cover the Soil Conservation Service share of
      the Yazoo Basin, Mississippi, demonstration erosion control projects.
    \6\ Fiscal year 1991 Committee Recommendation: The bill includes $7,000,000 for the Soil Conservation Service to continue work on eligible projects.
    \7\ Fiscal year 1990 Committee Recommendation: The bill includes $5,000,000 for the SCS to continue work in eligible projects.
    \8\ Fiscal year 1989 Committee Recommendation: The Committee concurs with the House provision of $5,000,000 for the Yazoo demonstration project.

                         Socially Disadvantaged Farmers

        Senator Cochran. You mentioned in your comments the program
    for socially disadvantaged farmers. I think that was the phrase
    that was used.
        Is it my understanding that this program has been
    transferred from the Farm Service Agency to the Natural
    Resources Conservation Service? And if so, why was the program
    transferred?
        Mr. Johnson. I believe it was transferred because there was
    a feeling that we probably were better connected with the
    1890's Institution, and with a good delivery system to move
    forward on it.
        I believe it was transferred last October. We are housing
    that program within our agency right now.
        I think that as the civil rights issues move forward, that
    program and where it will be will certainly be up to the
    Secretary, and where it is housed right now may not be where it
    is in the future. I think there is going to be some discussion
    of that as we move forward.
        Senator Cochran. I do not know how you spend the money for
    that program, but I would suggest that you consider some of the
    historically black colleges and universities, such as Alcorn
    State University and Mississippi Valley State University, which
    have had a history of working with farmers in our State. There
    are probably colleges and universities in other States that are
    similarly experienced in some of these initiatives.
        To involve them in an active way would be, in my view, very
    appropriate and a good use of these funds.
        Mr. Johnson. And we are doing that. The program, as we
    received it, had been funded at, I believe, $1 million. And
    then I think that the fund for rural America put another $4
    million into it in fiscal year 1997. So we are up to $5
    million, and we are asking that that be continued in our 1998
    budget.
        Senator Cochran. I noticed that a number of entities have
    been funded by the program; 28, I am told. For the record, we
    would like to have a list of those so we will know the kinds of
    things that you are spending the money on.
        Mr. Johnson. We will get that to you.
        Senator Cochran. Thank you.
        [The information follows:]
       Outreach for Socially Disadvantaged Farmers Program Participating
                                    Entities
    Alabama: Alabama A&M University, Tuskegee University
    Arkansas: Arkansas Land and Farm Development Corporation, University of
            Arkansas at Pine Bluff
    California: Hermandad Mexicana Nacional
    Delaware: Delaware State University
    Florida: Florida A&M University
    Georgia: Federation of Southern Cooperatives, Fort Valley State
            University
    Kentucky: Kentucky State University
    Louisiana: Southern University and A&M College
    Maryland: University of Maryland Eastern Shore
    Minnesota: American Indian Center (Project Grow)
    Missouri: Lincoln University
    Mississippi: Alcorn State University
    North Carolina: North Carolina A&T University
    North Dakota: Fort Berthold Community College, Little Hoop Community
            College
    Oklahoma: Langston University, Eastern Oklahoma State University
    South Carolina: South Carolina State University
    South Dakota: Oglala Lakota College
    Tennessee: Tennessee State University
    Texas: Prairie View A&M University, Texas A&M University
    Vermont: University of Vermont
    Virginia: Virginia State University
    Wisconsin: Lac Courte Oreilles Ojibwa Community College

                         Consolidation of FSA and NRCS

        Senator Cochran. I have a number of questions that I am
    going to submit. Senator Bumpers may be returning here, and he
    may have questions to either submit or discuss with you.
        One thing I noticed in here was this consolidation of
    administrative expenses between the Farm Service Agency and the
    NRCS which confuses me a little bit.
        They are two distinct missions, it seems. Matter of fact, I
    think a concise statement of the NRCS' mission is to provide
    national leadership in a partnership effort to help people
    conserve, improve, and sustain the Nation's national resources
    environment. This is in the budget.
        When you talk about FSA in the budget, its mission is to
    ensure the well-being of American agriculture and the American
    public through the efficient, equitable administration of
    funds, commodities, credit, conservation, environmental
    emergency assistance, domestic and international food
    assistance, and international export credit programs.
        How can you combine or consolidate your functions at the
    headquarters level with these two, what appear to be, distinct
    missions? How do you decide how much goes to each of these
    mission functions at the headquarters level?
        Mr. Johnson. I do not have the license to say this, but it
    confuses me a little bit, too. We think that we do have some
    opportunities to share. We are trying to do it now at USDA
    service centers.
        I think the important thing here is that we maintain our
    very well defined missions as agencies. And I do not believe
    that we are saying here that two agencies should become one, or
    that we should lose our missions, but that where they can
    service us and we can service them, we ought to look for ways
    in which we can do that.
        I have been working with Grant Buntrock on this now for 3
    years, trying to figure out ways where we can provide services
    to them; if we can do it better than they, and they to us,
    without our taking over their policy, for example, or they
    taking over our policy.
        And I think there are possibilities to do that. We need to
    continue to explore it.
        Senator Cochran. Well, there is an indication in the budget
    that there will be an independent entity asked to examine FSA
    and NRCS for opportunities for further consolidation and
    centralization of these agencies.
        Is this something that is going to be contracted out and
    studied? Do you have a request for funds for that purpose in
    the budget?
        Mr. Johnson. This is to be done in fiscal year 1997, I
    believe. I think that we are now scoping out the opportunity to
    do that with an outside contractor. It will probably be
    absorbed within our operating budget.
        Mr. Lyons. This is currently being discussed, Mr. Chairman,
    in the Secretary's office as to the structure, and how his
    study would proceed. So we are really not in a position, I
    think, to offer as many details as you might need.

                         Office closings--Staff Levels

        Senator Cochran. I know that we are going to see the agency
    closing field offices and consolidating offices throughout the
    country.
        Are you going to reduce the levels of staffing in the
    process? What are some of the practical results and
    consequences for farmers and landowners that we will notice?
        Mr. Johnson. Well, to a very great extent, that is up to
    you. We do need a strong conservation operations budget. And we
    have submitted that to you.
        Our view on this is that we do not see the Natural
    Resources Conservation Service cutting back further than what
    we are right now, or than what we set out to do by the end of
    this fiscal year in the consolidation of the service center
    effort.
        Rural Development, for example, is down to 800 offices now,
    or a little over 800. And we are in most of those offices with
    them.
        The Farm Services Agency is at 2,500 offices, and they are
    trying to work through their budget and their workload to see
    how many they should be in. And we will continue to be in those
    with them.
        But then I think that we will continue to work with our
    conservation districts and be out there where the work is.
    There is still as much land as there was before, even though
    there may be fewer farmers, and the commodity programs may not
    be there in the future. We do not know for sure yet.
        But I think you could view it in terms of maybe a nesting
    process where we may all be in some offices. Farm Services may
    in another batch with us, and then we are going to probably be
    in further offices out there across the country.
        Even when we have pulled back to 2,500, we have kept the
    presence in some areas. I keep telling people that the idea of
    a service center is a good one, because these are hubs through
    which--or out of which we work, but that we keep saying that if
    we get this together right, an office is also a laptop and a
    pickup truck, and that with the new technology, we ought to be
    in a number of places across the country, and not necessarily
    in four walls that look a certain way.
        So we will continue to work with the other agencies so that
    we plug in and try to be seen less in terms of our customers.
    But we see this as something that does not have to be confined
    within four walls at a certain number of places.

                               Supplemental Funds

        Senator Cochran. You mentioned the 1997 fiscal year as the
    year that you are going to be looking at ways to further
    consolidate and make the agency's operations more efficient in
    working with companion agencies.
        Do you expect that you will be submitting a request for
    supplemental funds, particularly in view of the flooding and
    the other problems that have arisen this year in the Ohio River
    Valley and the lower Mississippi River Valley?
        Mr. Lyons. Yes, Mr. Chairman; in fact, the administration
    is working up the numbers, so to speak, in terms of the funds
    we feel are going to be needed to address flooding and other
    natural disasters that have occurred on the west coast and the
    Great Plains, the Mississippi Basin area.
        I believe right now we are looking at the Ohio and the
    impacts of flooding on the Ohio so we can estimate some of the
    damages that have occurred there, so we can complete this
    package.

                     Previous Emergency Watershed Projects

        Senator Cochran. We had some previous emergency watershed
    projects that were identified in earlier years that were never
    finished because the money ran out, or it was not sufficient to
    cover all of the projects that were identified.
        I know in our State we have had emergency watershed
    projects characterized and studied, but never actually
    completed because of insufficient funds.
        Is there any consideration being given to permitting some
    of the funds that might be approved in a supplemental to be
    used to meet the needs that have already been previously
    identified as emergency in nature and in need of Federal
    assistance?
        Mr. Johnson. The process that we are going through right
    now is to try to collect all of those needs, including the
    needs from last year's hurricanes, for example. And we have
    needs going back to the early nineties.
        So we have not forgotten those, and we recognize that there
    still are needs out there. But we are proposing that to the
    Department, and then on through the system.
        Mr. Lyons. I think, Mr. Chairman, there is a need to assess
    the backlog of needs, as you have suggested, and also, I think
    to take a forward look.
        I know one of the issues we are discussing within the
    administration is what constitutes an emergency need. And if,
    for example, in the case of restoring flood damage, we are
    simply going to put things back the way they were, or take
    advantage of the opportunity, perhaps, to make needed
    improvements, whether it is in setting levies back, or in other
    watershed improvements that reduce the risk of future flooding;
    in essence, do it right the first time.
        And I would just say that this is an issue I hope we will
    have a chance to discuss more, because there is a little bit of
    a debate within the administration right now as to what
    constitutes an emergency.
        In my mind, it would be foolish to simply limit what we do
    to restoring the damage done if there is a way to be more
    efficient and reduce, hopefully, the likelihood that we will
    have to revisit those areas in future years, because we failed
    to make needed investments today to reduce the risks of damage
    down the road.

                                 Unfunded Needs

        Senator Cochran. It would be instructive for us to know how
    many unfunded needs have been identified by the State
    conservationists around the country. Can we have a breakdown of
    the unfunded needs by State, and how you plan to distribute
    supplemental funds that might be appropriated to the States for
    emergency watershed protection activities?
        Mr. Johnson. We will get that to you in writing.
        Senator Cochran. Thank you very much.
        [The information follows:]

     Natural Resources Conservation Service--Watershed and Flood Prevention
        Operations, Emergency Watershed Protection Program, and Planned
                       Distribution of Supplemental Funds

            State/project                                   Fund needs total
    CA: New Year's storm 1/97...............................      $9,900,000
    CA (FS): 16 National Forests............................       2,600,000
    ID: New Year's storms 1/97..............................       6,600,000
    ID (FS): 1/97 storm--Boise & Payette National Forests...       1,100,000
    NV: New Year's storms 1/97..............................      17,900,000
    OR: New Year's storms 1/97..............................       7,000,000
    OR (FS): 1/97 storm.....................................         150,000
    WA: New Year's storms 1/97..............................       2,000,000
    MT: January blizzards...................................       2,000,000
    ND: January blizzards...................................       1,000,000
    SD: January blizzards...................................         500,000
    States: Potential spring floods \1\.....................      18,000,000
    CA, ID, WA, OR, NV: EWP flood plain easements...........      10,000,000
    CA ID WA OR: Riparian area treatment....................       5,350,000
                        --------------------------------------------------------
                        ____________________________________________________
          Total.............................................      84,100,000

    \1\ Flooding potential from 300-400 percent of normal snowpack melt.

        NATURAL RESOURCES CONSERVATION SERVICE--WATERSHED AND FLOOD PREVENTION OPERATIONS AND EMERGENCY WATERSHED
                                                   PROTECTION PROGRAM
                                                    [March 18, 1997]
    ----------------------------------------------------------------------------------------------------------------
                           State/Project                          Fund needs TA          FA         Fund needs total
    ----------------------------------------------------------------------------------------------------------------
    CA: New Year's storms 1/97................................        $2,000,000        $7,900,000        $9,900,000
    CA (FS): 16 National Forests..............................         2,600,000  ................         2,600,000
    ID: New Year's storms 1/97................................         1,100,000         5,500,000         6,600,000
    ID (FS): 1/97 storm--Boise and Payette National Forests...         1,100,000  ................         1,100,000
    NV: New Year's storms 1/97................................         3,000,000        14,900,000        17,900,000
    OR: New Year's storms 1/97................................         1,000,000         6,000,000         7,000,000
    OR (FS): 1/97 storm.......................................           150,000  ................           150,000
    WA: New Year's storms 1/97................................           500,000         1,500,000         2,000,000
    MT: January blizzards.....................................           350,000         1,650,000         2,000,000
    ND: January blizzards.....................................           250,000           750,000         1,000,000
    SD: January blizzards.....................................           120,000           380,000           500,000
    MD: Hurricane Fran........................................           100,000           375,000           475,000
    NC: Hurricane Fran........................................         2,600,000        11,000,000        13,600,000
    VA: Hurricane Fran........................................           975,000         4,025,000         5,000,000
    WV: Hurricane Fran........................................            60,000           225,000           285,000
    MS: 1991-94 storm damage \2\..............................  ................        20,000,000        20,000,000
    IL: July 1996 Chicago rains...............................           200,000         1,000,000         1,200,000
    OH: Ross, Gallia, Brown Counties..........................            88,000           330,000           418,000
    OK: Grant and Alfalfa Cos.................................            32,000           105,000           137,000
    PA: Tioga County..........................................            20,000           200,000           220,000
    TN: Giles and Humphreys Cos...............................  ................            54,000            54,000
    AR: March 1997 tornado/floods.............................            30,000           170,000           200,000
    AR: March 1997 tornado/floods \1\.........................         1,000,000         5,000,000         6,000,000
    IL: March 1997 tornado/floods.............................           400,000         2,000,000         2,400,000
    IN: March 1997 tornado/floods.............................            40,000           200,000           240,000
    KY: March 1997 tornado/floods.............................           600,000         3,000,000         3,600,000
    OH: March 1997 tornado/floods.............................         4,000,000        18,200,000        22,200,000
    MS: March 1997 tornado/floods.............................           400,000         2,000,000         2,400,000
    TN: March 1997 tornado/floods.............................           400,000         2,000,000         2,400,000
    WV: March 1997 tornado/floods.............................           200,000         1,000,000         1,200,000
                                                               -----------------------------------------------------
          Subtotal............................................        23,315,000       109,464,000       132,779,000
                                                               =====================================================
    States:
        Potential spring floods \3\...........................         3,000,000        15,000,000        18,000,000
        Flood plain easements \3\.............................        15,000,000  ................        15,000,000
                                                               -----------------------------------------------------
          Subtotal............................................        18,000,000        15,000,000        33,000,000
                                                               =====================================================
    CA, ID, WA, OR, NV: EWP flood plain easements.............        25,000,000  ................        25,000,000
    CA, ID, WA, OR: Riparian area treatment...................        25,000,000  ................        25,000,000
    CA, ID, OR, WA: Salmon memorandum of understanding:
     Watershed-based habitat restoration......................        37,600,000        78,100,000       115,700,000
                                                               =====================================================
          Total...............................................       128,915,000       202,564,000       331,479,000
    ----------------------------------------------------------------------------------------------------------------
    \1\ Requires special authority for expanded debris removal.
    \2\ Requires special authority to address storm damage.
    \3\ Flooding potential from 300-400 percent of normal snowpack melt.

                                      EQIP

        Senator Cochran. We talked about the EQIP Program earlier.
    I have some other specific questions about that, and what would
    happen if the States do not use all of their allocations in a
    fiscal year.
        What happens to the money? Maybe you can answer that for me
    right now. If you cannot, you can answer that for the record.
        Mr. Johnson. I am being told that if we do not use it, we
    lose it. I have a feeling we are going to use it. [Laughter.]

                          Farmland Protection Program

        Senator Cochran. The Farmland Protection Program was one of
    those programs that is on my list of mandatory programs. But
    your budget, unlike some of the other mandatory programs,
    requests $17.3 million for that program.
        I assume that will conclude the funding for the program,
    and that will be the end. Is that a correct assessment?
        Mr. Johnson. I think that completes the funding. I hope it
    is not the end.
        Senator Cochran. Well, is that program worth continuing?
        Mr. Lyons. Yes, sir.
        Mr. Johnson. I believe it is, but I believe we need to
    continue to look at ways to be innovative in using it. As you
    know, it is--we are not----
        Senator Cochran. You just pay farmers not to sell their
    property to developers, is that what it is?
        Mr. Johnson. Well, first of all, we are putting funds to
    existing programs that are going on. And so we are helping
    State and local programs that have taken a look at themselves,
    in their home place, and recognized a real need to maintain
    good, high-quality, unique farmland, close to urban areas.
        And so it is not our doing it here in Washington saying,
    ``You ought to do that,'' but rather people at the local levels
    saying, ``This is very important to us.''
        And then as a nation, we are committing to helping them
    with that. We do not go out and pay 100 percent of any
    easement, or that is not the idea. The idea is to work together
    with States and local governments that already have programs
    going. So it is a support system for them.
        Mr. Lyons. Mr. Chairman, I think one of the benefits to
    this program is that it really is a partnership effort with
    States that have similar programs in place.
        And having grown up in the urbanized East, I have seen a
    lot of farmland converted to condominiums. And it is a
    tremendous loss because, of course, some of the most productive
    soils we have are in or near these urban areas.
        So I think there is a tremendous need. Certainly there is
    more need than we can satisfy with the resources that have been
    allocated to the program. We would certainly like to work with
    you to see if we could expand and improve the program.

                     Resource Conservation and Development

        Senator Cochran. There is a provision in your budget that
    calls for an increase of $3 million under the Resource
    Conservation and Development Program to fund 400 non-Federal
    watershed and rangeland coordinators in 25 States for high-
    priority watersheds.
        What is the need for these 400 new positions that would be
    funded in this program? Why do we need these 400 new people?
        Mr. Lyons. Mr. Chairman, actually I think the number is $18
    million in terms of the RC&D increase in that particular area.
        The rationale is that there are mechanisms that are
    developing, have developed, in parts of the country that really
    mirror or use as a model the RC&D Program, where coordinators
    are brought in to help bring entire communities together to
    help guide conservation work done in particular watersheds.
        We see a need or a value in using that as one alternative
    tool for reaching consensus on what kinds of improvements and
    conservation practices are needed in watersheds.
        I would suggest that though one of the critical parts that
    has got to be linked to this is to make sure that we have the
    dollars in the conservation operations to provide the technical
    assistance to these watershed councils.
        This is a program--or this is an idea, I should say, that
    has had its origins in Oregon where watershed councils have
    been established to deal with concerns related to loss of
    salmon habitat, for example.
        We are working very closely with existing watershed
    councils, and with conservation districts that have assumed a
    similar role, to try and improve the delivery of conservation
    technical assistance in those watersheds to deal with the
    declines in salmon habitat and other resource degradation.
        I think this is an area where we would like to work with
    the committee to see if we could not structure the most
    effective delivery systems, and capitalize on watershed
    councils and conservation districts, and RC&D's, and use them
    to the best benefit, to ensure we get the kind of delivery
    systems we need in place where appropriate.

                    Centers of Excellence--1890 Institutions

        Senator Cochran. There is a provision in the budget request
    that talks about Centers of Excellence at the 1890
    Institutions.
        Do you know which institutions have been selected, or has
    there been a selection process to identify the Centers of
    Excellence around the country? Could you let us know which 1890
    Institutions have been included in this list, and what that
    means in terms of what you are going to do for them?
        Mr. Johnson. We will do that. We will get it in writing to
    you, what each center of excellence is about, and how it is
    being funded, and what we expect of it. Yes.
        [The information follows:]

                             Centers of Excellence

        The Centers of Excellence Program was designed to establish
    partnerships between 1890 Institutions and USDA agencies. Each
    Center is to provide a USDA presence on the 1890 campus,
    enhance the capability of the Institution to assist in the
    delivery of USDA programs, ensure support from the agribusiness
    community, and provide assistance to outstanding students who
    commit to careers in USDA. Currently, NRCS has participated in
    the establishment of one Center.
        In fiscal year 1995, NRCS established the Geographic
    Information System and Remote Sensing (GIS/RS) Laboratory at
    Lincoln University. The GIS/RS Laboratory laid the foundation
    for the Center of Excellence of Leadership in GIS and Wildlife
    Management at Lincoln University. In fiscal year 1996, NRCS
    contributed $250,000 to the Center. In fiscal year 1997 and
    fiscal year 1998, it is estimated NRCS will contribute another
    $250,000 for each year. Through the Center, Lincoln University
    will become nationally and internationally known for academic
    excellence in GIS and wildlife management.

        Senator Cochran. Is there a specific line item in this
    budget request for funding the Centers of Excellence, or
    carrying out that program?
        Mr. Johnson. I do not believe there is a specific line item
    in it. We do not intend to increase it this year over where we
    were last year.
        Senator Cochran. Does that money come from the conservation
    operations budget, or where does it come from?
        Mr. Johnson. Yes; it is in our conservation operations.
        Senator Cochran. Is that sort of a pot of money where
    nobody knows what you are going to do with it until you do it?

                            Conservation Operations

        Mr. Johnson. No; our conservation operations is not that at
    all. It really is the basic conservation program for the Nation
    on private lands.
        Where it is allocated is based on needs and on strategic
    planning, and where we think we can get the greatest return in
    conservation on private lands in the Nation. It shifts from
    year to year.
        As we get better at assessing land health and looking at
    partners that we can work together with to beef up the effort,
    we try to allocate it as best we can for that. I would not call
    it a huge pot of money. [Laughter.]
        Senator Cochran. But I have noticed that that gets bigger.
    You know, the Secretary talked about how the budget for the
    service gets smaller.
        Mr. Johnson. Yes.
        Senator Cochran. Conservation operations seems to get
    bigger.
        Mr. Johnson. Well, of course----
        Senator Cochran. The mandatory programs seem to get bigger.
    I get the impression that is one way to keep this committee
    from having as much influence over how the money gets spent.
    [Laughter.]
        Mr. Lyons. I do not think we----
        Senator Cochran. Whether intended or not, I know it is not
    intended. [Laughter.]
        Mr. Lyons. Mr. Chairman, I would--you know, I use the
    analogy of a toolkit to describe all the various conservation
    programs we now have in place. I would equate conservation
    operations to the funds that we use to hire the carpenters.
        A toolkit is not worth much if you do not have people who
    know how to use it and apply it, and work with landowners. And
    that is why it is critical. And perhaps the request for those
    funds has increased simply because the demands are so much
    greater.
        And the Congress has created so many more new tools which
    are extremely valuable, but we have to have money to do it the
    old fashioned way, as they say, to get out on the ground and
    connect landowners with those tools, and then get the
    conservation work applied on the landscape as the landowners
    see their needs.
        That is why conservation operations is critical. And
    frankly, if we can get more money in there, that would be
    great, because we need a lot more people out there applying
    those conservation tools across the landscape.

                       Conservation Technical Assistance

        Mr. Johnson. Mr. Cochran, I think that you need to be aware
    that the CO-1 budget, the conservation operations, this next
    year is larger because the watershed technical assistance has
    been thrown up into that.
        If you look at where we have been over the last, oh, 15 or
    20 years, we have been flat or declining in our technical
    assistance. And as I said in my earlier remarks, we have in the
    past put a much greater emphasis on this technical assistance
    out to landowners.
        And if you ask the private sector how we can get
    conservation on the land, the one that always rises to the top
    is more technical assistance. And that is out of that budget.
    In fact, that is that budget.
        Mr. Lyons. Mr. Chairman, just one last point I would make,
    and I hope you have a copy of or have seen a copy of the
    ``Geography of Hope'' document that Paul and NRCS generated.
        But there is an interesting table in here, and I will give
    you this copy that tracks trends in appropriations for
    technical assistance, financial assistance, in our land
    retirement programs, basically the three areas in which we work
    and focus.
        And what this trimline shows, going back to 1934 when we
    first started doing business, is that funds for financial
    assistance have declined in real dollars over time, that the
    funding for technical assistance increased slightly, but really
    has been flat for the past, oh, 15 or 20 years.
        And, of course, the Land Reserve Program funding has
    increased, in part because we have moved toward creating
    programs like CRP and WRP, et cetera.
        It is an interesting trimline, because as Paul said, we
    used to put a lot more money into conservation on the landscape
    in terms of financial assistance.
        And the demand is increasing for technical assistance. But
    really that program has flat-lined, and I will be glad to share
    that with you.
        [The information follows:]
        [GRAPHIC] [TIFF OMITTED] T01MA18.039

                                Closing Remarks

        Senator Cochran. Well, I think overall, we have to be
    impressed with the work that has been done in the conservation
    area to help protect our soil and water resources, and help
    assure that we have the capacity to continue to produce in an
    efficient way the food and fiber we need, and the huge exports
    that we see each year going out of this country.
        It is a very impressive success story, in my opinion. I am
    quick to give credit where it is due in this area. I think the
    NRCS deserves a lot of credit, as well as the conservationists
    in the districts all over the country, especially in my State
    where they are very active. It is a serious effort that is
    being undertaken.
        The State NRCS departments have worked hard on it. We have
    had a lot of emphasis in this area by State government in my
    State. A lot of people have done a lot of good work to bring us
    where we are today.
        I do not have any other questions at this point. But I do
    have some which I will submit and Senator Bumpers may have some
    comments.
        I am going to have to go to another meeting. And I am
    prepared now to turn over the gavel to this guy. We do not have
    a quorum so we cannot pass anything.
        Senator Bumpers. Mr. Chairman, you do not have to turn the
    gavel over. I am going to submit questions in writing to Mr.
    Lyons about three water projects in my State, Bethtensal, Palo
    Mato, and the prairie water systems. Those are becoming
    increasingly critical in our State.
        And, you know, we produce 43 percent of the rice. In
    another 20 years, we will be producing about 10 percent of the
    rice if we do not do something pretty dramatic pretty soon.

                              Submitted Questions

        And I will phrase those questions in such a way--I think
    you are familiar with those things. I will submit those in
    writing, Mr. Chairman.
        Senator Cochran. Thank you, Senator.
        [The following questions were not asked at the hearing, but
    were submitted to the Department for response subsequent to the
    hearing:]
                     Questions Submitted by Senator Cochran
                            conservation operations
                  molokai soil and water conservation district
        For fiscal year 1997, the Committee included $250,000, for
    continued support of agricultural development and resource conservation
    in Hawaiian areas serviced by the Molokai Agriculture Community
    Committee.
        Question. What assistance does NRCS provide in this regard?
        Answer. NRCS provides technical assistance to the Molokai Soil and
    Water Conservation District (SWCD) and the farmers, ranchers, and other
    participants in the Molokai Agriculture Community Committee (MACC)
    program. The technical assistance NRCS provides is funded from the NRCS
    budget, not the $250,000 appropriation to the SWCD for the Molokai
    Agriculture Community Committee program. The SWCD uses the $250,000
    appropriation for cost sharing conservation project applications and
    administrative costs.
        The technical assistance NRCS provides is mainly focused on
    preparing and implementing natural resource conservation plans.
    Implementing these conservation plans involves designing irrigation
    systems, grazing management systems, windbreaks, and other resource
    conservation practices. In addition, NRCS provides educational and
    technical assistance to the clients they serve. NRCS also provides work
    space, equipment, and training to the MAC and SWCD staff.
        Question. Is funding for this activity included in the budget
    request for fiscal year 1998? How much is included?
        Answer. NRCS did not specifically request funds for the MAC in the
    fiscal year 1998 budget. However, every year since fiscal year 1992,
    the Molokai Soil and Water Conservation District (SWCD) has spent
    $250,000 for the Molokai Agriculture Community Committee (MACC)
    program.
                       bayou meto and beouf/tensas areas
        For fiscal year 1997, the Committee directed NRCS to continue
    supporting programs related to Bayou Meto and Beouf/Tensas areas and to
    continue planning and design activities in the Kuhn Bayou project, all
    in Arkansas.
        Question. Please provide for the Committee an explanation of the
    work completed to date on these projects, and estimates of the funds
    needed in the future, by fiscal year, to complete each of these
    projects. What is included in the fiscal year 1998 request for each of
    these?
        Answer. Work has continued on the Bayou Meto, Boeuf/Tensas and Kuhn
    Bayou projects in 1997 which was the third year of this effort at the
    direction of Congress.
        Specifically in Bayou Meto, the inventory work for the on-farm part
    of the work is now complete and the report is being reviewed by the
    sponsoring local organization. Public meetings to inform the public of
    the results of these studies and the establishment of a hydrology data
    base will be carried out during the remainder of this year. The Corps
    of Engineers has been authorized to plan a flood control/irrigation
    project in this area and NRCS will play a major role in that effort
    with funding anticipated from the COE.
        Boeuf/Tensas local sponsors continue to inform the public of the
    water decline and water quality status. They are in the process of
    organizing an irrigation district. NRCS is working on developing
    geographic information system (GIS) data for use in the study. Work is
    about 50 percent complete on this project.
        Kuhn Bayou is part of the Eastern Arkansas project and NRCS is
    performing some of the survey and design functions for this project. A
    natural resources conservation plan has been developed. The sponsors
    are seeking funding sources for implementation.
        The fiscal year 1998 budget request contains funds which could be
    used for these projects.
                              loess hills of iowa
        For fiscal year 1997, $400,000 was included for continuation of the
    pilot program to address erosion in the Loess hills of Iowa.
        Question. What is the status of this pilot project? When is it
    scheduled to be completed? How much will this project require, by
    fiscal year, to complete? What funds, if any, are included in the
    fiscal year 1998 request.
        Answer. Fiscal year 1997 funds have been provided to the Loess
    Hills Development and Conservation Authority (LHDCA). The LHDCA is an
    entity that was created by the Iowa Legislature in 1993 to help deal
    with the special natural resource concerns in the deep Loess area of
    the State.
        The funds are being used together with state appropriations to
    provide cost-share to local units of government that are installing
    stream channel grade stabilization measures on targeted degrading
    streams. Fiscal year 1997 funds have been obligated for structures in
    11 counties. In addition to the $400,000 in Federal funds, $1,012,000
    in State and local funds are being committed to these projects.
        Projects receiving fiscal year 1997 funds should be completed by
    the end of this calendar year, and the 1998 budget does not
    specifically identify funds for the pilot program.
        The issue will require approximately $24.1 million in Federal and
    State funding over the next 10-12 years in order to complete needed
    installations. Local leader are suggesting that this amount be split
    evenly from Federal and State sources. Additional local dollars will be
    used to supplement these funds, and to operate and maintain channel
    stabilization measures.
                              franklin county lake
        Funding of $750,000 was included in the fiscal year 1997
    appropriations for Conservation's Operations to provide design and
    technical assistance in Franklin County, Mississippi.
        Question. What is the status of this project?
        Answer. In fiscal year 1997 NRCS received $550,000 for the Franklin
    County Lake to complete the in-house engineering design, soil mechanics
    work and A&E for final spillway design. An interagency agreement was
    prepared to transfer $300,000 from NRCS to the US Forest Service to be
    used for land acquisition and exchange support, securing permits,
    environmental mitigation and support for removal of timber.
        The work is on schedule and construction plans specifications are
    currently being initiated. The design is to be completed this fall and
    ready for construction next fiscal year.
        Question. What environmental and economic benefits will be realized
    upon completion of this project?
        Answer. The project is expected to provide recreational benefits to
    the citizens of Franklin County as well as Mississippi and surrounding
    states. A mitigation plan is being completed to assure that fish and
    wildlife and other environmental benefits are maximized for the project
    area.
        Question. What funding is included in the fiscal year 1998 request?
        Answer. No specific funding is included in the fiscal year 1998
    request. However, the fiscal year 1998 budget request contains funds
    that could be used for the project.
                           great lakes basin program
        For fiscal year 1997, $250,000 was included to continue work on the
    Great Lakes Basin Program for soil and erosion and sediment control.
        Question. What is the status of the project? Are there other
    federal agencies which contribute funding for this project? Which
    agencies and how much is each contributing?
        Answer. This project has been active since its inception in 1991.
    No other federal agency contributes funding for this project. NRCS is
    contributing $350,000 in fiscal year 1997.
        Question. What is the timetable to complete this project? What
    funding will be needed in each fiscal year to complete this project?
        Answer. The project is expected to continue through the year 2002.
    $750,000 will be needed in each fiscal year through the year 2002 to
    complete this project.
        Question. How much is included in the fiscal year 1998 budget
    request?
        Answer. $750,000 is available in the fiscal year 1998 budget
    request for this project.
                        great lakes watershed initiative
        For fiscal year 1997, the Committee stated its expectation that the
    Department provide technical assistance and funding to assist the Great
    Lakes watershed initiative.
        Question. What is the status of this project?
        Answer. Twelve demonstration farms, six in the Lake Erie drainage
    and six in the Lake Ontario drainage, are currently being established.
    The next phase of compiling data and analyzing results on practices
    such as integrated pest management, constructed wetlands for dairy
    facilities, bark bed filter strips, grass filter strips, stabilized
    livestock crossing systems, chemical mixing and rinsing pads, packed
    gravel barnyard treatment systems and alternative watering systems has
    been initiated.
        Question. What is the timetable to complete this project? What
    funding will be needed in each fiscal year to complete this project?
        Answer. This initiative is scheduled to run through the year 2002.
    NRCS technical assistance funds in the amount of $75,000 will be needed
    each fiscal year through the year 2002.
        Question. How much is included in the fiscal year 1998 budget
    request?
        Answer. $75,000 is available in the fiscal year 1998 budget
    request.
                                 chesapeake bay
        The Committee provided $4.75 million for continued work on the
    Chesapeake Bay.
        Question. What is the nature and status of this work? What are the
    environmental benefits of this work?
        Answer. This work entails providing technical assistance to farmers
    throughout the Chesapeake Bay drainage basin to plan and install best
    management practices (BMP's) to control runoff, reduce erosion, manage
    nutrients and pesticides, and improve and maintain wildlife habitat.
    Specific accomplishments to date include the installation of nearly
    1,500 animal waste systems to safely contain manure, nutrient
    management plans on over one million acres to keep nutrients from
    washing into or infiltrating water supplies, dead bird composting
    facilities on more than one third of the poultry operations to reduce
    the volume of carcasses, kill pathogens, prevent odors and protect
    water quality and resource management systems have been applied to more
    than 100,000 acres to reduce erosion and water runoff from agricultural
    land. Integrated pest management is now being practiced on over 1.2
    million acres in the basin. About 3,000 acres have been enrolled in the
    Wetland Reserve Program. The work is on schedule to reach the goal of a
    40 percent reduction of nutrients in the Bay by the year 2000.
        Environmental benefits include improved water quality in the Bay
    and its tributaries, through a reduction of sediment, nutrients and
    pesticides. Improved wildlife/fisheries habitat in the Bay and
    throughout its drainage basin is also an environmental benefit.
        Question. How much funding will be needed, by fiscal year, to
    complete this project?
        Answer. A base level of $4.75 million will be needed through fiscal
    year 2000 to reach the primary goal of a 40 percent reduction of
    nutrients the Bay.
        Question. How much is included in the fiscal year 1998 request?
        Answer. The fiscal year 1998 budget request includes $4.75 million
    to continue this work.
                   gis center for advanced spatial technology
        The Committee has supported the GIS Center for Advanced Spatial
    Technology in Arkansas and its work with digital soil maps and the
    continuation of the National Digital Orthophotography Program.
        Question. Has NRCS maintained its strong relationship with the
    center and has NRCS remained the lead agency within the USDA for the
    development of GIS capabilities?
        Answer. Yes, the NRCS has continued to maintain a strong
    relationship with the GIS Center for Advanced Spatial Technology (CAST)
    in Arkansas.
        The NRCS is a leader within the USDA for the development of digital
    GIS information such as the digital orthophotography, soils databases
    and Natural Resource Inventory (NRI) databases. The Forest Service is
    also a major user of GIS within the USDA. With the increasing
    availability of digital geospatial databases, the NRCS is using GIS
    technology in more offices than ever before. GIS is being used at all
    levels of the organization, this includes the field service centers,
    state, regional and national headquarters offices.
        We foresee the largest use of GIS will happen at the field service
    center level. The NRCS has about 300 sites presently using GIS. The
    NRCS and the Farm Service Agency are currently working on a GIS
    Business Process Reengineering project with the goal to provide
    improved services to USDA customers by using GIS and digital geospatial
    data. We believe business processes which acquire, access, analyze,
    update, share and display geospatial data may have the greatest
    potential to increase information accuracy, data-sharing and at the
    same time reduce duplication and customer time spent at the field
    service centers.
                             mud river dam project
        The Committee in fiscal year 1997 encouraged the Department to
    continue working on the upper MUD River Dam project in West Virginia.
        Question. What is the status of this project? What other Federal or
    State agency's funding is available for the project? What funds are
    needed, by fiscal year, to complete this project? How much is included
    in the fiscal year 1998 budget request?
        Answer. The Upper Mud River Watershed Project is about 95 percent
    completed. A contract for the recreation facilities was awarded and
    construction is underway for the final recreation phase. A contract for
    dam repairs is planned to be awarded in April 1997, with work beginning
    in June 1997. All work will be contracted in fiscal year 1997 and
    project completion is expected by December 1997. No fiscal year 1998
    budget request is anticipated.
                    mississippi delta water resources study
        The Committee provided fiscal year 1997 funding for the Mississippi
    Delta water resources study at the fiscal year 1996 funding level.
        Question. What is the status of this study?
        Answer. The Mississippi Delta Water Resources Study is
    approximately two-thirds completed with about 75 percent of the needed
    data collected. Draft reports have been prepared. Approximately 5 staff
    years will be dedicated to this project from within NRCS and the
    remaining staff time needed will be from other sources.
        Question. What funds are needed, by fiscal year, to complete this
    study? How much is included in the fiscal year 1998 budget request?
        Answer. The study is scheduled for completion at the end of fiscal
    year 1997. No funds are requested for the study in the fiscal year 1998
    budget.
                golden meadow, louisiana plant materials center
        The Committee provided $100,000 to Golden Meadow, Louisiana, Plant
    Materials Center for fiscal year 1997 to facilitate the testing of
    application technologies in the development of an artificial seed for
    smooth cordgrass.
        Question. What is the status of the project?
        Answer. The project has gone well. Protocols have been worked out
    that permit production of artificial seed at will. The plan is to
    produce large numbers of them during the spring of 1996 in order to
    establish field plantings. The field plantings will evaluate
    establishment and survival characteristics under different
    environmental conditions. Depending on the success of field plantings,
    it may be necessary to ``fine-tune'' planting methodology and/or
    production techniques of the artificial seed.
        Question. What funds are needed, by fiscal year, to complete this
    study? How much is included in the fiscal year 1998 budget?
        Answer. The 1998 budget will continue funding at a comparable level
    in order to maintain the momentum and progress that has already been
    achieved. A funding level of $150,000 annually would allow for
    completion of the project by the year 2001.
                   crowley, louisiana, rice research station
        Question. Has the NRCS continued its work with the Crowley, LA,
    Rice Research Station on the development of additional species which
    will help stop erosion on inland wetlands and barrier islands? What
    programs have the NRCS helped with the Station? How much is requested
    in your fiscal year 1998 budget to help with this research?
        Answer. The relationship between the NRCS and Crowley Rice Research
    Station has been a productive one which has led to development of an
    artificial seed for smooth cordgrass. This species can be very
    effective in reducing erosion on inland wetlands and barrier islands.
    Since the species seldom produces viable seed, however, a unique
    approach of using artificial seed was adopted to provide adequate
    materials. The effort has now reached the point where field testing
    will be undertaken.
        Another species, California bullwhip, with proven erosion control
    characteristics also has potential for tissue culture work. This is
    being considered by the Research Station, and preliminary evaluations
    of their potential are being undertaken in order to develop a new
    release. NRCS has helped the Station in identifying those species that:
    have both the greatest application for conservation uses, and the
    potential for tissue culture work. NRCS also assists in field testing
    of new materials and has been able to accelerate such efforts through
    productive interactions with the Station. Examples include: efficiency
    of transplant methodology and hydro-mulching of artificial seed.
    Continuation of the interaction between NRCS and the Crowley Rice
    Research Institute would cost $125,000 in fiscal year 1998.
                     research on nutria-resistant materials
        The Committee provided in fiscal year 1997 $150,000 to continue a
    program for research on nutria-resistant materials.
        Question. What is the status of this research and the location
    where the research is on-going?
        Answer. The work to date has focused on smooth cord grass with an
    underlying strategy of producing sufficient plants in a restoration
    effort to survive impact of nutria activities. The effort has reached
    the stage where it can now be field-tested in 1996 on a broader scale.
    Previous evaluations have been undertaken at the Crowley Rice Research
    Station. Current plans are to establish 10 evaluation plots in Cameron
    Parish, LA. It is estimated that restoration success can probably be
    achieved even with a 10-20 percent loss to nutria during plant
    establishment. Other options such as including chemical additives to
    gel capsules will be explored as warranted.
        Question. Is funding requested for fiscal year 1998 for this
    project? How much?
        Answer. The 1998 budget proposes to fund this work at the current
    level of $150,000 in order to maintain momentum that has been
    generated.
            rural recycling and water resource protection initiative
        The Committee provided $3 million for the continuation of the
    multiyear rural recycling and water resource protection initiative in
    the Mississippi Delta region of Louisiana, Arkansas and Mississippi.
        Question. What is the status of this project?
        Answer. The project is approximately one third complete.
        Question. What funds are needed, by fiscal year, to complete this
    initiative? How much is included in the fiscal year 1998 budget
    request?
        Answer. Approximately $3 million is needed in each fiscal year from
    1998 through fiscal 2002 to complete the initiative. The fiscal year
    1998 budget request includes $3 million for the rural recycling and
    water resource protection initiative.
                  new york city watershed agriculture program
        Question. How did the Department assist in the evaluation of the
    New York City Watershed Agriculture Program? How much money does the
    fiscal year 1998 budget request for this program?
        Answer. The Congressional earmark stated that NRCS would assist the
    Watershed Agricultural Council with the evaluation of its programs to
    be conducted by EPA in 1997. To date there has been no contact from the
    Watershed Agricultural Council or EPA indicating the assistance they
    desire from NRCS. The 1998 budget did not include a specific request
    for this program.
                         indian creek watershed project
        How is the Department providing assistance to complete the Indian
    Creek Watershed project in Mississippi in fiscal year 1997?
        Question. What is the status of this project?
        Answer. The plan for the Indian Creek Watershed in Mississippi has
    been completed by NRCS and is now undergoing review here in the
    National office. Planned works of improvement provide flood protection
    to approximately 350 socially and economically disadvantaged residents
    and business owners in the rural community of Luka, Mississippi. The
    cost of the project is estimated at $3.6 million and the benefit/cost
    ratio is 0.3/1.0.
        Question. What funds are needed, by fiscal year, to complete this
    initiative? How much is included in the fiscal year 1998 budget
    request?
        Answer. Approximately $3.06 million of Public Law 83-566 funds
    would be needed to implement this project. The project will compete
    with other approved projects for funding.
                        trinity basin cooperative study
        The Committee urged the Department in fiscal year 1997 to provide
    necessary funding to meet Federal obligations to complete the upper
    Trinity basin cooperative study in Texas.
        Question. What is the status of this study?
        Answer. The study is progressing well. This is the fifth year of
    this seven year study being carried out with the Tarant County Water
    District.
        Question. How much is the Department providing in fiscal year 1997?
    How much is in the fiscal year 1998 budget request for this study?
        Answer. Funding for fiscal year 1997 was $200,000 and is being used
    for further development of the SWAT model to include in stream
    dynamics. With that capability, the model will be able to be linked
    with several EPA models such as WASP4 for reservoirs. In addition,
    extensive sampling and monitoring of streams is being carried out so
    that the model can be calibrated to existing conditions. The fiscal
    year 1997 funding should provide enough money to complete the project.
              monroe county, west virginia, plant materials center
        In the fiscal year 1997 Committee report, the Department was
    instructed to begin construction of the plant materials center in
    Monroe County, West Virginia, from funds earmarked for this purpose in
    previous appropriations.
        Question. What is the status of this plant materials center?
        Answer. The conceptual design package dealing with buildings to be
    constructed at the plant materials center is nearing completion. It is
    scheduled to be reviewed by the end of March so that bids can be
    received. In late April, it is anticipated that the contract can be
    awarded for the construction of buildings. Construction should begin
    later this summer.
        Question. What is the amount that the Department will use in fiscal
    year 1997 for this project? How much money is in the fiscal year 1998
    budget request for this project?
        Answer. The fiscal year 1997 budget estimate for this plant
    materials center being constructed at Alderson, West Virginia is
    $401,000. We anticipate that the funding level for fiscal year 1998
    will be the same.
        Question. Does the Department have a feasibility study on the
    establishment of this plant materials center? When will you provide it
    to the Committee?
        Answer. During the course of the development of the fiscal year
    1996 appropriations bill and the accompanying report, agency officials
    discussed with Subcommittee staff several ways to approach the plant
    materials center in West Virginia. As those discussions concluded, the
    Subcommittee staff relayed that it was decided to include language
    which would direct the construction of this center utilizing funds
    normally included in the appropriations for this program. Even though a
    feasibility study was discussed, the usefulness of the center and the
    Subcommittee's intent was clear. Therefore, no agency staff time or
    funds were dedicated to a study and we have proceeded with design and
    anticipated construction of the plant materials center.
           national natural resources conservation service foundation
        Question. The Committee included bill language in the fiscal year
    1997 Appropriations bill which allowed up to $250,000 of conservation
    operations to be used for the National Natural Resources Conservation
    Service Foundation. How much did the Department provide in fiscal year
    1997?
        Answer. The Department did not Fund the Foundation in fiscal year
    1997. A small amount of staff time was used to collect the nominations
    for the Board, file them, and to respond to questions about the status
    of the Foundation.
        Question. How much is requested in the fiscal year 1998 budget?
        Answer. No funds are requested for the Foundation in fiscal year
    1998 because some members of Congress have questioned using Federal
    funds for this purpose.
                   watershed and flood prevention operations
                               devil's lake basin
        Question. Please provide a summary of the situation in the Devil's
    Lake basin, the actions that NRCS has taken to address this situation,
    and the funding included in the fiscal year 1998 request to address
    this problem.
        Answer. Devils Lake residents and agencies are preparing for a lake
    level of 1,440.5' in June. The snow pack is still heavy with 3" of
    stored moisture. The Corps of Engineers is raising the City of Devils
    Lake dikes to 1,440 for spring runoff. The North Dakota Department of
    Transportation is raising three state highways and one federal highway
    to 1,440 and adding erosion barriers. The North Dakota Soil and Water
    Commission is promoting the As Soon As Possible (ASAP) wetland
    restoration program, and with the newest 70 applications will achieve
    10,200 acre-feet of storage.
        NRCS is participating on the Devils Lake Interagency Task Force and
    assisting the State of North Dakota in implementing the Devils Lake
    Emergency Response Plan for Upper Basin Water Retention.
        Eight NRCS Field Offices are providing priority scope and effect
    determinations where health and safety are issues.
        NRCS detailed the Watershed Regional Technology Team from Lakewood,
    Colorado to develop a comprehensive water management plan for the St.
    Joe and Calio Sub-Watershed Basins.
        NRCS is working with the Devils Lake Task Force to develop
    comprehensive water management plans in nine sub-basins over a 9 year
    period. The expected cost is $4.3 million and a funding source has not
    yet been identified. However, the Basin has been declared a priority
    area for both the Conservation Reserve and Environmental Quality
    Incentives Programs.
                           watershed projects status
        The Committee expressed its expectation that work continue on the
    Little Sioux and Mosquito Creek watersheds in Iowa; the Little Auglaize
    watershed in Ohio; Little Whitestick-Cranberry Creek in West Virginia;
    the Potomac headwaters in West Virginia; and Virgil Creek in New York.
        Question. What is the status of each of these projects? What is the
    timetable for completion for each of these projects? What funding will
    be needed in each fiscal year to complete each project?
        Answer. The Little Sioux Watershed Project in Iowa is one of the
    eleven watersheds authorized under the Flood Control Act Public Law 78-
    534. The project received directed funds of $1.4 million in fiscal year
    1997 and is about 68 percent completed. The remaining structural work
    could be installed by 2016 at an annual cost of $750,000 and the
    remaining land treatment could be applied by 2041 at an annual Federal
    cost of $1,400,000.
        Mosquito Creek Watershed in Iowa is authorized under the Watershed
    Protection and Flood Control Act Public Law 83-566. The project
    received directed funds of $100,000 in fiscal year 1997 and is about 85
    percent completed. Expected future funding needs are about $1.5
    million.
        The Little Auglaize Watershed in Ohio is authorized under Public
    Law 83-566 for flood control. The project received directed funds of
    $1.3 million in fiscal year 1997 and is about 95 percent completed. At
    present funding levels and Ohio priorities, the project will be
    completed in fiscal year 1999.
        Little Whitestick-Cranberry in West Virginia is authorized under
    Public Law 83-566 and received directed funding of $3.4 million in
    fiscal year 1997. This installs the first phase of the project and the
    remaining needs are about $3.0 million.
        Potomac Headwaters Watershed is a large Public Law 78-534 project
    in West Virginia, Virginia, and Maryland and is administered by West
    Virginia. The project received $2.3 million in directed funds in fiscal
    year 1997 and the remaining needs are about $80 million. A portion of
    the fiscal year 1997 funds are being utilized to begin Community-based
    Comprehensive Resource Management Plans where 1996 floods occurred.
        Virgil Creek Watershed in New York is a Public Law 83-566 Flood
    Prevention project with a single dam. The project received directed
    funds in fiscal year 1997 of $2.0 million to contract for the first
    phase of the dam. Every effort will be made to direct the remaining
    $2.5 million in fiscal year 1998.
        Question. How much is included in the fiscal year 1998 budget
    request for each of these projects?
        Answer. No project specific budget requests are made by NRCS for
    Public Law 83-566 and Public Law 78-534. The Watershed Protection and
    Flood Prevention Operations appropriation is allocated according to the
    quality of the approved projects, their contributions to the NRCS
    Strategic Plan, and commitments of sponsors.
                      lower amazon and flat creek project
        The Committee encouraged the Department in the fiscal year 1997
    Appropriations bill to work with local government entities and using
    other conservation programs in Oregon to provide assistance on the
    Lower Amazon and Flat Creek project.
        Question. What is the status of this project? Which local
    government entities is the Department working with? Were other
    conservation programs used? If so, which ones?
        Answer. The Lower Amazon and Flat Creek project is a proposal to
    modify existing flood control measures to restore flood plains and
    wildlife habitat near Eugene, Oregon. The project is in active planning
    by the U.S. Army Corps of Engineers, Bureau of Land Management, Natural
    Resources Conservation Service, City of Eugene, and the Lane County
    Council of Governments. Opportunities for other conservation programs
    are being examined, including State of Oregon as well as USDA Wildlife
    Habitat Incentives Program and the Wetland Reserve Program.
        Question. How much money is requested in the fiscal year 1998
    budget for this project?
        Answer. Again, no project specific fiscal year 1998 budget
    proposals have been made by NRCS.
                    west virginia resource management plans
        The Committee directed the NRCS in the fiscal year 1997
    Appropriations bill to provide resources to complete resource
    management plans for communities in West Virginia where the 1996 floods
    occurred.
        Question. What is the status of these community-based comprehensive
    resource management plans?
        Answer. NRCS in West Virginia has provided the necessary resources
    to complete innovative community-based comprehensive resource
    management plans for communities devastated by the floods of 1996.
    fiscal year 1997 funds were made available from the Potomac Headwaters
    Public Law 534 allocation and is being used to secure an A/E consulting
    firm to develop a North Fork South Branch Potomac River Watershed Plan.
    The consultant will work under the direction of a NRCS Community Based
    Assistance planner and will provide direct assistance to the local
    resident North Fork Watershed Committee.
        Question. What is the amount of necessary resources provided in
    fiscal year 1997? How much is requested in the President's fiscal year
    1998 budget?
        Answer. $300,000 was made available in March, 1997, and no specific
    additional needs or budget requests have been identified for fiscal
    year 1998.
             water storage and delivery systems on hawaii and maui
        Question. How has the Department enhanced the water storage and
    delivery systems on the islands of Hawaii and Maui as the Committee
    directed in the fiscal year 1997 Appropriations? How much does the
    Department estimate that it will cost to enhance these systems? How
    much is requested in the President's fiscal year 1998 budget?
        Answer. NRCS and Hawaii state sponsors have developed three water
    storage and delivery system plans on the islands of Hawaii and Maui
    under authority of the Watershed Protection and Flood Control Act
    Public Law 566.
        On Maui, the Upcountry Maui Watershed Plan/Environmental Impact
    Statement (EIS) proposes storage and a distribution system to irrigate
    473 acres in Upper Kula, supply irrigation water for the Hawaiian
    farmers in the Department of Hawaiian Homelands Keokea agriculture
    plots, and better utilize Other Important farmland. The project also
    relieves the demands on the Olinda Water Treatment Plant and will aid
    potable water supplies. The total cost of the project is $9.0 million
    with about 49 percent paid by the local sponsors. The Final Plan/EIS is
    complete.
        On the Big Island of Hawaii, two water storage and delivery system
    projects are developed. The Waimea-Paauillo Draft Plan/EIS has been
    completed The Plan proposes a 131 million gallon reservoir at Kauahi, a
    reservoir supply line, extended irrigation system, and a livestock
    drinking water distribution system. The project will serve 167 farmers
    on 1,985 acres and 265 ranchers on 22,900 acres. Most of the farmers
    and ranchers are of native Hawaiian ancestry. Total installation will
    be $17.4 million
        The Lower Hamakua Watershed Project on Hawaii was initiated in
    response to serious social and resource problems that followed the
    failure of a major sugar plantation. The draft Plan/EIS is being
    revised to address botany, stream archaeology, and land rights.
    Preliminary costs are $5.0 million.
        Again, no project specific budget requests are made by NRCS for
    Public Law 566. The Watershed Protection and Flood Prevention
    Operations appropriation is allocated according to contributions to the
    NRCS Strategic Plan, quality of plans and readiness of sponsors.
                      ewp funding to mississippi counties
        Question. How much did NRCS allocate to the following Mississippi
    counties with EWP funds appropriated for fiscal year 1997: Adams,
    Alcorn, Clairbome, Covington, DeSoto, Forrest Grenade, Hinds, Holmes,
    Itawamba, Jones, Leake, Lee, Lowndes, Madison, Monroe, Neshoba, Panola,
    Perry, Pontotoc, Prentiss, Rankin, Tippah, Union, Warren and Yazoo. How
    much is requested in the President's fiscal year 1998 budget for these
    counties? What is the status of the emergency watershed needs for each
    of these counties?

           FIRST GROUP UNDER WATERSHED AND FLOOD PREVENTION OPERATIONS
    ------------------------------------------------------------------------
                                                Fiscal year
                                                   1997          Status of
                                               appropriation       needs
    ------------------------------------------------------------------------
    Adams...................................      $5,463,000      $1,500,000
    Alcorn..................................  ..............         300,000
    Clairborne..............................  ..............         500,000
    Covington...............................  ..............         200,000
    DeSoto..................................  ..............       1,000,000
    Forrest.................................  ..............       1,000,000
    Grenada.................................  ..............         600,000
    Hinds...................................  ..............       3,000,000
    Holmes..................................  ..............         500,000
    Itawamba................................  ..............         200,000
    Jones...................................  ..............         500,000
    Leake...................................  ..............         200,000
    Lee.....................................  ..............       1,500,000
    Lowndes.................................  ..............         200,000
    Madison.................................  ..............       5,000,000
    Monroe..................................  ..............         200,000
    Neshoba.................................  ..............         500,000
    Panola..................................  ..............         200,000
    Perry...................................  ..............         100,000
    Pontotoc................................  ..............         200,000
    Prentiss................................  ..............         200,000
    Rankin..................................  ..............       1,500,000
    Tippah..................................  ..............         200,000
    Union...................................  ..............         200,000
    Warren..................................  ..............         300,000
    Yazoo...................................  ..............         200,000
                                             -------------------------------
          Total.............................       5,463,000  \1\ 20,000,000
    ------------------------------------------------------------------------
    \1\ This need for $20 million for Emergency Watershed Protection funds
      is a special authority within the President's request for Emergency
      Supplemental Appropriations for fiscal year 1997. This authority would
      allow NRCS to address damages in Mississippi from storms in 1991-94.
      EWP funding requests are not a part of the fiscal year 1998 budget
      process.

                                vermont projects
        In the fiscal year 1997 appropriations bill the Committee
    encouraged the Department to complete work on the following projects in
    Vermont as funding allowed: Lower Otter and Dead Creek, Lemon Fair
    River, lower Winooski River, lower LaMoille River, lower Black River,
    and the Barton and Clyde River projects.
        Question. What is the status and costs of each of these projects?
        Answer. The Lower Otter and Dead Creek, Lemon Fair River, Lower
    Winooski River, Lower LaMoille River, Lower Black River, and the Barton
    and Clyde River projects received $425,000 in directed funds in fiscal
    year 1997 for work on these projects. An additional $60,000 is needed
    in fiscal year 1998 for completing them.
        Question. How much is requested for each of these projects in the
    President's fiscal year 1998 budget?
        Answer. No specific projects were identified in the fiscal year
    1998 budget request.
                               watershed planning
                              zuni river watershed
        The Committee provided fiscal year 1997 funding of $300,000 for the
    Zuni River watershed.
        Question. What is the status of work on this project? What is the
    timetable for completion of the project? What funding will be needed in
    each fiscal year to complete this project?
        Answer. The Zuni River Watershed Act (ZRWA) was passed by Congress
    in August 1992 with the purpose of authorizing the development of a
    plan for the management of natural and cultural resources within the
    Zuni River Watershed and upstream from the Zuni Indian Reservation. An
    advisory group of 22 different agencies, groups, and individuals was
    formed to direct the development of a plan, A working group of eight
    individuals was organized to provide detailed guidance. Ten technical
    teams were formed to carry out the actual study. A full time
    coordinator has been provided by NRCS.
        Accomplishments in fiscal year 1996 include the completion of field
    work by the Field Resource Inventory Team. This data became available
    for the technical teams to begin evaluating the watershed and
    developing recommendations. The field work by the Hydrology/Erosion
    Team was completed. This information will be the basis for the erosion
    assessment and recommendations. A field review by the Advisory
    Committee was held and landowners interviews were carried out.
        Question. How much is included in the fiscal year 1998 budget
    request?
        Answer. Plans for fiscal year 1997 are to complete the project and
    issue the final plan in September 1997. A video is also planned for the
    presentation of the report. However, no additional construction costs
    were identified for the 1998 fiscal year.
                   little auglaize and piney creek watersheds
        The Committee expressed its expectation that work continue on the
    Little Auglaize watershed in Ohio and the Piney Creek Watershed in
    Mississippi.
        Question. What is the status of the work on these watersheds? What
    is the timetable for completion of these projects? What funding will be
    needed in each fiscal year to complete each project?
        Answer. The Little Auglaize Watershed is authorized under the
    Watershed Protection and Flood Control Act Public Law 566 for flood
    control. The project received directed funds of $1.3 million in fiscal
    year 1997 and is about 95 percent complete. At the present funding
    levels and Ohio priorities, the project will be completed in fiscal
    year 1999.
        Piney Creek Project is a sub-watershed within the Yazoo Watershed
    authorized by the Flood Control Act of 1944 (Public Law 534). Of the
    total Yazoo allocation to Mississippi, Piney Creek received about
    $200,000 and installed two structures in fiscal year 1996. Allocations
    to the Yazoo are expected to continue at present levels with the Piney
    Creek share determined by state priorities.
        Question. How much is included in the fiscal year 1998 budget
    request?
        Answer. Again, no project specific budget requests are made by NRCS
    for Public Law 566. The Watershed Protection and Flood Prevention
    Operations appropriation is allocated according to contributions to the
    NRCS Strategic Plan, quality of plans and readiness of sponsors.
                 technical assistance for gangland conservation
        The Administration's request includes an increase of $4.1 million
    for Conservation Technical Assistance for training for gangland
    conservation and the improvement of conservation district skills.
        Question. The budget states that the money requested will be
    supplemented with up to $944,000, for a total of $5 million to train
    NRCS staff. From which account does this supplemental money come?
        Answer. The additional $944,000 that may be utilized to implement
    the grazing lands training program will come from a variety of sources.
    Conservation Technical Assistance funds can be used to support the
    training if necessary. Additionally, funding may be leveraged with
    those from federal, state and local partners to provide training to a
    wider audience that would include representatives from federal, state,
    and local governments, industry, private livestock producers and the
    public. Participating partners may include the member organizations of
    the National GULCH Steering Committee, Conservation Districts,
    Universities, and others.
        Question. How many full-time equivalent employees will be hired
    with these additional funds?
        Answer. The funds have not been requested to hire new federal
    employees. However, approximately 1,000 employees will benefit from
    this training. A majority of the training will be developed to include
    a variety of partners, including university, extension, industry,
    private grazing land owners and managers, as well as the public that
    benefit from properly managed grazing lands.
              digitization of the geographical information systems
        The President's fiscal year 1998 request proposes an increase of
    $10 million to accelerate the recent rate of acquisition of the digital
    orthophotography maps and data digitization. The request states that an
    increase from the base of $7.5 million would allow USDA to continue the
    1997 initiative of providing the service centers with digital
    orthophotography map and digitized soil survey data for completed soil
    surveys for the entire United States in about 9-10 years.
        Question. Should less than $10 million be available for this
    function, how does one calculate the rate of digitization?
        Answer. This money will be used to accelerate both soil survey
    digitizing, and the production of digital orthophotography. However,
    before the soils can be digitized, two significant business processes
    which constitute two-thirds of the work involved to develop a digital
    product must be completed. First, the older soil maps must be updated
    and recompiled to fit the new accurate orthophoto base map. The updated
    maps are quality controlled for accuracy and matching to adjoining
    maps. Second, information about the soils such as descriptions and soil
    correlations must be completed. The digitizing process itself is in
    usually the least expensive and time consuming of the three major
    business processes. The rate of digitizing alone is based on the
    complexity of the individual soil survey areas. In areas where the soil
    surveys are complex, mapping of the soils to the new digital
    orthophotography base map and digitizing requires more time as compared
    to areas where the patterns of soils and the detail on the maps are not
    as complex. Based on our experience, the average cost to just digitize
    a soil survey area is $20,300. If less than the $10 million is
    available for digitizing soil surveys, fewer soil survey areas will be
    digitized based on the cost for digitizing.
        The rate of digital orthophotography production is calculated on a
    single map basis, approximately $1,000 per digital orthophoto map. An
    average county has approximately 70 maps for complete coverage, this
    translates to an average of about $70,000 per county.
        To ensure easy access to soils and natural resource information by
    our customers and partners, the NRCS goal is to have the digital
    orthophotography and digital soils data completed for the nations
    private lands by the year 2002. This date matches the USDA target for
    putting geographic information systems (GIS) in Field Service Centers
    to improve business process efficiencies, reduce duplication and
    improve customer satisfaction. If $10 million is made available, the
    acquisition of digital orthophotography and the digitizing of soils
    will be completed in year 2003. If the $10 million is not approved, the
    acquisition of digital orthophotography and the soil digitizing will
    not be completed on schedule.
        Question. How will the work be accomplished without additional USDA
    employees being added to the payroll if the $10 million increase
    requested is provided?
        Answer. The additional $10,000,000 being requested is to accelerate
    the digitizing and acquisition of digital orthophotography initiative
    started in fiscal year 1997. In fiscal year 1997, we are putting into
    place an infrastructure of people and technology to provide quality
    digitized soil surveys. Once this infrastructure is operational and the
    staffs are sufficiently trained, our digitizing capacity will be
    greater than it currently is. Taking advantage of this increased
    production capacity will not require adding more people to the payroll
    of NRCS. In addition, we plan to increase the amount of digitizing to
    be contracted. Re-direction of staff already employed by the agency for
    this accelerated initiative will provide more staff years to do this
    work.
        Digitizing the soil maps is only part of the work that has to be
    done to provide a quality product as we transition the soil survey
    program from one originally designed to produce hard-copy publications
    to one that develops maps and related soil descriptions and
    correlations into digital format. Having the maps and associated
    resource data developed for use in an information system that is
    accessible by the public allows many customers to produce their own
    information without having the NRCS to do it all for them. Bringing
    older soil survey information to up-to-date standards is a heavy
    workload, but must be done to ensure that the maps and related data
    match between differently soil surveys. This will take several years to
    complete as the soil surveys that we call modern soil surveys have been
    conducted over the last 50 years. With the changing needs of modern
    customers, this has left us with a patch work quilt of soil surveys
    across the nation. Some surveys meet current needs, however many do not
    meet current standards. We estimate that about 20 percent of the soil
    surveys are out of date, and need some form of updating to meet
    customer expectations. This would be about 400 soil surveys. This
    updating requires field mapping work, and associated quality assurance
    checks to ensure our surveys meet the National Cooperative Soil Survey
    quality standards.
        No additional employees will be needed to acquire digital
    orthophotography since the work is contracted to the private sector.
    The US Geological Survey administers the digital orthophotography
    contract, and staffing is already in place for this function. Digital
    orthophotography is delivered to the NRCS in a form ready to use in a
    GIS and for soil mapping and digitizing.
                        soil survey resource information
        The fiscal year 1998 budget request proposed an increase of $5
    million to fund 75 Full Time Equivalents (FTE) to prepare 2,400
    completed soil surveys for digitizing and to provide information to
    update soils data.
        Question. Would this function be completed in fiscal year 1998? If
    not, when will you expect to finish this function and how much more
    money would you anticipate needing for those fiscal years beyond 1998?
        Answer. The initiative for updating soils data in association with
    the digitizing of soil survey areas was proposed for a 6 year project
    funded at $5 million each year. Soil Survey information, like any other
    kind of information, must meet the current needs of customers if it is
    to remain useful. Soil Survey information is now available for about 94
    percent of the nation's privately owned land and for about 76 percent
    of the entire country. The soil surveys we call modern soil surveys
    have been conducted over the last 50 years, and with the changing needs
    of modern customers that has left us with a patch work quilt of soil
    surveys across the nation. Some meeting current needs, some not. This
    $5 million a year would be used to ensure critical data needed to
    provide current interpretations would be available for those soil
    surveys digitized. This would not however, do the entire job of bring
    all soil surveys up to current standards
        Question. Is the NRCS currently doing any soil surveys? If so, how
    much money will be allocated for these surveys in fiscal year 1998? How
    many will be completed in fiscal year 1998?
        Answer. NRCS is currently conducting soil surveys in 640 areas that
    have not been previously mapped, and is updating older soil surveys in
    224 areas where the information is no longer adequate to meet current
    customer needs. Assuming similar funding as we received in fiscal year
    1997 we will allocate $76.4 million dollars to this initiative. Of that
    approximately 25 percent or $19 million is used in providing soil
    science expertise to assist the agency and our customers in the use of
    soil information. The remainder is used for soil survey and the
    associated support activities.
        Approximately 50 to 55 soil surveys are completed each year.
     technical assistance for resource conservation and development program
        The fiscal year 1998 budget calls for an increase of $18 million
    under the Resource Conservation and Development program to fund 400
    non-federal watershed and rangeland coordinators in 25 states for high-
    priority watersheds.
        Question. Which are the 25 states that have high-priority
    watersheds? Are these recently designated high-priority watersheds?
        Answer. The states and the particular high-priority watersheds that
    would benefit from the assignment of coordinators have not been
    selected at this time. The selections of locations would be made by the
    Deputy Chief for Programs and the state conservationists based upon
    recommendations from the state technical committees, local leaders and
    partners. The list would be developed once funding for the coordinators
    was allocated.
                    environmental quality incentives program
        The Department of Agriculture announced on March 19, 1997,
    preliminary state funding allocation for the Environmental Quality
    Incentives Program (EQIP). The Department allocated $170 million for
    state priority areas. The remaining $30 million will be allocated to
    the states when their final needs for technical, financial, and
    educational assistance are determined.
        Question. It is estimated that NRCS will award 5,143 contracts
    costing approximately $170 million over fiscal years 1997 and 1998. How
    did NRCS decide on this number of contracts and these costs?
        Answer. NRCS conducted a workload analysis to estimate this
    information. For the analysis, we assumed that $180 million would be
    available each year for financial assistance in contracts and that 10
    percent, or $20 million, of EQIP funds would be available for technical
    assistance costs related to operating the EQIP program. The actual
    technical assistance costs to carryout EQIP will be more than the $20
    million. Using our experience in the Great Plains Conservation Program
    and the Colorado River Salinity Control Program, which used long-term
    contracts, we assumed that an average contract would cost about $35,000
    based on about 40 percent of contracts would be at the $50,000 per
    contract payment limit, and about 60 percent of contracts would average
    $25,000 per contract. This results in 5,143 contracts per year.
        Question. When do you think that the states' final needs will be
    assessed? How will the Department assess these needs?
        Answer. The final allocations will be made when the final rule is
    effective. The preliminary funding information was distributed in March
    so that state conservationists could make decisions as to the amount of
    funds that are provided for significant state-wide natural resource
    concerns and the amount that will be allocated to each priority area.
    National guidance provides that at least 65 percent of the funds
    allocated to the State must be allocated to priority areas. However,
    the State conservationist, with the advice of the State Technical
    Committee and concurrence of FSA, may allocate a higher percentage to
    priority areas and less than 35 percent to significant state-wide
    natural resource concerns. The state funding decisions will be shared
    with the national office about April 7th. We will review them to ensure
    that on the national level 50 percent of the funds are targeted to
    natural resource concerns related to livestock production, and then
    finalize allocations.
                                 new world mine
        Question. The Clinton Administration has offered $65 million to
    Crown Butte Mines, Inc., in a cash deal to stop development of a
    proposed mine near Yellowstone National Park. To offset the $65
    million, the administration proposes deferring entry of 2 million acres
    into the Conservation Reserve Program (CRP) from 1997 to 1998. I
    understand this proposal will require legislative action. Is that
    correct?
        Answer. Yes, legislation will be necessary to complete the proposed
    exchange of assets.
        Question. Why did the Administration offer up CRP funds as an
    offset?
        Answer. Since protecting the New World Mine is an important natural
    resource concern, it seemed appropriate to find an offset from another
    Federal natural resource protection program. The offset proposed from
    the CRP would provide the needed savings with limited impact on the
    program.
        Question. How will this impact the CRP?
        Answer. The impact on the CRP will be minimal. There will be no
    change in the maximum enrollment target for additional acreage for the
    two years combined, fiscal years 1997 and 1998. The target is to enroll
    28 million acres over this period of which the amount for fiscal year
    1997 will still be at least a very ambitious 17 million acres. The
    Administration's proposal will not reduce the amount of acreage
    eventually eligible for the CRP and we still intend to enroll the same
    36.4 acres by 2002.
        Question. CRP unobligated balances are essential to fund technical
    assistance for program needs in fiscal year 1997, fiscal year 1998 and
    future years. Do you believe that this proposal will set a precedent by
    the Administration as other PAYGO problems arise?
        Answer. The Administration will have to address PAYGO problems as
    they arise and will always seek the best alternative to address them.
    We do not think this proposal will set a precedent as far as using the
    CRP enrollment activity for fiscal year 1997 made this an attractive
    alternative this year.
        Question. How will it impact the funds required for CRP/WRP
    technical assistance in future years?
        Answer. It should not impact future technical assistance needs for
    CRP/WRP in 1997 and 1998 since this will be funded through unobligated
    1996 CRP funds. Technical assistance for the CRP and WRP are more
    directly affected by the 1996 Farm Bill which amended Section 11 of the
    CCC Act by limiting the total amount of CCC funds made available for
    non-program payments to the total amount spent in 1995.
        Question. Is it not true that the enrollment for CRP is
    unpredictable because farmers are watching crop prices before they
    decide how much land to enroll?
        Answer. The number of farmers that will bid in any CRP sign-up is
    unpredictable. Short-term and long-term consideration of prices is
    certainly a factor. A high price scenario that farmers project may only
    be temporary.
        Question. What are the CRP enrollment projects in fiscal year 1998
    and the outyears?
        Answer. The fiscal year 1998 budget assumes the following
    enrollment projects for CRP:
                                                                       Acres
    1998....................................................      19,000,000
    1999....................................................       8,500,000
    2000....................................................       5,300,000
    2001....................................................         758,000
    2002....................................................       1,000,000

        Question. What are the assumptions underlying these projections?
        Answer. CRP enrollment is assumed to gradually increase to 36.4
    million acres by 2002 which is the maximum enrollment level authorized
    for this program. With 21.4 million acres scheduled to expire on
    September 30, 1997, 4.8 million acres the following year and 3.4
    million acres on September 30, 1999, it is not practical to expect full
    replacement of all expiring acres during fiscal year 1997. Therefore,
    at the time the budget estimates were completed, 19 million acres were
    projected as the maximum amount likely to be replaced in 1997 with the
    remaining expiring acres and additional acres needed to return to the
    36.4 million acres occurring over several years.
        Question. Please explain the PAYGO offset. How much would be saved
    by delaying the sign-up of 2 million acres of farmland in the
    Conservation Reserve Program from 1997 to 1998?
        Answer. Legislation is required to authorize the use of royalties
    under this proposal. A critical factor in being able to exchange the
    royalties is compliance with the so called ``PAYGO'' requirements of
    the Budget Enforcement Act of 1990 which requires legislation to be
    budget neutral and to have no net impact on the Federal budget deficit.
    The Administration estimates that deferring two million acres from the
    current CRP sign-up for one year will save about $103 million over five
    years.
        Question. Would this be fiscal year 1998 savings?
        Answer. These savings are projects over a five year period so a
    portion would come in 1998.
        Question. Why would it not increase the amount needed to reach your
    CRP acreage target in fiscal year 1999?
        Answer. The proposal only serves to postpone the sign-up of a small
    portion of the projected acreage, not to reduce the size of the
    program. The target of enrolling 28 million acres over the next two
    years will not change.
                            plant materials centers
        Question. Which of the 26 Plant Materials Centers have completed
    their research? How many products has each center produced and what are
    they?
        Answer. None of the plant centers have completed their work. The
    work of developing and transferring new plant technology for NRCS Field
    Offices is an ongoing process which will continue to require new state-
    of-the-art information to adequately meet emerging resource challenges.
    The 1996 Farm Bill, for example, has a number of provisions and
    technology needs which can best be met by information from the plant
    materials program. Some of the technology needs are yet to be
    developed.
        Centers organize their work load into separate projects that are
    comprised of individual studies addressing specific conservation needs.
    At the present time there are approximately 500 active studies
    receiving attention. As the objectives of individual studies are met,
    the study is terminated and new ones are initiated. Projects are
    undertaken to work on high priority needs, and a typical study takes 3-
    4 years from its inception, to implementation, to transfer of
    information at the current funding level.
        Products from centers most commonly include: releases of new
    materials; printed information on where, how, and when to use plants;
    presentations to Field Office staff and land users; revisions of plant
    science information in NRCS's Field Office Technical Guides; and new/
    revised plant technical guides that evaluate critical land management
    approaches. Products like these number in the hundreds annually on a
    program-wide basis. On a per center basis, a ``typical'' number would
    be 20 or more. There is some year-to-year variation depending on the
    number of studies reaching completion.
        Question. What products are currently in the pipeline?
        Answer. The plant materials program is a diverse one with many
    projects underway. Specifically, the program is developing plant
    recommendations, technology, and products for: Farm Bill Programs such
    as the Conservation Reserve Program (CRP), Environmental Quality
    Incentives Program (EQIP), Wildlife Habitat Improvement Program (WHIP),
    and Wetlands Reserve Program (WRP); critical habitats like wetlands,
    riparian corridors, and disturbed areas; environmental concerns
    relating to native plants, noxious/invasive plants, threatened and
    endangered species; management practices including buffer strips, soil
    bioengineering, waste management; and, program outreach efforts on
    tribal issues and with limited resource farmers.
                              technical assistance
        Question. In the fiscal year 1997 Committee report, the Department
    was urged to implement CRP and the Wetlands Reserve program (WRP) in
    their entirety, including technical assistance, through the Commodity
    Credit Corporation (CCC) as authorized in the 1996 FAIR Act. You
    indicated in your prepared testimony that the CCC reimbursement cap
    prevents this. Why does it, when Section 341 of the FAIR Act directs
    you to use CCC funds to ``carry out'' these programs?
        Answer. Section 161 of the Federal Agriculture Improvement and
    Reform Act of 1996 (the 1996 Act) amended Section 11 of the Commodity
    Credit Corporation Charter Act to restrict the transfer of funds from
    CCC to any agency of the Federal government, any State, the District of
    Columbia, any territory or possession or any agencies thereof.
    Transfers may not exceed the amount that was transferred in fiscal year
    1995. This restriction was effective October 1, 1996. Section 341 of
    the 1996 Act amended section 1241(a) of the Food Security Act of 1985
    (the 1985 Act) to provide mandatory funding through the Commodity
    Credit Corporation to carry out Conservation Reserve Program, Wetlands
    Reserve Program and EQIP. While section 1241(a) authorizes use of CCC
    funds, section 161 restricts the amount of CCC funds that can be used
    by agencies to administer programs on behalf of CCC. The reference in
    section 1241 of the 1985 Act is similar to other statutes that
    authorize CCC to carryout specific functions. Similarly, the section 11
    cap restricts the use of CCC funds under these other programs.
        EQIP is exempt from the section 11 cap because section 1241(b)
    specifically provides that ``Of the funds of the Commodity Credit
    Corporation, the Secretary shall make available $130,000,000 for fiscal
    year 1996, and $200,000,000 for each of fiscal years 1997 through 2002,
    for providing technical assistance, cost-share payment, incentive
    payments, and education under'' EQIP. The specific language in
    subparagraph (b) provides authority to utilize CCC funds for EQIP
    technical and educational assistance in amounts greater than specified
    in section 11 of the CCC Charter Act.
                    environmental quality incentives program
        Question. Many of the local conservation districts have written
    regarding the use of Conservation Operations technical assistance funds
    for technical assistance for the Environmental Quality Incentives
    Program (EQIP).
        Have Conservation Operations Technical Assistance funds been used
    to provide technical assistance for EQIP? If so, why? What is the
    percentage of this money that has been used?
        Answer. In fiscal year 1996, NRCS had to utilize some conservation
    operations technical assistance funds to implement EQIP or we would not
    be able to administer the program in all States. For 1997, NRCS has not
    yet used the $20 million, or 10 percent, of CCC funds approved by the
    Office of Management and Budget for technical assistance. Discussions
    about the total funding for technical assistance provided from the CCC
    will continue with OMB as better information is developed. NRCS will
    continue to analyze its conservation technical assistance program in
    order to determine a more accurate estimate of how much is needed to
    operate EQIP, other farm bill programs, and the ongoing conservation
    assistance underway with Conservation Districts.
        Question. What is the percentage of technical assistance from CCC
    needed to provide adequate technical assistance for EQIP? What about
    CRP?
        Answer. NRCS estimates that at least 19 percent of EQIP funds are
    needed for use in 1997 in providing technical assistance for producers.
    The technical assistance needs will probably increase in subsequent
    years. Early analysis indicates it is possible that higher technical
    assistance needs may be required in future years because: EQIP
    contracts are 5 to 10 year contracts--there will be engineering,
    design, oversight, and follow-up activities by NRCS in each of the
    years of the contract; and, some of the EQIP contracts will have
    structural practices, such as animal waste facilities, waterways,
    terraces, etc., which will require significant time commitment from
    NRCS engineers and technicians for the design, building, and follow-up.
    However, some of the conservation technical assistance program funds
    will continue to subsidize the implementation of EQIP because the CCC
    Charter language does not permit CCC funds to be used for equipment and
    computers which are necessary to carryout the program.
        NRCS and FSA have entered into an agreement concerning
    reimbursement for the costs of providing technical assistance for CRP
    that provides that NRCS will receive $77 per bid offered for fiscal
    year 1997 and $456 per bid accepted into the program, if the land is
    newly enrolled or requires a new conservation plan. In addition, NRCS
    is beginning to tract actual time spent working on CRP so that in
    future years reimbursement will be calculated based on actual time
    spent. For fiscal year 1997, the reimbursement for NRCS technical
    assistance for CRP will not be paid using CCC funds, but CRP
    unobligated balances from the appropriated account.
                 wetlands reserve program technical assistance
        Question. Under current law, reimbursement for NRCS technical
    assistance for WRP is limited to available funds under the section 11
    cap. The FAIR ACT amended the Commodity Credit Corporation Charter Act,
    section 11, limiting the total amount of CCC funds made available for
    reimbursement to the 1995 level, effecting reimbursement agreements of
    all other Agencies competing for the limited funding source available.
    In addition to the section 11 cap, the FAIR Act prevents the use of
    reimbursable funds for purposes other than salary. CCC funds cannot be
    used for supplies, equipment, transportation expenses, etc., thus these
    funds will have to be absorbed through the Conservation Operations
    Account.
        What is the estimated amount of funds needed for those purposes not
    covered by CCC funds?
        Answer. The technical assistance funds needed for CCC conservation
    programs affected by the section 11 cap are as follows.

            Program                                         Fiscal year 1998

    Wetland Reserve Program.................................     $18,200,000
    Wildlife Habitat Incentives Program.....................       7,500,000
    Conservation Farm Option................................       3,750,000
    Farmland Protection Program.............................         720,000
    Conservation Reserve Program............................      20,642,073
                        --------------------------------------------------------
                        ____________________________________________________
          Total.............................................      50,812,073

        These funds, however, should be available in fiscal year 1998
    assuming sufficient levels of unobligated 1996 CRP and WRP funds which
    were appropriated and therefore not subject to the Section 11 cap.
        Question. What unobligated funds will be used and what amount?
        Answer. Unobligated WRP appropriations will be used to fund the
    $18,200,000 needed for WRP. Unobligated CRP appropriations will be used
    to fund the $20,642,073 needed for CRP and the $7,500,000 needed for
    WHIP.
        Question. Will appropriated funds be necessary? If so, how much?
        Answer. For fiscal year 1998, the $3,750,000 needed for CFO and the
    $720,000 needed to fund FPP are proposed to come from the section 11
    cap. However, since CCC funds cannot be used for personal property.
    NRCS will need to fund the purchase of such items from the conservation
    operations technical assistance account. Approximately 27 percent of
    the technical assistance costs normally are spent on personal property.
    Therefore, we expect that approximately $200,000 would be needed to pay
    the cost of doing business in the implementation of CFO and FPP in
    fiscal year 1998.
                   watershed and flood prevention operations
        Question. How many new projects do you anticipate approving in
    fiscal year 1998?
        Answer. We anticipate approving 7 new watersheds operation projects
    in fiscal year 1998.
        In your statement Mr. Under Secretary, you state that the fiscal
    year 1998 budget request for Watershed and Flood Prevention Operations
    is $40 million plus $60 million in Conservation Operations for
    technical assistance.
        Question. Why has NRCS moved technical assistance for water
    resources from the Watershed and Flood Prevention Operations?
        Answer. Technical Assistance for water resources has been moved
    from the Watershed and Flood Prevention Operations to Conservation
    Operations in an attempt to consolidate all technical assistance
    activities except for the Resource Conservation and Development program
    under one appropriation account.
        Question. How will this impact the activities currently funded
    under these functions?
        Answer. This consolidation of technical assistance funds will not
    impact the activities currently funded under these functions. The $60
    million, which is approximately the current level, will be allocated to
    states to be used for implementation of Watershed and Flood Prevention
    Projects as is the current practice.
                watershed and flood prevention language changes
        Question. The NRCS request has changes to the appropriations
    language. Please explain the rationale for each of the following:
    language that makes funds available to high-priority projects; deletes
    language for providing $15 million under Public Law 534 authority;
    deletes language for the $200,000 for employment under the Organic Act
    of 1944; and, language that allows up to $15 million to be used to
    offer subsidized loans through the Rural Utilities Service or Rural
    Business Cooperative Service.
        Answer. As a result of a $881 million unfunded commitment and
    limited funding to reduce that amount, NRCS plans to give priority and
    fund those approved projects which have the highest net benefits.
    Projects will be evaluated regionally and priorities established.
    However, many projects have been waiting their turn for funding and
    commitments made in the past will have to be honored.
        Deletion of the $15 million under Public Law 78-534 represents a
    combining of the funds for Public Law 83-566 and Public Law 78-534 into
    a single line item which was proposed in the 1997 President's budget.
    These programs are very similar in purpose, scope and procedures.
    Combining of the fund allows us more flexibility to utilize the money
    where the greatest need exists regardless of the program.
        In the past loan money was available to sponsors through the
    Farmer's Home Administration for loan under the Public Law 83-566
    program. Because of high interest rates on the money, loans were rarely
    made over the past 10 years. During the past two years or so no money
    was provided to the Rural Development agencies for these loans. Under
    the 1998 proposal, this program has a more attractive interest rate
    because the funds would be used to buy down the interest rate that
    sponsors would have to pay for their loans. The use of $15 million for
    subsidized loans through the Rural Utilities Service or Rural Business
    Cooperative Service is an attempt to revitalize the loan program, and
    allow sponsors the option of borrowing funds at a reduced rate to more
    quickly complete their projects.
        Question. Will this loan from RUS or RBCS be used only for existing
    Small Watershed Projects?
        Answer. The appropriation and funding allocation is for Public Law
    83-566, therefore, the Public Law 566 funds for subsidized loans
    through RUS or RBCS could only be used for these small watershed
    projects.
                 funding high priority public law 534 projects
        Question. You suggest deleting language that provides for $15
    million under Public Law 534 and shifts the funding of high-priority
    projects under Public Law 566 authority. What would not be funded as a
    result of this shift in funding?
        Answer. The funding for projects in Public Law 534 and Public Law
    566 will largely not change as a result of this shift in funding.
    Deletion of the $15 million under Public Law 78-534 represents a
    combining of the funds for Public Law 83-566 and Public Law 78-534
    which was done in the 1997 appropriation language. These programs are
    very similar in purpose, scope and procedures. Combining of the fund
    allows us more flexibility to utilize the money where the greatest need
    exists regardless of the program.
                           nrcs salaries and expenses
        Mr. Under Secretary, you state in your testimony that since
    December 1994 NRCS has been closing field offices and consolidating
    services, and reducing staffers at headquarters.
        Question. Please give the levels of staffing from 1994 to present
    that have been cut at the field office level and the headquarters
    operations.
        Answer. We will provide a table showing the percentage of staffing
    levels for NRCS locations.

                         NRCS STAFFING LEVELS (PERCENT)
    ------------------------------------------------------------------------
                                                      Fiscal year--
                                            --------------------------------
                                                1997       1996       1994
    ------------------------------------------------------------------------
    National headquarters..................      \1\ 3          3          4
    Field offices..........................         77         75         72
    State offices..........................         15         17         22
    Other..................................          5          5          2
    ------------------------------------------------------------------------
    \1\ In fiscal year 1996 staff for NHQ was 392, down from 536 in fiscal
      year 1994, the fiscal year 1999 target is 258.

                                nrcs institutes
        You also state that the establishment of 6 NRCS Institutes will
    occur so that science and technology can be focused on.
        Question. What are these institutes and where are they located?
        Answer. Two new Institutes, the Wildlife Habitat Management
    Institute and the Information Technology Institute, in addition to six
    original Institutes, have now been established. The eight Institutes,
    their mission, and their headquarters location will be provided.
                             eight nrcs institutes
        1. Soil Quality Institute--Ames, Iowa. Mission is to provide
    leadership in soil quality, build partnerships, and develop, acquire,
    and transfer soil quality information and technology.
        2. Wetland Science Institute--Laurel, Maryland. Mission is to
    develop, adapt, and transfer science and technology to protect and
    restore wetlands.
        3. Social Science Institute--Greensboro, North Carolina. Mission is
    to develop and transfer information, procedures, training, and guidance
    related to the social and economic aspects of human behavior.
        4. Natural Resources Inventory and Analysis Institute--Ames, Iowa.
    Mission is to improve NRCS's potential to assess status, condition, and
    trends of our Nation's natural and environmental resources.
        5. Watershed Science Institute--Seattle, Washington. Mission is to
    incorporate ecological principles into natural resource conservation
    and accelerate development and transfer of watershed-based technology.
        6. Grazing Lands Technology Institute--Fort Worth, Texas. Mission
    is to acquire, develop, coordinate and transfer economically and
    ecologically sound grazing lands technology.
        7. Information Technology Institute--Fort Worth, Texas. Mission is
    to explore, develop, and transfer the science and technology of state-
    of-the-art automated processes and tools.
        8. Wildlife Habitat Management Institute--Jackson, Mississippi.
    Mission is to cooperate with conservation partners in acquiring,
    developing, and transferring wildlife habitat restoration and
    management technology.
                nrcs national headquarters structure adjustments
        Question. The Department approved on January 31, 1997, further
    adjustments to the NRCS National Headquarters structure. What were
    these further adjustments?
        Answer. The goal of the NHQ reorganization was to realign and
    restructure the current NHQ organization based on our reorganization
    appraisals and the Blue Ribbon Report on National Resources Inventory
    and Performance Management. The goal was not to reduce staffing levels,
    but to ensure an optimum organization structure for the Agency. Every
    employee has a position at the same grade level and in the same local
    commuting area under the new structure. There are no changes to the
    Agency's budget as a result of the reorganization. We will provide
    highlights of the major functional changes for the record.
                      highlighted major functional changes
        1. Establish a new Deputy Chief for Soil Survey and Resource
    Assessment. This new deputy is responsible for all programs and
    activities related to the collection of natural resource and soils
    data, the assessment of natural resource status, natural resources
    conditions and trends, policy analysis, and strategic planning.
        2. Deputy Chief for Programs to better reflect the focus of the
    Deputy Area. It established a Department of Agriculture Program
    Outreach Division as a result of the transfer of the Secretary's
    Section 2501 program from the Farm Service Agency to NRCS. Also
    transferred to this division are the 1890 and Hispanic Association of
    Colleges and Universities programs from the Deputy Chief for
    Management. It established a Civil Rights Program Compliance Division
    to align Title 6 responsibilities with program operations.
        3. Name change from Deputy Chief for Soil Science and Resources
    Assessment to Deputy Chief for Science and Technology to more
    adequately align the Deputy Chief with the science and technology
    consortium of divisions, institutes, and centers which the Deputy Chief
    supervises.
        4. Name change from Deputy Chief for Management and Strategic
    Planning to Deputy Chief for Management due to the transfer of
    strategic planning functions to the new Deputy Area. As the result of
    the separation of Title 6 and 7 responsibilities, it established the
    Civil Rights Employment Division to provide leadership for Title 7. The
    old Information Resources Management Division is now called the
    Information Technology Division to reflect a refocus on technology, and
    the addition of the Chief Information Officer centralized leadership
    and decision-making relative to information technology agency-wide.
                      workload shifts related to fair act
        You state that the President's request for Conservation Operations
    is increased from fiscal year 1997 because of uncontrollable costs from
    inflation and pay costs, the cost to relocate NRCS operations to the
    USDA Service Centers, and increased program responsibilities with the
    implementation of the conservation programs of the FAIR Act.
        Question. What workload shifts did NRCS encounter as a result of
    the passage and implementation of the FAIR Act?
        Answer. There are several steps that we have taken to manage the
    increases in workload from the new conservation programs and the
    possible shifts in workload relative to implementation of the 1996 Act,
    including new AMTA contracts. In allocating fiscal year 1997 funds for
    EQIP, a natural resource-based allocation formula was developed so the
    allocation of funds could be primarily based on conservation needs.
        The 15th sign-up for CRP has resulted in tremendous workload in
    certain areas of the country. We are managing this workload by
    detailing employees from surrounding areas to assist in completing the
    sign-up activities. On a Regional level, the Regional Conservationists
    are coordinating the need for detailees between States.
        NRCS is attempting to manage the workload shifts resulting from
    implementation of the 1996 Act conservation programs without a
    precipitous shift in employees from any area of the country. We assume
    that there may be a gradual shift to certain high workload areas as
    programs are implemented.
                          relocation cost requirements
        Question. What are the fiscal year 1997 relocation cost
    requirements?
        Answer. NRCS has not tracked the costs for USDA Service Center
    implementation agency-wide which have been funded within the annual
    funds available to the agency. However, the database on service centers
    will be enhanced to capture this information.
                           small watershed operations
        Question. What process is NRCS using to revisit all Public Law 566
    plans to reduce the backlog of work? How many plans do you anticipate
    will be revised?
        Answer. NRCS recently completed a ``Backlog Review'' where every
    active watershed project was examined by NRCS, local sponsors, and
    stakeholders. The intent of the review was to work out those projects
    and structural works of improvement which were economically or
    environmentally unsound. As a result of that review, 131 supplements
    were prepared deleting 1900 miles of channel work and 410 structures.
    Seventy nine projects were declared completed. About one third of the
    measures needing to be deleted remain in the plans. These will be
    deleted in fiscal year 1997 through an estimated 69 supplements to the
    original plans.
                         backlog of watershed projects
        Question. What is the number and dollar amount of project backlogs?
    How much is included in the fiscal year 1998 request to address this?
        Answer. The backlog is presently estimated at $881 million for
    Public Law 566. The fiscal year 1998 budget proposes $40.0 million be
    used to reduce the backlog.
                    high priority flood prevention projects
        Question. The 1998 budget proposal provides no additional funds for
    flood prevention work under the authority of Public Law 534, but would
    continue work on the remaining high priority projects that qualify for
    funding under Public Law 566. Which high priority projects remain?
        Answer. We have not developed a specific list of projects that
    would remain, however, all active Public Law 534 projects contain sub-
    basin with high priority projects. Priority will be determined by
    Congressional language, states priorities, funding availability,
    contribution to the NRCS Strategic Plan, and sponsor commitment.
                              information systems
        On March 7, 1997, the Colorado Springs Gazette announced that the
    National Systems and Research Company had won a $212 million, five-year
    contract to upgrade computer and communication systems for FSA and
    NRCS.
        Question. Why was this contract awarded at this time? Did this not
    fall under the Department's moratorium on the new information system
    technology investments?
        Answer. National Systems and Research Company is one of 6 vendors
    awarded a contract under a competitive procurement by the Farm Services
    Agency for a wide range of IRM support services.
        The procurement resulted in the award of 6 indefinite delivery,
    indefinite quantity contracts to separate vendors. The 212 million
    dollars is the total amount of delegated procurement authority issued
    to the FSA contracting officer for contracts. Each of the 6 contracts
    has a minimum guarantee of $5,000 per year, and a maximum amount of
    $43,240,000 per year.
        When appropriate and approved, specific task orders are to be
    competed among the 6 contractors. Task orders are subject to the
    constraints of the current Department moratorium. The contracts may be
    used for certain investments permitted by the moratorium, or by
    moratorium waivers. The contracts may not be used for investments
    prohibited by the moratorium. While it is in effect, the moratorium
    will constrain the use of these contracts.
        The contracts are expected to support maintenance of current NRCS
    and FSA computing systems, and the development, deployment, and support
    of new computing systems for service centers, administrative
    convergence, and other initiatives under the auspices of the
    departmentally coordinated technical architecture and approved agency
    information system plans.
                            conservation operations
            language to limit agreements with districts for training
        Question. Under Conservation Operations, the fiscal year 1998
    budget requests appropriations language to impose a funding limitation
    of up to $5 million for agreements with conservation districts to
    support training in rangeland conservation. Why is this funding
    limitation requested?
        Answer. This language provides funding limitation for agreements
    with conservation districts to support training in rangeland
    conservation.
                      emergency watershed protection funds
        Mississippi has specific needs for funds in Mississippi that do not
    qualify for the EWP. These funds are needed to repair damages resulting
    from storms occurring in 1991 and 1993. The counties in Mississippi
    effected were Alcorn, Hinds, Claibome, Madison, Rankin. Forrest, and
    Yazoo.
        Question. Will funding from the fiscal year 1997 Emergency
    Supplemental be available for non-exigency needs?
        Answer. These needs were not part of the President's Emergency
    Supplemental request.
        Question. Does this request place any emphasis on any long term
    solution to the non-structural flood damages?
        Answer. Long-term flood damage solutions are addressed under
    Watershed Operations and Flood Prevention Program (Public Law 566 and
    Public Law 534) planning and installation rather than under the
    Emergency Watershed Protection Program. However, the 1996 Farm Bill
    included flood plain easements as an eligible EWP measure. We will
    investigate non-structural easement opportunities in Mississippi.
                 emergency measure funding needs in mississippi
        Question. What are Mississippi's needs for any pending fiscal year
    1997 EWP projects and what is the projected cost? What Mississippi
    needs are outstanding from past fiscal years and what is the estimated
    costs?
        Answer. Mississippi pending fiscal year 1997 EWP current needs as a
    recent of the March tornado and rains are for a total cost of $2.4
    million. Outstanding requests for storm damage for 1991-94 are $20
    million dollars.
        Question. If funding for the special projects are received, can you
    implement the projects in a timely manner?
        Answer. The special projects for 1991-94 could be installed over a
    three-year period.
                      demonstration erosion control (dec)
        The Yazoo Basin Demonstration Erosion Control Project was
    established in 1984. It authorized the Natural Resources Conservation
    Service, U.S. Corps of Engineers and the Agricultural Research Service
    to work jointly on a program to demonstrate on a watershed system basis
    methods of reducing flooding, erosion, and sedimentation in 6 selected
    watershed of the foothills area in the Yazoo Basin. Today the DEC area
    has been increased to include 16 watersheds in the area. From fiscal
    year 1985 until fiscal year 1992, the NRCS received direct funding for
    this program.
        Question. Was any Demonstration Erosion Control (DEC) funding
    available for the NRCS in fiscal year 1997?
        Answer. The initial funding for the DEC program was received in
    fiscal year 1985 and the Congress earmarked $4,100,000 for continuation
    of the joint NRCS-Corps of Engineers project begun in 1984 to alleviate
    flood and drainage problems in the Yazoo River Basin. The NRCS has
    received directed funding for the DEC watershed in the amounts of $4.1
    million in fiscal year 1985; $5 million in fiscal year 1986; $5.4
    million in fiscal year 1987; $5 million in fiscal year 1988; $5 million
    in fiscal year 1989; $7 million in fiscal year 1990; $7 million in
    fiscal year 1991 and $8 million in fiscal year 1992. No funding was
    provided for NRCS for the Demonstration Erosion Control (DEC) in fiscal
    year 1997.
        Question. Has the NRCS acquired any money from the Corps of
    Engineers for DEC funding in fiscal year 1993 through fiscal year 1997?
    If not, why?
        Answer. The Corps of Engineers provided NRCS funding for the DEC
    project as follows: $115,000 in fiscal year 1993; $660,000 in fiscal
    year 1994; $4,430,000 in fiscal year 1995; and $1,785,000 in fiscal
    year 1996. No funding was provided by the Corps for NRCS funding of DEC
    in fiscal year 1997.
                              sharkey series soils
        The Committee is aware that a PEER-reviewed study has been
    conducted which indicates that a significant percentage of Sharkey
    Series Soils in Sharkey County, Mississippi, which have been previously
    considered ``wet'', have now been determined to possess characteristics
    as ``non-hydric soil''.
        Question. I have been told that NRCS concurs with the findings of
    the Sharkey Soils Studies initiated by Dr. David Pettry, a soil
    scientist for Mississippi State University. Is this true?
        Answer. Dr. Pettry and others published a bulletin in 1996
    suggesting that the Sharkey soil as mapped in Mississippi was given an
    incorrect taxonomic classification of Inceptisols, and that the correct
    classification should be Vertisols. It was also suggested that the
    Sharkey soil had been incorrectly designated as a Hydric Soil and that
    that designation should be dropped.
        At the time of the meeting with Dr. Pettry, the NRCS was aware of
    the problems with the taxonomic placement of Sharkey soil into the
    order of Inceptisols and was already in the process of reclassifying
    the soils into the order of Vertisols, so yes, NRCS was in agreement
    with Dr. Pettry on that issue.
        The field study was to review the actual mapping of the soils
    designated as Sharkey and to review their designation as Hydric soils.
    This field study verified that there is a hydric component and a non-
    hydric component within the Sharkey series as mapped, and that the
    designation of Sharkey series as a Hydric soil in the list of ``Hydric
    Soils of the United States'' should remain. On this issue therefore
    NRCS differed with Dr. Pettry.
        Question. Please provide an explanation of any existing or future
    implications which Dr. Pettry's findings might reflect upon wetlands
    regulations for purposes of Section 404 of the Clean Water Act,
    Swampbuster provisions, or any other field and on-site determinations
    carried out by USDA, the Corps of Engineers, or other federal agencies.
        Answer. The implications of Dr. Pettry's findings on the taxonomic
    placement of Sharkey soils into the Vertisol order are mostly academic
    and important to soil scientists in having the proper concept of the
    formation of the soil and its location on the landscape for mapping
    purposes.
        The implications of the designation of Sharkey soil as a Hydric
    soil do not change since that designation is to remain the same.
        What this study does point out is the continuing need to update
    soil survey information as new uses and interpretations of that
    information develop. The Sharkey soils have been mapped in many areas
    and a soil survey published before there was such a designation as
    Hydric Soil. Had that been an important concept at the time Sharkey
    soil was being mapped in those areas, perhaps fewer inclusions of soils
    with better drainage or poorer drainage would have been included in the
    design of the mapping unit. However, this is not greatly significant
    for the purposes of the wetlands regulations of Section 404 of the
    Clean Water Act, Swampbuster provisions, or any other field and on-site
    determinations carried out by USDA and others because the designation
    of a wetland must be verified in the field. The Hydric soil designation
    is only one indicator that an area may qualify as a wetland.
        The 1990 Farm Bill defined a `wetland', except when such term is
    part of the term `converted wetland', to mean land that ``has a
    predominance of hydric soils; is inundated or saturated by surface or
    ground water at a frequency and duration sufficient to support a
    prevalence of hydrophytic vegetation typically adapted for life in
    saturated soil conditions; and under normal circumstances does support
    a prevalence of such vegetation''.
        It is unlikely that any of the acres identified and delineated as
    jurisdictional wetlands on non-agricultural lands in the Mississippi
    Delta will not change as a result of this study.
                            wetlands reserve program
        Question. Please describe the current relationship with the private
    organization that was selected to support the implementation of the
    Wetlands Reserve Program.
        Answer. On January 19, 1996 the NRCS and the National Fish and
    Wildlife Foundation entered into a cooperative agreement in furtherance
    of the WRP effort. Under that agreement the Foundation was to receive
    and match $5,000,000 of WRP funds and help identify and establish
    ecologically sound and cost-effective easements. On February 7, 1997
    the agreement period was extended to August 30, 1997 to provide the
    Foundation with additional time in which to raise matching funds and
    complete easement efforts with the program funds that were provided
    under the original January 19, 1996 agreement.
               private delivery of federal conservation programs
        It is my understanding that the Department of Agriculture is
    considering contracting out certain delivery activities associated with
    one or all of the following federal conservation programs: the Wetlands
    Reserve Program (WRP), Conservation Reserve Program (CRP), or the
    Wildlife Habitat Incentives Program (WHIP). As I understand it, this
    contracting would be to non-profit and state conservation agencies in
    the name of ``partnerships''
        As I understand it, the reason this new delivery system is being
    developed is because of a lack of resources and staff to successfully
    carry these out.
        I realize this Committee instituted a pilot program two years ago
    with the National Fish and Wildlife Foundation, a government-sponsored
    entity, to implement the Wetlands Reserve Program. Now this is being
    expanded to totally private organizations.
        Question. The President's budget proposes the closure of
    significant numbers of Farm Service Agency field offices. How can you
    justify contracting out the delivery of federal programs at the same
    time we are closing these offices?
        Answer. The partnerships that NRCS is striving to establish do not
    focus on type of administrative services that are available from the
    Farm Service Agency. We are seeking to work with those entities with
    unique special experience and proven ability in the implementation of
    projects of the same type in the same local areas as NRCS is now
    charged with implementing through the WRP. Entities that, based on
    their years of experience and similar wetlands and wildlife
    conservation mission, bring unique talents and independent resources to
    the WRP are the focus of the effort (e.g., Ducks Unlimited, The Nature
    Conservancy, Pheasants Forever, State Waterfowl Associations such as
    the Wisconsin Waterfowl Association and the California Waterfowl
    Association, and State Wildlife Agencies). Through this partnership
    approach we believe that NRCS will be able to learn from and work
    closely with those most skilled and knowledgeable and who are
    established in the local areas involved. We also believe that the
    project results achieved through such partnership efforts will achieve
    the greatest ecological benefits in the most cost efficient manner and
    of the most benefit to private landowner participants. The necessity of
    increases in agency personnel will also be moderated by this
    partnership effort.
        Question. What protection is there to prevent these private
    organizations from assisting their big contributors in enrolling land
    in the government programs they are implementing?
        Answer. WRP project recommendation is a direct function of the
    State driven ranking process that is in place in each State. The State
    Conservationist, with the advice of the State Technical Committee,
    develops the ranking criteria by which all applications are to be
    rated. The ecological merits of the restoration that could be expected
    to occur on the site is the dominant consideration. Cost factors
    associated with the site are the second major consideration.
    Determination of all ecological measures of the value of the site for
    restoration are under the ultimate control of the NRCS field
    representative who conducts the field review of the application. Cost
    factors are based on projected easement land values and engineering
    restoration considerations. These also are the responsibility of the
    local NRCS field representative and other NRCS specialists as may be
    needed (e.g. engineering and soils assistance). Development and
    administration of the prioritized ranking list is under the full
    control of the NRCS State Office.
        Question. Under what authority would these partnerships be entered
    into?
        Answer. Generally, the basic authorizing legislation for the Agency
    as amended by the 1985, 1990, and 1996 Farm Bills and other legislation
    provide the authority for NRCS to enter into partnership agreements.
    The Soil Conservation and Domestic Allotment Act of 1935 (the Soil
    Conservation Act), 16 U.S.C. 590a, provides authority for the Secretary
    to cooperate or enter into agreements with, or to furnish financial or
    other aid to, any agency, governmental or otherwise, or any person,
    subject to such conditions as he may deem necessary, for the purposes
    of this Act. The WRP final rule, promulgated under the authority of
    both the Wetlands Reserve Program statute (16 U.S.C. 3837 et seq.) and
    the Soil Conservation Act, states that the Department may enter into
    cooperative agreements with Federal or State agencies, conservation
    districts, and private conservation organizations to assist the
    Department with educational efforts, easement management and
    monitoring, and program implementation assistance. 7 CFR 146.2(f).
                   the conservation farm option program (cfo)
        Question. The regulations have not been promulgated for the
    Conservation Farm Option Program (CFO). When will the final regulations
    be published?
        Answer. We expect to publish the final rule in the Federal Register
    by September 30, 1997.
        Question. The President's request makes available $2 million in
    fiscal year 1997 and $15 million in fiscal year 1998 for the purposes
    of a CFO pilot program. In what areas is the pilot program being
    implemented? On what assumption does NRCS base the estimation of the
    number of contracts for fiscal year 1997 and 1998?
        Answer. The information on specific pilot areas is not available at
    this time. Proposals for participation in the fiscal year 1997 program
    have not yet been received. However, an effort will be made to
    distribute the program funding geographically as well as among the
    producers of wheat, feed grains, cotton and rice.
        The number of contracts are estimated using an average value of
    $50,000 divided into the available funding for each fiscal year.
        Question. How much do you estimate will be needed for each of
    fiscal years 1999-2002?
        Answer. Funding for each of those fiscal years is authorized by the
    Federal Agriculture and Reform Act of 1996 as follows: fiscal year
    1999, $25 million; fiscal year 2000, $37.5 million; fiscal year 2001,
    $50 million and fiscal year 2002, $62.5 million.
                                     ______

                     Questions Submitted by Senator Bumpers
                  reimbursement for nrcs technical assistance
        Question. I understand the Department has taken the position that
    the 1996 Farm Bill has placed restrictions on section 11 transfers from
    CCC even for programs that were converted from appropriated to direct
    spending. I further understand that carryover funds from the CRP and
    WRP accounts may be available for the costs of technical assistance in
    fiscal year 1997 and perhaps fiscal year 1998.
        To what extent will these carryover funds be available to meet the
    demands of providing technical assistance for NRCS and related programs
    in fiscal year 1998 and future years?
        Answer. With respect to the WRP, the 1996 unobligated appropriated
    funds available of approximately $31 million, are proposed to support
    the NRCS technical assistance needs for WRP in the fiscal year 1997 and
    fiscal year 1998 program sign-ups only. Of the $31 million available,
    approximately $12.327 million will be used for NRCS technical
    assistance supporting the 1997 WRP program sign-up to enroll 130,000
    acres, and $18.200 million in support of technical assistance for 1998
    to enroll 212,000 acres. The full $31 million requested for 1997 and
    1998 are not available under the limited 1995 CCC spending level cap
    enacted under the Federal Agriculture Improvement and Reform Act of
    1996. A similar situation exists for the CRP where about $111 million
    in 1996 unobligated appropriated funds will be available for technical
    assistance in fiscal years 1997 and 1998.
        Question. What plans do you have in the event these funds are
    exhausted?
        Answer. I would hope some joint effort between the Administration
    and Congress could be reached to resolve this matter in the future, and
    provide needed technical assistance funding in support of the WRP, and
    other conservation programs now limited under the CCC section 11 cap.
    The technical assistance funding level needs of the WRP presently are
    not sustainable under the Conservation Operations account at the
    current funding level without reducing conservation work being
    conducted out of NRCS field offices. Technical assistance for the
    implementation of conservation practices, in support of the vast
    conservation issues facing this nation, are vital to the health of our
    nations lands. I would hope resolve on this important key issue is
    reached in the near future.
        Question. How would the implementation of conservation programs
    (mandatory and discretionary) be affected if this subcommittee would
    limit funding for technical assistance to a baseline equal to previous
    year discretionary spending for technical assistance?
        Answer. The fiscal year 1998 Presidents budget proposes an increase
    of $20,349,000 for the NRCS Conservation Technical Assistance account,
    to support partial pay increases for 90 FTE's who will provide
    technical assistance to approximately 9,000 farmers and ranchers who
    own approximately 700,000 acres of land, developing soil survey data,
    and enhancing the infrastructure of the base program to broaden skills
    for delivery of the 1996 Farm Bill programs.
        The NRCS technical staff are the cornerstone for the implementation
    of the conservation programs, who develop the critical conservation
    plans so needed for program delivery. In our efforts to reorganize the
    agency, great efforts were made to sustain this critical work force,
    comprised of natural resource science expertise and capable of
    utilizing developments in new scientific technologies in the area of
    natural resource sciences for the implementation of conservation
    programs.
        Setting a limit on technical assistance funding in fiscal year 1998
    would effect NRCS training for rangelands and improvements of
    conservation skills. NRCS technical assistance is utilized under a
    voluntary partnership with landowners, and is the primary vehicle
    through which needed improvements in the management, and establishing
    the condition of private grazing land is achieved.
        A limit would also inhibit growth towards enhancements of the
    conservation districts skills which are needed to carry out the
    delivery of the 1996 Farm Bill programs, through cooperative agreements
    with professionals trained in the management of pasture lands, grazing
    lands, forests, and rangelands to assist in local program delivery.
        A limit would also effect Soil Survey data developed through
    Geographic Information Systems. This natural resource science
    technology is vital to the implementation of the 1996 Farm Bill
    programs. Soil survey data is an important component of program
    delivery, used by all resources to make critical land use decisions
    that range from taxation and development to farming and natural
    resource protection under a voluntary approach with landowners. GIS
    provide orthophotographic maps of reference points needed to make
    decisions on soils, farm field boundary's, rivers, roads, for the land
    users. This technology is a vital tool for Service Centers in
    addressing local landowner concerns.
        CCC programs for fiscal year 1998 will also require an increased
    workload from the NRCS technical staff responding to enacted
    legislation for CRP, WRP EQIP, WHIP, CFO, and FPP. Technical assistance
    funding for these programs other than WHIP, which is funded from CRP,
    are all subject to CCC and its restrictions. After exhausting all
    available funds to support technical assistance needs, NRCS would still
    be faced with critical funding choices and the operation of the agency
    in regards to program delivery of the new programs. The impact of a
    change to this effect would be far reaching.
                         technical assistance for eqip
        Question. I understand that you will provide an amount for
    technical assistance equal to 10 percent of full EQIP funding to carry
    out these program.
        How do you justify that amount?
        Answer. The 1997 apportionment provided by the Office of Management
    and Budget authorized 10 percent of EQIP funds for technical
    assistance. Initial workload estimates for EQIP were based on data
    gathered for a 1995 evaluation of the conservation technical assistance
    program. This data indicates that actual costs to operate EQIP could be
    higher that the 10 percent now apportioned. NRCS realizes that
    additional data is needed by OMB and have therefore begun a process to
    develop a new work measurement and program accountability system. We
    hope that these improvements will provide a better justification for
    future technical assistance needs relating to EQIP, other farm bill
    related programs, and ongoing conservation assistance with Conservation
    Districts.
        Question. Is it not true that historically a larger percentage of
    funding was required for technical assistance related to these
    programs?
        Answer. Yes. In researching the level of technical assistance
    required to implement EQIP, we completed an analysis of the technical
    assistance provided in 1995 to the four programs which have been
    replaced by EQIP. The analysis indicates that in 1995 the technical
    assistance provided was 767 FTE's--or about $41.5 million--or 31
    percent of the appropriated funds for ACP, CRSC, WQIP, and GPCP.
        Question. What will be the effect on implementing these programs if
    discretionary spending for technical assistance is not made available
    for EQIP?
        Answer. The impact of not receiving sufficient funds to provide
    technical assistance for EQIP are numerous. Field offices will have
    major delays in getting plans and engineering designs prepared for
    producers. In addition, programs that have been historically delivered
    through the Conservation partnership--that is conservation districts,
    state conservation agencies, and NRCS--will be disrupted.
        The presence of Federal technical assistance leveraged over $734
    million dollars in state and local financial and technical assistance
    in 1996. This is about six times the 1995 NRCS field office base
    program expenditures. Another $37 million was leveraged through
    assistance in implementing EPA's 319 program grants directed at
    reducing nonpoint source pollution from agriculture. Without the NRCS
    technical presence in the base program, other agencies would not be
    able to ensure that their cost sharing programs are technically sound
    and professionally accountable. Diversion of staff from activities
    supporting local and state initiatives will result in reduced capacity
    to implement state cost-share programs. The unintended consequence may
    be that the new Federal programs could substitute for, rather than
    augment, state and local initiatives.
        Diverting staff from the base program reduces support critical to
    natural resources inventories and assessments which are used in the
    National Conservation Program, strategic planning, and budget
    formulation and accountability.
        As part of the locally-led conservation effort, NRCS assists
    districts in helping individuals and communities with a broad range of
    natural resource issues including urban conservation, wellhead
    protection, irrigation management, and wildlife habitat improvement.
    Some of these locally-based concerns will not be addressed if funds are
    shifted away from support of the base conservation program. NRCS will
    providing technical assistance to nearly 200 state and local programs.
    A reduction in NRCS resources seriously impacts the success of the
    local and state cost sharing programs.
        Many socially disadvantaged farmers and ranchers do not participate
    in cost-sharing or Federal loan or commodity program. The base program
    meets a critical outreach need by assisting limited resource farmers
    with solving their natural resource problems. Servicing this group
    requires substantially more time and effort than servicing NRCS's
    traditional customers. Reducing staff time allocated to base activities
    may disproportionately weaken service provided to limited resource
    farmers and ranchers.
        The base program provides a network of well trained and technically
    competent conservationists located in most counties who are able to
    respond to emergencies. Recent examples of disaster assistance include
    the 1993 Midwest flood, flooding in California and the Northwest, and
    hurricane Hugo. The base program provides the foundation for the
    agency's rapid and efficient response to emergencies. The Emergency
    Conservation Program treated 927,000 acres in 1994, 874,000 acres in
    1995, and 1,354,000 acres in 1996. The Emergency Watershed Program
    obligated $123 million in 1994, $134 million in 1995, and $139 million
    in 1996 to protect flood damaged natural resources. Much of the
    Emergency Watershed work protects streambanks from erosion and restores
    hydraulic conditions to pre-disaster conditions.
        Development of conservation planning standards, technical guidance,
    soil surveys, and natural resource information is a fundamental
    function of the base program. This information is the foundation for
    implementing EQIP, as well as the other Federal, state, and local cost-
    sharing programs. As staffing is directed away from the base program,
    the science-based credibility of the agency will erode and application
    of conservation technology will vary from county to county since
    national technical standards will not be available.
                                orthophotography
        Question. Could you please provide an update on the progress of
    NRCS's Orthophotography activities and the agency's relationship with
    the GIS Center for Advanced Spatial Technology in Arkansas?
        Answer. The NRCS, Farm Service Agency and the US Geological Survey
    continue to cost share and partner with state and federal agencies in
    the development of digital orthophotography base maps. At this time,
    approximately 21 percent of the conterminous US is complete, and
    another 27 percent is in-work. This is an overall increase of 15
    percent in one year. In Arkansas, the NRCS, Farm Service Agency and the
    USGS are cost sharing in the development of digital orthophotography
    for seven counties in fiscal year 1997.
        The interest in using digital orthophotography as a base map is
    increasing as the use of Geographic Information Systems (GIS) becomes
    more widespread. Digital orthophotography provides a rich source of
    information for a GIS. The images are accurate, current and contain
    more information than traditional data input such as line maps. With
    the advent of Pentium chips and increased disk storage for computers,
    digital imagery is now easily accessible. The NRCS has increased the
    use of digital orthophotography for soil mapping, soil digitizing, and
    as the base map for all natural resource information collected and
    analyzed for decision making at the Field Service Centers.
        The NRCS has an excellent relationship with the GIS Center for
    Advanced Spatial Technology (CAST) in Arkansas. The NRCS State GIS
    Specialist for Arkansas is headquartered at the CAST facility. The NRCS
    GIS Specialist utilizes the GIS technology and staff expertise provided
    by CAST to help NRCS implement GIS at the county Field Service Centers.
    CAST provides 1/4 technical and administrative support to the NRCS GIS
    Specialist.
        Through a cooperative agreement with NRCS, the CAST also provides
    NRCS professionals with training in GIS, remote sensing and Global
    Positioning Systems (GPS). The NRCS provides direct funding to help
    carry out this cooperative agreement. The CAST has developed GIS
    software to allow NRCS to more easily input a variety of digital data
    into our GIS for NRCS activities. The CAST is working with the
    Washington County NRCS and Farm Service Agency (FSA), and the County
    Assessor's office on a GIS project to reduce the time NRCS and FSA is
    required to collect information about the location of a farm when a
    landowner applies for USDA farm program assistance. When this project
    is complete, the farmer could point on the digital orthophoto map
    showing the location of his farm, and another database will provide
    land ownership information about the property. The automatic linkage to
    county records will reduce errors in manually filling out forms and
    provide the information almost instantly. The CAST is using GIS and
    remote sensing analysis tools to provide NRCS field service centers
    with land use/land cover maps for our use in working with the Fish and
    Wildlife Service in improving wildlife habitats.
                   east and central arkansas water resources
        Question. Could you please provide an update on agency activities
    in respect to the East Arkansas ground water study and the Bayou Meto,
    Beouf/Tensas, and Kuhn Bayou (Point Remove) projects?
        Answer. Efforts have continued with the implementation of on-farm
    water conservation measures in critical ground water decline areas.
    This is a 26-county area experiencing critical ground water decline and
    saltwater intrusion problems. In 1997, 338 irrigation system plans were
    developed, 260,000 feet of pipeline installed, 13,880 acres of land
    leveled, 15,900 acres of tail water recovery systems installed, and
    extensive monitoring and water quality samples taken.
        Work has continued on the Bayou Meto, Boeuf/Tensas and Kuhn Bayou
    projects in 1997 which was the third year of this effort at the
    direction of Congress.
        Specifically in Bayou Meto, the inventory work for the on-farm part
    of the work is now complete and the report is being reviewed by the
    sponsoring local organization. Public meetings to inform the public of
    the results of these studies and the establishment of a hydrology data
    base will be carried out during the remainder of this year. The Corps
    of Engineers has been authorized to plan a flood control/irrigation
    project in this area and NRCS will play a major role in that effort
    with funding anticipated from the COE.
        Boeuf/Tensas local sponsors continue to inform the public of the
    water decline and water quality status. They are in the process of
    organizing an irrigation district. NRCS is working on developing GIS
    data for use in the study. Work is about 50 percent complete on this
    project.
        Kuhn Bayou is part of the Eastern Arkansas project and NRCS is
    performing some of the survey and design functions for this project. A
    natural resources conservation plan has been developed. The sponsors
    are seeking funding sources for implementation.
        The fiscal year 1998 budget request contains funds which could be
    used for these projects.
                cooperation with corps of engineers in the delta
        Question. Would you provide your views on the willingness of USDA
    to work cooperatively with the Corps of Engineers and state, local, and
    private sources toward long-term solutions to water resource problems
    in the state, especially in the Delta?
        Answer. NRCS has been partnering with the COE in this area one
    these projects since 1987. Also involved is the Arkansas Conservation
    Agency. All three parties are dedicated to this effort and must
    participate for it to be successful. NRCS is anxious for this
    partnership to continue so as to help the landowners in this region
    solve their problems.
                                     ______

                      Questions Submitted by Senator Kohl
                            wetlands reserve program
        In the 1996 farm bill, the Wetland Reserve Program (WRP) was
    reauthorized, with changes in the program that required new enrollments
    to be divided between 3 categories. One-third of the acres enrolled are
    to be for permanent easements, one-third for 30-year easements, and
    one-third for 10-year contracts. However, subsequent to the WRP
    reauthorization, the Conservation Reserve Program (CRP) has been
    modified to allow cropped or prior-converted wetlands to be enrolled in
    that program.
        Question. Has the fact that cropped and converted wetlands are now
    permitted to be enrolled in the CRP affected interest in the WRP ten-
    year contracts? If so, would you recommend any change in the WRP
    structure to avoid future duplication between the two programs?
        Answer. Landowner interest in the restoration cost-share agreement
    component of the WRP is very low. While the CRP enrollment of wetlands
    may have a bearing on this situation, it is not clear if this is a
    major factor or just one of many related factors. We believe these
    programs compliment each other rather than duplicate efforts by
    allowing landowners more options for the conservation of wetlands.
        Question. Your testimony regarding the Wetland Reserve Program
    (WRP) suggests that you are getting more demand for the permanent
    easement enrollments than for the other types of enrollments (30-year
    easements or 10-year contracts). Given this demand for the permanent
    easements, do you believe that the program should be modified to better
    reflect the demand?
        Answer. Our demand for permanent easements is very heavy. The
    demand for 30-year easements is moderate and the demand for restoration
    cost share agreements is very light. We are attempting to enroll the
    130,000 acres in fiscal year 1997 in the one-third permanent, one-third
    30-year easement, and one-third restoration cost-share agreement as
    provided for in the 1996 FAIRA Act. It is obvious that, based on
    landowner interest, we are badly under funding permanent easements, are
    pretty much on target on 30-year easements, and are placing far too
    much emphasis on restoration cost-share agreements. To achieve the most
    cost effective and ecologically sound restoration results, it would be
    more practicable if the ratio were 45 percent permanent easement, 40
    percent 30-year easement, and 15 percent restoration cost-share
    agreement. Even though the restoration cost-share agreements are in
    less demand than easements we do fully support having this as one of
    our WRP options.
        Question. In the Fiscal Year 1997 Agriculture Appropriations Act,
    language was included to allow for the 130,000-acre enrollment cap for
    the Wetland Reserve Program to be exceeded if non-federal cost share
    funds were secured to pay for these additional enrollments. Can you
    tell me whether this provision has been helpful to the WRP
    implementation in fiscal year 1997? Do you have an estimate of how many
    additional acres will have been enrolled in fiscal year 1997 as a
    result of this provision? Would you recommend that the subcommittee
    continue to include this provision in fiscal year 1998? Are there other
    such modifications that you would find helpful in fiscal year 1998 in
    implementing the WRP?
        Answer. The opportunity to work with partners, receive non-Federal
    contributions, and apply these contributions to acres above the 130,000
    fiscal year 1997 acreage cap has been very helpful.
        With the $8,089,700 of non-Federal contributions, we will
    ultimately be able to enroll approximately 9,000 acres of additional
    easements. Because these funds were largely associated with permanent
    and 30-year easements we are able to apply them back to these types in
    the same proportion as they were received.
        We would definitely appreciate having this option continued in
    fiscal year 1998. Perhaps of equal value to the actual funds that are
    being received and the additional acres that are being enrolled is the
    fact that this provision has attracted a lot of partner attention. With
    their funding participation comes very beneficial expert assistance in
    the many and varied aspects of wetland restoration. This partnership
    relationship is making the on-the-ground results of even greater value
    to the involved landowners and the national wetland conservation
    purpose as well.
        It would be beneficial to the WRP and would allow us to be more
    responsive to the tremendous level of landowner interest if the acres
    that are enrolled in response to the level of non-Federal contribution
    could be considered outside of the fiscal year 1998 acreage cap and the
    overall program cap as well. An indication from the Congress that the
    relative proportion of acres in each of the three categories of WRP
    land should more nearly match the level of landowner interest in each
    category would also be very helpful. In order to assist us in our
    efforts to work with the many non-governmental conservation partners
    and to enable us to enlist their support in the WRP effort, the
    specific provision of authority for the use of CCC funds in conjunction
    with such partnership agreements is needed.
                                     ______

                      Questions Submitted by Senator Leahy
                            allocation of eqip funds
        Question. Last week NRCS allocated a majority of the fiscal year
    1997 funds for financial assistance. Even though 50 percent of these
    funds are intended for assistance to livestock operations, my state,
    which is almost 90 percent livestock, received less than the two-year
    average NRCS used as a base. How do the criteria in the formula used by
    NRCS to allocate the EQIP funds account for livestock and what weight
    do these criteria have on the overall formula?
        Answer. We will provide a table sets forth each of the 26 elements
    that we used in the 1997 allocation formula, it also shows the weight
    that was assigned to each factor and whether the factor is considered
    to affect livestock. This formula is used to determine the basic
    percentage of the EQIP funds that each state should receive. As you can
    see in the weights assigned to each of the factors, that the livestock
    factors are assigned 50.2 percent of the total weight.
        The basic amount determined by the formula was adjusted so that no
    state would receive a dramatic increase or decrease in conservation
    assistance funds which might negatively impact their ability to manage
    or deliver the program. A historical funding level was used to limit
    major shifts. The average amount received in a state for fiscal year
    1994 and 1995 for the ACP, WQIP, GPCP, and CRSCP was used to establish
    the historical level.

                                             ELEMENTS OF ALLOCATIONS FORMULA
    ----------------------------------------------------------------------------------------------------------------
                                                                                            Total weight (percent)--
                   Element                      Measurement                 Source         -------------------------
                                                                                             Livestock  Nonlivestock
    ----------------------------------------------------------------------------------------------------------------
    Cropland............................  Acres..................  NRI....................  ..........         5.9
    Cropland eroding above T............  Acres..................  NRI....................  ..........         6.4
    Irrigated cropland..................  Acres..................  NRI....................  ..........         4.4
    Land in specialty crops.............  Acres..................  NRI....................  ..........         3.2
    Grazing and (non-Federal)...........  Acres..................  NRI....................        3.3   ............
    Grazing land (Federal)..............  Acres..................  Census.................        0.7   ............
    Rangeland in fair and poor condition  Acres..................  NRI....................        4.2   ............
    Pastureland needing treatment.......  Acres..................  NRI....................        4.2   ............
    Forestland..........................  Acres..................  NRI....................  ..........         2.2
    Forestland eroding above T..........  Acres..................  NRI....................  ..........         3.6
    Wetlands............................  Acres..................  NRI....................        2.9          2.9
    Riparian areas......................  Acres..................  NRI....................        2.15         2.15
    Coastal zone land...................  Acres..................  NOAA...................        1.75         1.75
    Land subject to flooding............  Acres..................  NRI....................  ..........         2.4
    Ground water vulnerability            Index..................  USDA...................        2.6          2.6
     (nutrients and pesticides).
    Land with saline and alkaline soil    Acres..................  NRI....................  ..........         2.7
     problems.
    Impaired rivers and streams.........  Miles..................  EPA....................        2.4          2.4
    Water bodies........................  Acres..................  NRI....................        1.3          1.3
    Other land on farms/ranches.........  Acres..................  NRI....................  ..........         2.5
    Livestock...........................  Animal units...........  Census.................        3.3   ............
    Animal waste........................  Tons...................  Census.................        5.2   ............
    Animal waste management system        Average capital cost...  EPA....................        6.4   ............
     capital cost.
    Animal waste disposal...............  Animal units/cropland    Census and NRI.........        6.4   ............
                                           acres.
    Farms and ranches...................  Number.................  Census.................        1.95         1.95
    Indian tribal land..................  Acres..................  BIA....................        0.8          0.8
    Limited resource producers..........  Number.................  Census.................        0.75         0.75
                                         ---------------------------------------------------------------------------
          Total.........................  .......................  .......................       50.2         49.8
    ----------------------------------------------------------------------------------------------------------------

                      priority distribution of eqip funds
        Question. In allocating EQIP funds, NRCS placed a priority in the
    first year on capitalizing on the experience of those States that had a
    successful relationship with the State agriculture program, a solid
    reputation for assisting farmers to improve their conservation
    practices and a commitment by the State to contribute to the cost-share
    program. I'm certain that lake Champlain and Memphremagog must have
    ranked high under these criteria and I know you're familiar with the
    commitment of farmers in these watersheds and the capability of the
    NRCS staff in Vermont. But, I would imagine that many of the States
    receiving large increases in the fiscal year 97 allocation may not be
    able to use all of their allocation. Would you agree that when that
    occurs, funds should be redistributed to States that have the
    previously mentioned attributes? Would you also agree that States that
    can show a considerable interest, even a list of farmers who want to
    participate in EQIP should receive a higher allocation of those
    remaining funds?
        Answer. Yes, we intend to monitor the obligation of funds in each
    State throughout the summer and will redistribute funds to ensure that
    all 1997 EQIP funds are obligated before the end of the fiscal year.
    States that can show that they have producers ready to enroll will be
    able to receive additional allocations to the extent that funds are
    available.
               limitation on percentage increase in eqip by state
        Question. Finally, when you allocated this year's funds, you placed
    a 30 percent cap on the increase any one State could receive over the
    previous year. I can understand why that cap would be placed on States
    receiving a large allocation because it may dramatically increase the
    workload. But I would think that this cap is not necessary for smaller
    States because even 50 percent increase would be very manageable. Is
    the cap necessary for small States and does NRCS believe it could be a
    negative incentive for programs to expand as much as possible in the
    next year?
        Answer. We believe that the 30 percent cap is necessary in large,
    as well as small States. Small States may actually have more difficulty
    handling a rapid increase in funds than a larger State because a small
    State does not have the depth of resources in all specialized technical
    fields that are needed to implement a program such as EQIP. Large
    States usually have on staff more than one employee with technical
    expertise, such as engineer, biologist, or economist. In smaller
    States, often employees with specialized expertise are shared with
    another State. Large increases in workload, without more than one
    employee to complete the task could result in a State having difficulty
    in managing the program. We will be evaluating the implementation of
    the program in all States during 1997 and will use the feed-back we
    receive from both large and small States to evaluate whether the cap
    was set at an appropriate level and whether the cap was appropriate for
    both large and small States.
                     increased scope of crp, wrp, and eqip
        Question. As CRP, WRP, and EQIP expand their scope, there will be
    an increased demand for technical assistance from NRCS. Assuming the
    Department does not increase staff to meet this demand, has the
    Department considered developing partnerships with non-profit
    organizations that can offer similar or complementary services, such as
    the Sustainable Agriculture Research and Education or the Appropriate
    Technology Transfer for Rural Areas programs?
        Answer. The Department is evaluating all legal opportunities to
    expand our partnerships to improve the implementation of conservation
    programs in the field. One of the opportunities that we have been
    researching is to increase partnerships with non-profit groups so that
    program participants can benefit from the specialized expertise that
    may be available within a non-profit group.
                            conservation farm option
        Question. During the drafting of the Farm bill, we all recognized
    the need to insure that the various conservation programs are
    complementary and can be used by farmers as a ``toolbox'' of
    conservation assistance. The Conservation Farm Option was intended to
    help meet this goal. I see in your fiscal year 98 request that you are
    going to begin implementation of the program in pilot areas. What type
    of areas are you looking for to launch these program pilots?
        Answer. Areas where there are diversified and well manifested and
    documented natural resource problems would be suitable pilot areas.
    Such areas that have a high number of eligible producers that are
    willing to participate in the CFO program would be high priority areas.
    This would provide the opportunity to plan and implement a variety of
    innovative practices, combine several of our traditional programs and
    have high probability of achieving measurable results. However, an
    effort will be made to distribute the program funding geographically as
    well as among the producers of wheat, feed grains, cotton and rice.
                      american heritage rivers initiative
        Question. When the President announced the American Heritage Rivers
    initiative it was stated that some of the funding would come through
    NRCS conservation programs. What is the NRCS involvement in developing
    the guidelines for this initiative? How does NRCS plan to re-focus its
    programs for the rivers that are designated?
        Answer. NRCS has a representative and alternate on the working
    group developing guidelines for the American Heritage Rivers
    initiative. The mechanism has not been established for focusing federal
    services on designated rivers.
                          farmland protection program
        Question. The Farmland Protection Program, and its predecessor
    Farms for the Future, has been highly successful in Vermont. How many
    farms have the program helped purchase easements on? How many did the
    new program assist with fiscal year 1997 funds? What is the estimated
    need for this program?
        Answer. When easement acquisitions are completed, the Farmland
    Protection Program will acquire contingent remainder rights on
    approximately 203 farms. For fiscal year 1997, $2 million was approved
    by the Congress. We are currently in the process of making
    recommendations to the Secretary of Agriculture to implement the
    program for this year. We will find out how many that the program may
    assist in 1997 when allocation of funds is completed. The need of
    Federal funds for this program in the immediate future is estimated at
    $460 million based on the current pending offers that the State and
    local government entities have.
                 wetlands reserve program technical assistance
        Question. In 1998, the Wetlands Reserve Program estimated to have a
    program increase of $44,885,000. Assuming a resulting increased demand
    for technical assistance that NRCS is now unable to address through
    program funds, how will NRCS meet this increased demand over the long-
    term? What is the projected need for this assistance over the next five
    years? How does this technical assistance lower the cost to the farmer
    in enrolling land in the WRP?
        Answer. The NRCS has no access to Commodity Credit Corporation
    funds (CCC) for agency WRP technical assistance funding needs in fiscal
    years 1997 or 1998. Consequently, the WRP technical assistance need for
    fiscal years 1997 and 1998 will be covered through the use of 1996
    prior year appropriated unobligated WRP funds that were initially
    scheduled to be utilized in the purchase of 1996 WRP easements.
    Approximately $31,000,000 of such prior year funds will be utilized. To
    enable us to honor and complete these 1996 easement commitments we will
    in turn utilize Commodity Credit Corporation Funds of approximately $31
    million. Only through this switching of funds was the agency able to
    find a way to fund technical assistance needs for fiscal years 1997 and
    the projected technical assistance need associated with the
    Administration's 1998 budget request. In the longer term, it will be
    necessary for NRCS to be able to utilize CCC funds to cover WRP
    technical assistance needs, since prior year appropriated WRP funds
    will not be available in fiscal year 1999 and beyond.
        Excluding fiscal years 1997 and 1998, since prior year WRP
    appropriated funds are available for technical assistance needs for
    these years, the WRP technical assistance funding need through fiscal
    year 2002 will be approximately $38,188,000.
        Technical assistance funding is required if the agency is to
    provide landowner's who wish to enroll in the WRP with that
    opportunity. Such funding also provides landowners with assistance in
    achieving the most cost effective restoration results, thus lowering
    the cost of the restoration effort by minimizing the likelihood that
    restoration actions will fail and need to be subsequently reinstalled
    The assistance also enables landowners to receive help in monitoring
    their restoration results and the terms and conditions of their
    easement commitments so as to achieve the optimum wetland restoration
    and protection benefits from the WRP.
                          watershed sciences institute
        Question. I am pleased that Vermont is a part of the NRCS Watershed
    Sciences Institute. What is the current status of the Institute and
    what future activities are planned?
        Answer. The Watershed Sciences Institute is one of eight
    functioning National Institutes in NRCS. Its mission is ``To
    incorporate ecological principles into natural resource conservation
    and accelerate the development and transfer of appropriate technology
    in response to comprehensive watershed needs and environmental
    sustainability at the watershed and landscape scales.'' The Institute
    is acquiring and developing technologies such as those associated with
    resource management and planning on a watershed scale; functional
    restoration of streams and associated riparian areas; evaluation and
    management of agricultural nonpoint source runoff and waterborne
    pollutants; and agricultural sustainability.

                              Subcommittee Recess

        Senator Cochran. Our next hearing will be on Tuesday, April
    8, at 10 a.m., in room 124 of the Dirksen Senate Office
    Building. At that time, we will review the budget request for
    the Department's farm and foreign agricultural services.
        The subcommittee stands in recess.
        [Whereupon, at 11:20 a.m., Tuesday, March 18, the
    subcommittee was recessed, to reconvene at 10:10 a.m., April
    8.]

    AGRICULTURE, RURAL DEVELOPMENT, AND RELATED AGENCIES APPROPRIATIONS FOR
                                FISCAL YEAR 1998

                                  ----------

                             TUESDAY, APRIL 8, 1997

                                           U.S. Senate,
               Subcommittee of the Committee on Appropriations,
                                                        Washington, DC.
        The subcommittee met at 10:10 a.m., in room SD-124, Dirksen
    Senate Office Building, Hon. Thad Cochran (chairman) presiding.
        Present: Senators Cochran, Burns, Bumpers, and Kohl.

                           DEPARTMENT OF AGRICULTURE

    STATEMENT OF DALLAS R. SMITH, ACTING UNDER SECRETARY,
                FARM AND FOREIGN AGRICULTURAL SERVICES
    ACCOMPANIED BY:
            CHRISTOPHER E. GOLDTHWAIT, GENERAL SALES MANAGER
            DENNIS KAPLAN, DEPUTY DIRECTOR, OFFICE OF BUDGET AND PROGRAM
                ANALYSIS, DEPARTMENT OF AGRICULTURE

                              Farm Service Agency

    STATEMENT OF BRUCE R. WEBER, ACTING ADMINISTRATOR

                          Foreign Agricultural Service

    STATEMENT OF AUGUST SCHUMACHER, ADMINISTRATOR

                             Risk Management Agency

    STATEMENT OF KENNETH D. ACKERMAN, ADMINISTRATOR

                                Opening Remarks

        Senator Cochran. The subcommittee will please come to
    order.
        This morning we continue our hearings, reviewing the
    President's budget request for fiscal year 1998, as it relates
    to agriculture, rural development, and related agencies. This
    morning we will specifically review the budget request of the
    Farm Service Agency, the Foreign Agricultural Service, and the
    Risk Management Agency.
        Our witness list this morning includes Dallas Smith, who is
    Acting Under Secretary for Farm and Foreign Agricultural
    Services; Bruce Weber, Acting Administrator for the Farm
    Service Agency; August Schumacher, Administrator for the
    Foreign Agricultural Service; Christopher Goldthwait, General
    Sales Manager; Kenneth Ackerman, Administrator for the Risk
    Management Agency; and Dennis Kaplan, with the Department's
    Office of Budget and Program Analysis.
        We have received your written statements, which we
    appreciate very much. We will make them all a part of the
    record in full, and we encourage you to proceed to summarize
    those statements, if you like, and make whatever comments you
    think would be helpful to our understanding of this budget
    request. We will then have an opportunity to discuss your
    comments and ask questions.

                               Prepared Statement

        We have a prepared statement from Senator Bumpers, and it
    will be made part of the record.
        [The statement follows:]

                     Prepared Statement of Senator Bumpers

        Mr. Chairman: Thank you and welcome to all our guests
    today.
        To the average American, the term ``Department of
    Agriculture'' is likely to suggest images of farmers tilling
    the soil and moving their products to feed a hungry world. We
    all know that the Department of Agriculture is much more than
    that simple pastoral symbol. The Department of Agriculture of
    today includes a vast research capability, marketing and
    inspection, food safety, conservation, rural development, food
    and nutrition assistance, and much, much more. But of all the
    panels that will appear before this subcommittee, none better
    than this represents the traditional, perhaps stereotypical,
    client of the Department of Agriculture, the American farmer.
        Although the goal of the American farmer at the time the
    Department of Agriculture was created has little changed, the
    means by which he meets that goal today would not even be
    recognizable to the farmer of the 1860's. The farmer of 130
    years ago had much of a continent yet to settle in which new
    fertile lands reached to the horizon and natural resources
    seemed ever abundant. With the closing of the frontier came a
    realization that we needed to better manage our finite
    resources and a role of government was created to help the
    farmer accomplish his task. From region to region, farming
    practices and structure might vary, but a constant champion and
    protector of the farmer has been the USDA.
        Nuances to that farmer/government relationship are ever
    changing and last year has witnessed some of the greatest
    changes in a generation. I fear that too many of us have lost
    the memory of farm economies gone awry, leaving the nation in a
    wrenching depression. I fear for the worst and hope for the
    best.
        Our national economy is strongly founded on the principle
    of free enterprise. So it may seem strange to some that for so
    long agriculture, the mainstay of the American economy, was
    tied to a system of production controls and price supports. The
    American farmer is a small individual producer playing to a
    global market. He represents one of the very few, perhaps the
    only, member of our economy who buys his inputs retail and
    sells his products wholesale. The farmer is virtually unable to
    pass any of his costs on to anyone else and his livelihood,
    sometimes his very life, is often held in the balance by the
    forces of nature. If we feel that abundant food is an important
    resource of our society, and I believe we do, then it is
    understandable that society has a stake in the well-being of
    the American farmer.
        Today we will hear from the agencies responsible for
    delivery of government services to the farmer on the farm and
    in the development and maintenance of foreign markets. With the
    changes of the past few years, exports opportunities are more
    important than ever. With the changes of last year, new
    challenges face the farmers in the countryside and the changing
    face of USDA is yet to finish this transformation. Risk
    management may become the new by-word for our new farmer/
    government relationship. Certainly, with the loss of programs
    farmers have relied on for a generation, much is at risk.

                      Under Secretary's Opening Statement

        Senator Cochran. Mr. Smith, you may proceed.
        Mr. Smith. Thank you, Mr. Chairman, Senator Burns.
        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 have already
    introduced the Administrators and also our representative from
    the budget office at USDA. Statements by the Administrators
    have also been submitted for inclusion in the record. I will
    summarize my own prepared statement, after which we will be
    pleased to respond to your questions.
        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 at
    USDA. How we accomplish our mission will, in large part, be
    determined by the new policies set in place by the 1996 farm
    bill. And one of our primary tasks this past year has been to
    implement the policy and program changes provided in that 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 [FSA] is a major part of our
    mission area. 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 toward emphasizing
    guaranteed loans, which are made in partnership with private
    lenders and have a low subsidy cost for the 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 that a competitive bid
    process will be used to enroll nearly 19 million acres of new
    and expiring CRP contract acreage in 1997. Enrollments in
    subsequent years are assumed to gradually increase total
    enrollment to 36.4 million acres by the year 2002.
        Signup for CRP regular enrollment was held March 3 through
    March 28. Preliminary results from the field indicate that
    landowners submitted nearly 302,000 offers to enroll almost 26
    million acres, of which about 18 million acres are currently
    under contracts that expire at the end of September.
        With technical assistance from the Natural Resources
    Conservation Service, FSA will undertake the voluminous task of
    evaluating the environmental benefits of all offers and, by
    mid-June, will notify producers as to which acres have been
    accepted in the program. Continuous signup is also in place for
    certain high-priority practices involving small acreages, such
    as riparian buffers, filter strips, and windbreaks.
        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
    [ACP]. EQIP is administered by the Natural Resources
    Conservation Service, in cooperation with the Farm Service
    Agency.
        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 the $5 billion
    mark 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 the 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 disruptions, allows managed haying and
    grazing of CRP acreage, increases fruit and vegetable planting
    flexibility for acreage enrolled in the production flexibility
    contracts, and provides for greater flexibility in 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 part of the Department's streamlining
    initiative and reflecting changes made by the farm bill, the
    budget projects that 500 Farm Service Agency offices will be
    closed by the end of 1999. This issue of office closures is a
    very sensitive topic, and I want to take a moment here to put
    the issue in an appropriate context.
        First of all, although there have been 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 the closures might be accomplished. Moreover, he
    has made it clear there will be no further office closures at
    this time beyond a few remaining closures that have been
    planned for some time in order to reach our original goal of
    about 2,500 service centers.
        Second, the Secretary has asked each of the involved
    agencies, including the Farm Service Agency 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 would 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 planning.
        The Risk Management Agency [RMA] is also a very important
    agency within our mission area. 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 21st century. To accomplish these tasks,
    RMA 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 agriculture community.
        The administration's proposal to make revenue insurance
    available nationwide reflects the strong demand among producers
    that we have seen for 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 experience is within the statutory limits and
    comparable to RMA'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 expense, 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 our Risk
    Management Agency and the General Accounting Office and would
    reduce discretionary spending for delivery expenses by $203
    million under current law to $150 million under the proposal.
    Further, our proposal would make a portion of the overall
    reimbursement rate discretionary and subject to appropriation,
    whereas current law treats only the sales commissions 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 Risk Management Agency's administrative expenses, which
    reflects a modest increase of $4 million for full-time staff
    positions, to adjust for recent losses and to improve RMA's
    ability to service participating private sector companies.
        Turning now to the international side of the Farm and
    Foreign Agricultural Services mission area, I am 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 2\1/2\ 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 international programs and activities.
        For the CCC 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
    facilities finance guarantees.
        The budget provides higher program levels for our two
    export subsidy programs, the Export Enhancement Program [EEP]
    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 estimates 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 FAS appropriations request also includes $2.4 million
    for the Cochran Fellowship Program, which will continue the
    program at its current 1997 level. 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 provides an advance appropriation of $3
    million for 1999 to fund documented wage and price increases
    and/or exchange rate losses incurred during 1998. Second, the
    budget proposes that funds appropriated to FAS in 1998 be
    available for obligations for 2 years rather than 1 year.
        In closing, I would like to note that today's budget
    realities mean that the Government must be leaner and more
    efficient, but the era of responsive and responsible Government
    is not over. While there are things that Government cannot do
    or Government should not 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 our 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, members of the committee, that concludes my
    statement. We will be pleased to answer any questions that you
    might have.

                              Prepared Statements

        Senator Cochran. Thank you very much, Mr. Secretary. We
    thank you again for being here and for helping us to understand
    the details of this budget request. We have your written
    statements and they will be made part of the record.
        [The statements follow:]
                       Prepared Statement of Dallas Smith
        Mr. Chairman and members of the Subcommittee, 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. With
    me today are August Schumacher, Administrator of the Foreign
    Agricultural Service; Christopher Goldthwait, the General Sales
    Manager; Randy Weber, Acting Administrator of the Farm Service Agency;
    Kenneth Ackerman, Administrator of the Risk Management Agency; and
    Dennis Kaplan from the Office of Budget and Program Analysis.
        Statements by the Administrators, providing details on their
    agencies' budgets and program proposals for 1998, have been submitted
    to the Subcommittee. My statement will summarize the proposals, after
    which we will be pleased to respond to your questions.
        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. We
    work to keep America's farmers and ranchers--the linchpins of our
    agricultural economy--in business.
        How we accomplish our mission will in large part be determined by
    the new policies set in place by the Federal Agriculture Improvement
    and Reform Act of 1996 (the 1996 Act), and 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 1996 Act has provided much greater flexibility to our
    farmers in their production and marketing decisions, it has also
    increased the risks inherent in farming by reducing the Federal
    government's role in supporting incomes 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
    risks. 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.
                              farm service agency
        The Farm Service Agency (FSA) administers the farm credit programs,
    several conservation programs, and the domestic commodity price and
    income support programs of the Commodity Credit Corporation (CCC). The
    CCC is also the source of funding for most of the cost-share and land
    retirement conservation programs administered by the FSA and the
    Natural Resources Conservation Service (NRCS), and many of the export
    programs administered by the Foreign Agricultural Service (FAS).
    Farm Credit Programs
        The farm credit programs administered by FSA continue to serve as a
    vital source of credit for our nation's farmers and ranchers. They
    provide a safety net for producers who suffer a financial setback.
        This budget continues the trend toward 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. Our goal is
    to assist borrowers, through supervised credit, to achieve a successful
    agricultural operation and graduate to private credit. Far more
    attention than in prior years is being paid to repayment ability and
    adequate security.
        The 1998 budget provides for a total of about $2.8 billion in farm
    credit program loans and guarantees, which is about $300 million less
    than the amount that can be supported by the 1997 appropriation. Of the
    reduction, about $200 million is in the guaranteed farm ownership loan
    program. However, the 1998 budget level of $400 million is consistent
    with the actual demand for the program in recent years. The
    unsubsidized guaranteed farm operating loan program would be maintained
    at a level of about $1.7 billion. The remaining farm ownership and
    operating programs are generally funded at the 1997 supportable levels
    with a modest increase for the credit sales program. In addition, the
    1998 budget proposes to maintain the emergency disaster loan program at
    $25 million.
    Commodity Credit Corporation
        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 Act, 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 2002.
        Beginning in 1998, in response to recommendations of the Office of
    the Inspector General, the request for appropriations to reimburse CCC
    for net realized losses will cover the actual amount of the
    unreimbursed losses incurred 2 years earlier. The 1998 budget requests
    $784 million for the balance of 1996 losses not reimbursed through
    appropriations in 1996 and 1997. Appropriations to reimburse CCC for
    net realized losses incurred in 1997 will be requested in the 1999
    budget.
        Provisions of the 1996 Act also limit CCC expenditures for computer
    equipment and cap reimbursements to agencies for administrative support
    services at 1995 levels.
    Conservation Programs
        The Conservation Reserve Program (CRP) is the major conservation
    program administered by FSA. The 1996 Act reauthorized the CRP, set
    maximum enrollment at 36.4 million acres, and switched the program's
    financing from direct appropriations to CCC funding. The legislation
    also redefined the program, changing its primary focus from highly
    erodible land conservation and supply management to environmental
    protection, with wildlife habitat and water quality improvements
    joining erosion reduction as primary program objectives.
        The 1998 budget assumes a competitive bid process will be used to
    enroll nearly 19 million acres of new and expiring CRP contract acres
    in 1997. This figure is not, however, a target such as was used by CRP
    in the 1980's. Instead, enrollment will depend upon the nature of the
    bids. The goal of the CRP is to only retire lands where the benefits to
    society from the retirement from agricultural production exceed the
    costs. Enrollments in subsequent years are assumed to gradually
    increase total enrollment to 36.4 million acres by 2002.
        Signup for CRP regular enrollment was held March 3 through March
    28. Results as of March 21 indicate that landowners submitted over
    240,200 offers to enroll almost 20 million acres, of which about 14.7
    million are currently under contracts that expire in September. With
    technical assistance from NRCS, FSA will undertake the voluminous task
    of evaluating the environmental benefits of all offers, and by mid-June
    will notify producers as to which acres have been accepted into the
    program. Continuous signup is also in place for certain high priority
    practices involving small acreages, such as riparian buffers, filter
    strips and windbreaks.
        The budget also reflects provisions of the 1996 Act authorizing CCC
    funding for a number of new conservation programs, most of which will
    be administered by NRCS in cooperation with FSA.
        The Agricultural Conservation Program, the Colorado River Basin
    Salinity Control Program, the Water Quality Incentives Program, and the
    Great Plains Conservation Program were replaced by the Environmental
    Quality Incentives Program. The Flood Risk Reduction Program provides
    incentives to move farming operations from frequently flooded land, and
    the Conservation Farm Option gives producers incentives to create
    comprehensive farm plans. The Wildlife Habitat Incentives Program
    provides cost-share assistance to landowners to implement management
    practices improving wildlife habitat. The Farmland Protection Program
    provides for the purchase of easements limiting nonagricultural uses on
    prime and unique farmland.
        Under the Emergency Conservation Program (ECP), the Department
    shares the cost of carrying out practices to assist and encourage
    farmers to rehabilitate farmland damaged by natural disasters. ECP
    received emergency funds of $25 million in 1997, and on March 19 the
    Administration transmitted to Congress a request for ECP supplemental
    funding of $20 million, plus a contingency reserve of $17 million to be
    available at the request of the President. The 1998 President's budget
    does not include a request for funding ECP, but proposes the
    establishment of a new $5.8 billion contingent reserve for emergency
    funding requirements for various disaster assistance needs. This fund
    would be available to the President for disaster relief purposes,
    including use in the Department's emergency conservation activities.
        CCC outlays for CRP and other conservation programs are projected
    in the 1998 budget to increase from negligible levels in 1996, when
    rental payments were funded through appropriations, to $1.9 billion in
    1997 and to $2.2 billion in 1998.
    Commodity Programs
        The 1996 Act replaced the deficiency payment program which had been
    in place since the 1970's with a new program of payments that generally
    are not tied to market prices or to current plantings. Dairy policy
    also is changed under the 1996 Act with a phaseout of price support and
    consolidation of milk marketing orders. The new law also alters the
    sugar and peanut programs. As a result, a great deal of the volatility
    associated with forecasting commodity program outlays has been removed.
        Commodity program outlays are a barometer of changing programs and
    policies. The 1998 budget projects that CCC outlays for commodity
    programs will increase from about $5 billion in 1997 to $6.2 billion in
    1998, and then decline again to about $4 billion by 2002.
        This budget also reflects legislation that we will be proposing to
    the authorizing committees to improve the safety net for farmers,
    reflecting the President's pledge when he signed the 1996 Act. Our
    legislation provides discretionary authority to extend commodity loans
    for 6 months during periods of depressed market prices or market
    disruptions, allows managed haying and grazing of CRP acreage,
    increases fruit and vegetable planting flexibility for acreage enrolled
    in production flexibility contracts, and provides for greater
    flexibility in the timing of contract payments. The change in CRP
    haying and grazing provisions is estimated to reduce CRP outlays by
    about $25 million per year.
        Legislation will also be proposed to expand revenue insurance
    coverage nationwide, improve farm credit services, and make other
    technical adjustments to improve farm programs.
        Changes made by the 1996 Act have diminished the traditional role
    of the 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. That is why
    risk management has become a top priority, and why the President and
    the Department attach such importance to enactment of legislation
    designed to improve the programs that help farmers better manage price
    and production risk.
    FSA Salaries and Expenses
        For FSA salaries and expenses 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 5,877 Federal staff-years and 9,879
    non-Federal county office staff-years--reductions of 269 and 1,850
    staff-years, respectively, from 1997 levels. We expect to achieve this
    reduction through a combination of about 530 buyouts and a reduction in
    force of about 1,589 staff-years.
        Since 1993, FSA has downsized its work force by approximately 4,700
    FTE's, or about 21 percent, due to streamlining efforts and the
    programmatic impacts of the 1996 Act. The additional reduction of 2,119
    FTE's proposed in the 1998 budget would bring the cumulative FSA work
    force reduction since 1993 to 30 percent. This breaks down to 34
    percent for non-Federal county office employees and 23 percent for
    Federal employees, including Federal county farm credit staff.
        As part of the Department's streamlining initiative, the budget
    projects that 500 county FSA offices will close by the end of 1999. No
    decisions have been made as to which offices will be affected, and none
    will be made without the appropriate consultations with Congress. In
    1997, the Department will contract for an independent study of FSA and
    NRCS to look for additional opportunities for streamlining and
    increasing the efficiency of our service to customers, as well as
    undertake a major review of our regulations, in conjunction with NRCS,
    to significantly reduce the paperwork burden on farmers.
                             risk management agency
        Farmers today face a risk environment dramatically different from
    that which existed a few years ago. Deficiency payments and ad hoc
    disaster aid have been eliminated, and a number of other price and
    production assistance programs have been significantly reduced by the
    1996 Act and other legislation. To fill this void, producers must take
    active steps to reduce their agricultural risks.
        The 1996 Act created the Risk Management Agency (RMA) to administer
    the crop insurance program and to carry out other risk management
    functions. Previously, the crop insurance program was administered by
    the FSA, which retains responsibility for the Noninsured Crop Disaster
    Assistance Program (NAP), and which provides basic catastrophic crop
    insurance through its county offices in States where private crop
    insurance resources are limited.
        The RMA and the Federal Crop Insurance Corporation (FCIC) play a
    pivotal role in fulfilling the mandates of the 1996 Act while ensuring
    that American agriculture remains solid, solvent, and globally
    competitive into the 21st century. To accomplish these tasks, RMA
    intends to refine existing products, create innovative, cost-effective
    tools, educate farmers and the public, and expand its partnerships with
    the private insurance sector and the agricultural community.
        The 1998 budget provides funding for the crop insurance program
    administered by RMA under both current law and new legislation to be
    submitted to the authorizing committees to improve the safety net for
    farmers by establishing a nationwide program for revenue insurance.
    Revenue insurance protects producers' incomes against shortfalls due to
    either price or yield fluctuations. Our legislative proposal is
    intended to be budget neutral overall. However, it provides for a
    reduction in the discretionary spending portion of program expenses.
        Under current law, funding for sales commissions, which has been
    treated as mandatory spending, shifts to discretionary spending in
    1998. All other expenses of RMA are treated as mandatory, although
    subject to appropriation, for which the budget provides ``such sums as
    may be necessary.''
        The Administration's proposal to make revenue insurance available
    nationwide reflects the strong demand among producers that we have seen
    for new revenue insurance products, such as Crop Revenue Coverage,
    Income Protection, and Revenue Assurance. However, current law limits
    RMA's authorities in the revenue insurance area to pilot programs. In
    implementing the revenue insurance programs, no additional premium
    subsidy has been paid, and the expected 1996 loss ratio experience is
    within the statutory limits and comparable to RMA's standard multiperil
    production risk coverage. The additional cost to the Federal government
    has been an increase in delivery expenses, including underwriting gains
    paid to the insurance companies.
        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 multi-peril coverage. This reduction is based on
    extensive analysis conducted by RMA and the General Accounting Office
    and would reduce discretionary spending for delivery expenses from $203
    million, under current law, to $150 million under the proposal.
    Further, our proposal would make a portion of the overall reimbursement
    rate discretionary and subject to appropriation whereas current law
    treats only the sales commissions portion of the reimbursement as
    discretionary. We believe this change offers insurance companies more
    flexibility for adjusting to the reduced reimbursement rate.
        Finally, our legislative proposal will provide more flexibility for
    determining subsidy amounts and establishing pilot programs. It will
    also make certain changes in program compliance requirements. None of
    these changes is expected to have a budgetary impact.
        The current law budget also includes funding for $257 million in
    mandatory account spending to reimburse the reinsured companies for the
    delivery of limited and buy-up coverage. This is a decrease from 1997
    due to the legislative mandate that a portion of administrative
    expenses paid to the reinsured companies be transferred to the
    discretionary account. Under proposed legislation, it is estimated that
    an additional $10 million in administrative reimbursements to reinsured
    companies would be required.
    RMA Salaries and Expenses
        Staff levels for RMA have decreased dramatically in recent years
    even as the program has grown in size, scope, and expectations. Overall
    staff resources, including administrative resources from the FSA, have
    been reduced by more than 20 percent since 1993. As of September 30,
    1996, there were 536 employees in RMA, at headquarters and in 10
    regional service offices and 6 compliance offices.
        Under current law, 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 RMA's ability to service participating
    private sector companies. Funding for the new and expanded programs is
    intended to ensure that the programs are implemented as expeditiously
    as possible. The current law budget also includes $203 million for the
    payment of sales commissions out of the discretionary account. Our
    legislative proposal would reduce the discretionary portion of the
    administrative reimbursements paid to reinsured companies to $150
    million and allow for the payment of expenses other than just sales
    commissions.
                          foreign agricultural service
        Turning now to the international side of the FFAS mission area, I
    am 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, agriculture led all U.S. trade
    categories as the most significant contributor to the U.S. balance of
    trade and supported one million jobs both on and off the farm, one-
    third of which were in rural areas.
        Early forecasts of agricultural exports for the current year
    suggest a more moderate sales pace. Current projections for 1997 call
    for exports to reach $56.5 billion, down about 6 percent from 1996, but
    still the second highest value on record. The anticipated reduction
    mainly reflects increased foreign production of grains and lower
    average prices for wheat and coarse grains. High-value exports are
    forecast to set another record this year.
        These strong export gains provide convincing evidence that American
    agriculture is reaping the benefits of the North American Free Trade
    Agreement, the Uruguay Round Agreement on Agriculture, and the more
    than 200 other trade agreements the Administration has successfully
    negotiated. As a result of these agreements, we now have the most open
    world market of this century and enormous opportunities for additional
    export growth.
        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 Act 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. At the same time, we must continue to
    adapt and improve these efforts to meet today's challenges and keep
    pace with intense competition.
        Much of our recent export success can be directly linked to the
    combined effects of our trade policy initiatives, export assistance
    programs, and the market development efforts of FAS working with our
    agricultural cooperators and others, including participants in the
    Market Access Program (MAP).
        Overseas, FAS field offices support USDA programs and the U.S.
    agricultural export drive in 95 locations around the globe. These
    offices continue to function as the ``eyes and ears'' for U.S.
    agricultural exporters, and the thousands of attache reports that they
    prepare each year are now available to the widest possible U.S.
    audience almost instantly via the Internet. In line with the
    Department's Long-Term Agricultural Strategy, we have increased staff
    in the Pacific Rim and Latin America, and decreased staff in Europe.
        Domestically, FAS has expanded its outreach and information efforts
    to educate U.S. businesses about the tremendous potential of global
    markets. A key part of this effort is the location of export advisors
    at the state level--at the California, Colorado, and Oregon State
    Departments of Agriculture and the Iowa State Office of the FSA.
        FAS has joined forces with cooperators and MAP participants such as
    the American Hardwood Export Council and the American Seafood
    Institute, and with local entities such as state departments of
    agriculture across the country to sponsor export seminars for small and
    new-to-export businesses. Last July, in conjunction with FSA, FAS
    conducted outreach efforts in 47 states plus Puerto Rico. The state-
    hosted events attracted over 2,000 participants, bringing together
    producers, bankers, agribusinesses, exporters, shippers, universities,
    and Federal, state, and local officials.
        Through these and other programs, the Department plays a vital role
    in working with the private sector to identify emerging market
    opportunities overseas and in using our export promotion and market
    development tools to achieve our shared trade objectives.
        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 international programs and activities.
        For the CCC export credit guarantee programs, the budget provides a
    total program level of $5.7 billion, which includes $5.3 billion for
    GSM-102 short-term guarantees and $400 million for GSM-103
    intermediate-term guarantees. The overall increase of $200 million
    above the 1997 level consists of guarantees which will be made
    available to emerging markets for U.S. agricultural products.
        The GSM-102 program level continues two other credit initiatives--
    supplier credit guarantees and facilities financing guarantees. The
    budget provides for $350 million of supplier credit guarantees, an
    increase of $100 million above the 1997 level. These guarantees, which
    were first made available in late 1996, allow exporters of U.S.
    agricultural products to obtain CCC guarantees for short-term credit
    extended directly to foreign buyers. Supplier credit guarantees are
    expected to be particularly useful in facilitating sales of processed
    and consumer-ready products, which are among the fastest-growing
    components of U.S. agricultural exports. To date, supplier credit
    guarantees have been made available to facilitate U.S. agricultural
    exports to Mexico, Guatemala, El Salvador, Panama, Jamaica, Indonesia,
    Malaysia, Singapore and the Philippines.
        Also under GSM-102 authority, the budget includes $100 million of
    facilities financing guarantees, unchanged from the current estimate
    for 1997. Under this initiative, CCC will provide guarantees for the
    establishment or improvement of facilities and/or services designed to
    address infrastructure barriers to increased export sales. We
    anticipate publishing an interim final rule this spring for this
    program.
        The budget provides higher program levels for our two export
    subsidy programs in 1998--the Export Enhancement Program (EEP) and
    Dairy Export Incentive Program (DEIP). In the case of EEP, we propose
    to make available $500 million, the maximum level permitted by the 1996
    Act and a $400 million increase over 1997. The budget includes $89
    million for DEIP in anticipation of higher sales under this program.
        One of the more promising developments in 1996 was the virtual
    suspension of global export subsidies, which mask market signals and
    distort trade. EEP and DEIP program activity was reduced in 1996 as a
    result of world commodity supply and competitive conditions.
    Unfortunately, the responsible restraint by the United States has been
    tested by renewed European Union subsidization, which began last
    September. We must be ready to protect our agricultural trade interests
    including the resumption of EEP, if necessary, and therefore, we have
    provided full funding for EEP in 1998.
        For the Market Access Program (MAP), formerly the Market Promotion
    Program, the budget continues funding at its maximum authorized level
    of $90 million. The MAP provides cost-share assistance to nonprofit
    agricultural trade organizations, state and regional trade groups, and
    private companies which carry out export promotion activities overseas.
    The program has proven to be particularly effective in promoting sales
    of high-value products.
        During the past year, changes have been made in MAP to target more
    resources to small businesses. In 1996, 56 percent of the funds for
    promotion of branded products was made available to small entities, up
    from 41 percent in 1994, and another 20 percent was made available to
    farmer cooperatives. Additional program improvements recently have been
    made which are designed to broaden participation, clarify program
    criteria, strengthen evaluation and accountability, and simplify
    program requirements for participants.
        The budget includes a proposed rescission of $50 million in budget
    authority for the Public Law 480 Title I concessional sales program in
    1997 in order to provide a partial offset for a supplemental
    appropriations request for the Special Supplemental Nutrition Program
    for Women, Infants, and Children (WIC). This proposal will reduce the
    Title I program level by $60 million and estimated commodity shipments
    by 200,000 metric tons. However, allocations of commodity assistance
    already announced for 1997 will not be affected by the rescission
    because the reduction will be taken from a reserve of unallocated funds
    and from unobligated funds carried over from 1996.
        For 1998, the budget proposes a total Public Law 480 program level
    of $990 million, a reduction of $57 million from the revised estimate
    for 1997. This reduction will occur in the Title I concessional sales
    program; funding for Titles II and III will remain largely unchanged
    from 1997 enacted levels. Our 1998 request level is expected to provide
    for approximately 3.2 million metric tons of commodity assistance,
    unchanged from the revised tonnage estimate for 1997.
        The 1998 budget for Public Law 480 also shifts the budget and
    expenditures for the Title I program from the international affairs
    function to the agriculture function of the Federal budget. This
    proposal is an outgrowth of recent changes in the Title I statutory
    authorities, which have placed a much greater emphasis on the program's
    market development objectives. With these changes, the role and
    importance of the Title I program in the Department's overall long-term
    market development strategy has increased. Shifting Title I to the
    agriculture function will allow the program to be managed and budgeted
    as part of a consistent package of agricultural export programs.
    FAS Salaries and Expenses
        The Foreign Agricultural Service administers the Department's
    important trade, export, and international cooperation activities. As
    the Subcommittee will recall, last year's budget continued the pro-
    active approach to the fundamental objective of increasing U.S.
    agricultural exports by 50 percent by the year 2000. With the resources
    provided for 1997, FAS has expanded market development activities,
    including the Cooperator Program, and our domestic outreach efforts to
    facilitate the entry of small and medium sized producers into the
    international marketplace.
        For 1998, the FAS budget proposes a funding level of $150.9 million
    and 885 staff-years, an increase of $15.4 million above the 1997 level.
    Most of the proposed increase will be used to help meet the costs of
    several FAS activities which are currently supported with CCC funds
    made available to FAS through reimbursable agreements. The budget
    proposes that future funding of these activities will be included in
    the FAS appropriation. With this change, their funding will no longer
    be subject to the annual limitation on CCC reimbursable agreements
    established by the 1996 Act.
        These activities include the Emerging Markets Program, under which
    technical assistance and training are provided to promising overseas
    growth markets where there is potential to increase U.S. exports
    significantly over the long term. They also include the operating costs
    of the CCC Computer Facility, which serves as the Department's
    collection point for international production intelligence and crop
    estimates, and for other, related FAS Information Resources Management
    costs.
        An increase of $500,000 is requested to implement a systematic
    process to review, identify, and catalog technical barriers to trade
    and other technical requirements that limit export opportunities in the
    top 30 export markets accounting for the majority of U.S. agricultural
    trade. This review will lead to recommendations for overcoming the
    identified barriers and expanding U.S. exports to these markets.
        For the Cochran Fellowship Program, the budget provides funding of
    $2.4 million, unchanged from this year's level.
        The budget also includes new provisions to address the difficulties
    in accurately estimating and funding the annual operating costs of our
    overseas offices. First, the budget provides an advance appropriation
    of $3 million for 1999 to fund documented wage and price increases and/
    or 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. This will allow any savings
    that may be realized in the cost of overseas operations to be carried
    over for use the following year.
        In conclusion, today's budget realities mean that 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. We will be pleased to
    answer any questions you and other members of the Committee may have.
                                     ______

                      Prepared Statement of Bruce R. Weber
        Mr. Chairman and Members of the Subcommittee, I am pleased to
    present the fiscal year 1998 budget for the Farm Service Agency (FSA).
    When our statement was presented to you last year, Congress had just
    enacted the Federal Agriculture Improvement and Reform Act of 1996.
    That legislation made significant changes in the design and funding of
    the programs that this agency administers. Implementing the legislative
    changes and working toward increased cost savings are our major tasks
    in 1997. Our 1998 budget reflects the new direction in farm programs
    coupled with a significant contribution toward the bipartisan effort to
    balance the Federal budget by 2002. As I discuss the budget estimates
    for our various activities--price and income support and related
    programs of the Commodity Credit Corporation, conservation programs
    funded by the Commodity Credit Corporation, the farm credit programs of
    the Agricultural Credit Insurance Fund, and a number of others--I will
    highlight the major changes. To conclude, I will summarize our request
    for administrative support, noting the impact of the program and budget
    changes on FSA staffing.
                          commodity credit corporation
        Domestic farm commodity price and income support programs are
    administered by the Farm Service Agency and financed through the
    Commodity Credit Corporation, a government entity for which FSA
    provides operating personnel. The CCC is also the source of funding for
    most of the conservation programs administered by FSA and NRCS, and it
    funds most of the export programs administered by FAS. Funds are
    borrowed by the Corporation from the Treasury to finance CCC programs.
    The Corporation has the authority to have outstanding Treasury
    borrowings of up to $30 billion at any one time. Commodity support
    operations, handled primarily through loans and payment programs, and
    some limited purchase programs, currently include those for wheat,
    corn, soybeans, minor oilseed crops, cotton (upland and extra long
    staple), rice, tobacco, milk and milk products, barley, oats, sorghum,
    peanuts and sugar.
                           commodity program outlays
        The CCC budget attempts to capture the impact of economic or other
    conditions 2 years into the future. The current 1998 budget estimates
    largely reflect estimated supply and demand conditions for the 1997
    crop. However, a great deal of the volatility associated with
    forecasting commodity program outlays has been removed due to the
    provisions of the 1996 Farm Bill. The price and income support program
    funded by CCC for the 1996 crops and beyond are determined by that
    legislation, which has fundamentally restructured income support
    programs and discontinued supply management programs for producers of
    feed grains, wheat, upland cotton, and rice. The deficiency payment
    program, which was tied to market prices and had been in place since
    the early 1970's, has been replaced with a new income support program
    of payments that generally are not related to current plantings or to
    market prices. The new law also expands planting flexibility and
    suspends the authority for the Secretary to require farmers to idle a
    certain percentage of their cropland in order to be eligible for income
    support payments.
        The budget includes proposed legislation that will build better
    programs to help farmers manage risk and thereby improve the safety net
    for farmers, reflecting the President's concerns when he signed the
    1996 Farm Bill. The proposed legislation would provide discretionary
    authority to extend commodity loans for 6 months during periods of
    depressed market prices or market disruptions, allow for managed haying
    and grazing on CRP acres, increase fruit and vegetable planting
    flexibility for acreage enrolled in production flexibility contracts,
    and provide greater flexibility in the timing of production flexibility
    contract payments. The change in CRP haying and grazing provisions is
    estimated to reduce CRP outlays by about $25 million per year.
        Mr. Chairman, reflecting the trend for Federal outlays for farm
    price and income support programs, total CCC outlays have declined from
    the fiscal year 1986 high of $26 billion to $4.6 billion in fiscal year
    1996. This is the first time CCC outlays have dropped below $5 billion
    since fiscal year 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 fiscal year 1997 and
    $9.9 billion in fiscal year 1998, and decline to about $7.6 billion by
    fiscal year 2002. This outlay trend is shown on the graph below.
    [GRAPHIC] [TIFF OMITTED] T01AP08.040

        For fiscal year 1998, total net outlays are expected to increase by
    $2.1 billion to $9.9 billion--about a 27-percent increase, reflecting
    higher net commodity lending outlays of $467 million; the absence of
    deficiency payment refunds in fiscal year 1998, whereas $1.1 billion
    will be received in 1997; an increase of $400 million in the export
    enhancement program; higher net interest expenditures of $297 million;
    and increased conservation program expenses of $241 million. While no
    deficiency payment refunds are estimated for fiscal year 1998,
    production flexibility contract payments will decline by $644 million.
    ADP Expenses and other Section 11 Activities
        Section 161 of the 1996 Farm Bill 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 year 1996, and $275 million for the six-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 for ADP-related expenses in fiscal
    year 1996 was $144 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.
        The 1998 budget assumes that expenditures for computer and
    telecommunications equipment will total $109 million in fiscal year
    1997 and $104 million in fiscal year 1998. The budget projects annual
    spending under the cap on reimbursable agreements will total $41.2
    million in fiscal year 1997 and $35.6 million in fiscal year 1998.
    Reimbursement for Realized Losses
        The 1998 budget reflects an estimated need for $784 million to
    reimburse CCC for its realized losses, a reduction of $716 million from
    the fiscal year 1997 reimbursement of $1.5 billion. In prior years, the
    request for appropriations to reimburse the CCC for net realized losses
    has been based on an estimate of losses incurred one year earlier which
    have not been previously reimbursed. The estimate could exceed or fall
    short of the actual amount of loss. Beginning in 1998, in response to
    OIG recommendations, the request for appropriations to reimburse CCC
    for net realized losses will cover the actual amount of the
    unreimbursed losses incurred 2 years earlier. Fiscal year 1996 losses
    totaled $7.8 billion, of which $5.5 billion was restored by
    appropriations in 1996 and $1.5 billion was restored by appropriations
    in 1997, leaving a balance of $784 million to be restored in 1998.
    Appropriations to reimburse CCC for net realized losses to be incurred
    in 1997, currently estimated to total $9 billion, will be requested in
    the 1999 budget.
    Appropriation Language Changes
        Two CCC appropriation language changes are proposed in the budget:
      --New language establishing a minimum program level for export
            credits for emerging markets.
      --A shift in funding for the Emerging Markets Technical Assistance
            Program from CCC to FAS appropriation. With this change, these
            activities will be carried out with discretionary, rather than
            mandatory funding and will no longer be included in the annual
            limitation on Section 11 CCC reimbursable agreements and other
            transfers. The increase in FAS funding is offset by a $10
            million decrease in the fiscal year 1998 CCC reimbursable
            agreements and other transfers cap.
                        ccc-funded conservation programs
    Conservation Reserve Program
        The 1996 Farm Bill reauthorized the Conservation Reserve Program,
    established maximum enrollment at 36.4 million acres, and changed the
    program's financing from direct appropriation to CCC funding. The
    legislation also redefined the program, changing its primary focus from
    highly erodible land conservation and supply management to
    environmental protection, with wildlife habitat and water quality
    joining soil erosion reduction as primary program objectives.
        Continuous signup is available for certain high priority practices
    involving small acreages, such as riparian buffers, filter strips, and
    windbreaks. Signup for CRP regular enrollment was held March 3 through
    March 28. I am pleased to report that as of March 21, the end of the
    third week of the 4-week signup, landowners had offered to enroll
    almost 20 million acres, of which about 14.7 million are currently
    under contracts that expire in September. The remaining 5.3 million
    acres are new offers. With technical assistance from the Natural
    Resources Conservation Service, FSA will carry out the massive job of
    evaluating the environmental benefits of all offers, and will notify
    producers by mid-June as to the acres that have been accepted into the
    program.
        In 1997, CCC is making payments of approximately $1.765 billion for
    rental costs and about $8 million for sharing the cost of permanent
    cover on replacement acres. Fiscal year 1997 CRP technical assistance
    costs of $83 million for NRCS and FS are funded by unobligated balances
    of CRP funds appropriated prior to enactment of the 1996 Farm Bill. For
    1998, CCC program costs are expected to total approximately $1.928
    billion, consisting of $1.667 billion for rental payments on previously
    enrolled and extended acres; $246 million for cost-sharing of permanent
    cover on enrolled acres; and $15 million for NRCS technical assistance
    funded under the CCC Section 11 cap on reimbursables and transfers. An
    additional $24 million in NRCS and FS technical assistance costs in
    1998 will be funded by unobligated balances of CRP appropriated funds.
    Other CCC-Funded Conservation Programs
        The 1996 Farm Bill restructured many of USDA's conservation
    programs and, as with the CRP, changed the financing to CCC funding.
    With the exception of the Flood Risk Reduction Program, the CCC-funded
    conservation programs are administered under the lead of NRCS. NRCS
    will discuss these programs with you in detail, and I will just mention
    them briefly.
        The Wetlands Reserve Program was reauthorized by the 1996 Farm
    Bill, and funding of $163.6 million is included in the CCC budget. The
    new Environmental Quality Incentives Program encompasses the objectives
    of four previous conservation programs: the Agricultural Conservation
    Program, the Water Quality Incentives Program, the Great Plains
    Conservation Program, and the Colorado River Basin Salinity Control
    Program. The CCC budget reflects $200 million for the EQIP in 1998. The
    Conservation Farm Option is a pilot program which allows an eligible
    producer to receive a single payment totaling what he or she would have
    received separately under the CRP, WRP, and EQIP. For 1998, $15 million
    is included for the CFO in the CCC budget. The new Farmland Protection
    Program will use $18 million in 1998 to share with State and local
    governments the cost of acquiring conservation easements on specified
    farmland. CCC funding of $22.5 million will be used in 1998 for the
    Wildlife Habitat Incentives Program, which shares the cost of
    developing habitat for upland wildlife, wetland wildlife, threatened
    and endangered species, fish, and other types of wildlife. The Flood
    Risk Reduction Program enables production flexibility program
    participants with acreage that is frequently flooded to receive in
    advance up to 95 percent of the production flexibility contract
    payments they are projected to receive from the time of enrollment in
    the FRRP through September 30, 2002. In exchange the producer must
    agree to terminate the production flexibility contract on FRRP acres,
    comply with swampbuster and conservation compliance requirements, and
    forgo future payments for disasters, crop insurance, and conservation
    programs, as well as loans for contract commodities, oilseeds, and
    extra-long staple cotton. The FRRP is funded at $10 million in 1997,
    but no funding is proposed for 1998.
                       appropriated conservation programs
    Agricultural Conservation Program
        As I indicated, the 1996 Farm Bill repealed the Agricultural
    Conservation Program in its sixtieth year and incorporated its
    objectives into the new Environmental Quality Incentives Program funded
    by CCC.
        The fiscal year 1996 ACP appropriation of $75 million remained
    available after April 4, 1996, to fund previously approved practices as
    well as new practices that met the objectives of the EQIP. Outlays
    under the program from 1996 and prior obligations, including long-term
    agreements, will continue for a number of years.
    Emergency Conservation Program
        The Emergency Conservation Program assists producers in
    rehabilitating farmland damaged by natural disaster and in carrying out
    emergency water conservation measures during periods of severe drought.
    The program shares the cost of practices to restore the land to its
    productive capacity as it existed prior to the disaster. As might be
    expected, funding needs for this program vary widely from year to year,
    depending upon the occurrence of natural disasters.
        No ECP funding was provided in the fiscal year 1997 Appropriations
    Act, but supplemental funding of $25 million was made available by the
    Omnibus Consolidated Appropriations Act. All of those funds were
    allocated, along with over $8 million in unused allocations for prior
    disasters that were returned from the States and re-allocated. As of
    March 28, $277 thousand remains. As a result of winter storms in the
    West, flooding in the Ohio Valley, and other recent disasters, requests
    for emergency conservation assistance are expected to be substantial
    when flood waters recede and realistic estimates can be made. On March
    19, the Administration forwarded to Congress a request for emergency
    supplemental appropriations, which includes an ECP request of $20
    million plus another $17 million in contingency funding for ECP to be
    released upon the official request of the President.
        The Budget requests no specific funding for the ECP for fiscal year
    1998 but instead includes a request for a Governmentwide disaster
    contingency account.
    Dairy Indemnity Program
        The Dairy Indemnity Program compensates dairy farmers and
    manufacturers who, through no fault of their own, suffer income losses
    on milk or milk products removed from commercial markets due to
    residues of certain chemicals or other toxic substances. Payees are
    required to reimburse the Government if they recover their losses
    through other sources such as litigation. The 1998 appropriation
    request of $100 thousand would cover program needs in an average year
    with no major contamination incidents. However, 1997 has already proven
    to be exceptional, with Arizona alone experiencing a loss in excess of
    $120 thousand due to contamination of feed grown in soil containing
    residues of a pesticide used years ago. This claim, along with a
    sizable aflatoxin problem in Texas and smaller ones in six other
    States, has exhausted the full $257 thousand available for allocation
    at the start of the year. Although additional requests from producers
    have come in, we have notified our county offices that no funds are
    currently available.
                        farm credit and related programs
    Agricultural Credit Insurance Fund
        The programs of the Agricultural Credit Insurance Fund provide a
    variety of loans and loan guarantees to farm families who would be
    unable to obtain credit otherwise. The majority of FSA lending activity
    occurs in partnership with private lenders through the guarantee
    programs, which provide a safety net for producers by providing a means
    for them to continue to obtain credit from their regular lenders when
    they have suffered a financial setback. This budget continues the trend
    toward emphasizing guaranteed loans, which are most cost-efficient for
    the taxpayer because of their low subsidy cost. We remain responsive,
    however, to the continued need for direct loans, which are targeted to
    beginning farmers and members of socially disadvantaged groups. Our
    goal is to assist borrowers, through supervised credit, to achieve a
    successful agricultural operation and graduate to private credit.
        The 1998 budget provides for a total program level of $2.8 billion
    in ACIF loans and guarantees, approximately $300 million less than the
    current estimate for 1997. Of this amount, $2.3 billion would be for
    subsidized and unsubsidized loan guarantees, and $532 million would be
    for direct loans.
        Farm Ownership Loans.--For direct farm ownership loans we are
    requesting a loan level of $30.8 million, which requires an
    appropriation of just over $4 million. For guaranteed farm ownership
    loans in fiscal year 1998, we are requesting a loan level of $400
    million, which requires an appropriation of $15.4 million.
        Farm Operating Loans.--We are requesting a subsidy appropriation of
    $29.6 million to enable us to make direct farm operating loans of $450
    million. For guaranteed farm operating loans, an appropriation of $19.3
    million will make possible $200 million in loans with subsidized
    credit. For our largest farm operating loan program, unsubsidized
    guarantees, a request for $19.9 million in appropriated funds will
    cover the Federal cost of $1.7 billion in loans.
        Other Loan Programs.--The Budget requests $25 million for credit
    sales of acquired property, which requires budget authority of $3.3
    million. This program assists qualified applicants to purchase property
    in FSA inventory.
        The Budget also proposes a subsidy of just over $6 million to
    support a program level of $25 million in emergency disaster loans in
    fiscal year 1998. I would like to note that in fiscal year 1997, in
    addition to the $6.4 million regular appropriation, we have a carryover
    subsidy of $28.9 million that will support additional emergency
    disaster loans of $95.2 million. The carryover is from the funds that
    were made available in fiscal year 1996 by the 1997 Agriculture
    Appropriations Act, to remain available until expended. We expect to
    fully utilize these funds in the current fiscal year.
        In addition, we are requesting $132 thousand to provide $1 million
    in Indian tribe land acquisition loans.
        The 1998 budget proposes a farm credit program level close to the
    1997 level but at a reduced cost, thanks to a combination of agency
    efforts to reduce direct loan delinquency rates and the benefits of
    expected lower interest rates in a strong economy. In 1997, total
    direct lending authority is $568 million, supported by a subsidy of $74
    million. The budget, in contrast, estimates total direct lending
    authority of $532 million for 1998, with a subsidy of $43 million. So,
    while total direct lending authority decreases by about 6 percent, the
    supporting subsidy decreases by more than 40 percent. Through better
    management of the credit programs and by utilizing the tools provided
    in the 1996 Farm Bill, we will be able to continue to serve the credit
    needs of the Nation's small, family farmers while producing the kind of
    cost cutting performance necessary to achieve a balanced budget.
    State Mediation Grants
        Since 1987, State Mediation Grants have enabled a number of States
    to develop programs to deal with conflicts involving distressed
    agricultural loans. The Department of Agriculture Reorganization Act of
    1994 expanded the program from farm credit cases only, to include
    disputes concerning wetland determinations, conservation compliance,
    pesticides, and other issues. Operated primarily by State universities
    or departments of agriculture, the program provides a neutral mediator
    to assist producers in resolving disputes before they result in
    litigation, bankruptcy, or other serious consequences. Moreover,
    mediation, at $200 to $250 per case, offers significant savings over
    national level administrative hearings, which cost about $3,000 to
    $4,000 per case, not including indirect costs such as travel and salary
    of FSA employees involved in the appeal.
        Currently 22 States have programs that qualify for grants. Three
    other States are developing programs, and additional States are
    considering doing so. For fiscal year 1998 the Budget requests $4
    million, an increase of $2 million over fiscal year 1997, to meet the
    rising demand expected as a result of the program's broadened scope and
    to accommodate newly participating States.
                             administrative support
        The costs of administering all FSA programs are funded by a
    consolidated Salaries and Expenses account. The account is comprised of
    direct appropriation, transfers from program loan accounts under credit
    reform procedures, user fees, and advances and reimbursements from
    various sources. These reimbursements include funding from the Foreign
    Agricultural Service and Risk Management Agency for common
    administrative support activities provided by FSA personnel.
        For FSA Salaries and Expenses we are requesting a total
    appropriated level of $954 million, a net decrease of $1.9 million from
    fiscal year 1997.
        Our staffing reductions for 1998 continue to run well ahead of
    those projected in the Department's reorganization plan. The budget for
    FSA calls for 1998 staffing levels of 5,877 Federal staff-years and
    9,879 non-Federal county office staff-years--reductions of 269 and
    1,850 staff-years, respectively, from the 1997 levels of 6,146 and
    11,729. We estimate that this total reduction of 2,119 staff-years will
    be achieved through a combination of about 530 buyouts and a reduction
    in force of about 1,589 staff-years. Salary and benefit savings of
    $75.9 million from the proposed staffing reductions will be mostly
    offset by one-time separation costs estimated at $56.3 million and by
    pay-related costs of $18.9 million for remaining staff.
        As a result of the 1996 Farm Bill, 1998 workload in some areas such
    as commodity program payments, conservation, basic farm record
    maintenance, and compliance will continue the decline begun this year.
    Other activities are expected to remain constant or, in some cases such
    as commodity loan activity, to increase.
        Although FSA workload is lower in 1997 due to the 1996 Act, FSA is
    faced with a CRP signup that, as you know, was held March 3 through
    March 28 and will enroll as much as 19 million acres. The associated
    workload was not considered in the agency's 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 addition of
    this workload will stretch current resources and may require the hiring
    of temporary employees. The decision to increase enrollment levels
    includes enrolling an additional 8 million acres in 1998. Although
    workload is expected to continue to decline in 1998, required staffing
    reductions coupled with the increased enrollment level may again
    require relying upon temporary employees to fully accomplish CRP-
    related workload.
        From 1993 through the current fiscal year, FSA has downsized its
    work force by approximately 4,700 FTE's, or about 21 percent, due to
    streamlining efforts and the programmatic impacts of the 1996 Farm
    Bill. The additional reduction of 2,119 FTE's proposed in the 1998
    budget would bring the cumulative FSA work force reduction since 1993
    to 30 percent, which breaks down to 34 percent for non-Federal county
    office employees and 23 percent for Federal employees, including
    Federal county farm credit staff.
        The President's Budget projects that, as part of the USDA
    streamlining initiative, 500 county FSA offices will close by the end
    of fiscal year 1999. I would like to emphasize, however, that no
    decisions have been made as to which offices will be affected. We are
    currently in the planning stages of determining the various criteria
    that will be used as a basis for these decisions. However, we will not
    make any decisions without the appropriate consultations with Congress.
        The Department is also planning an independent study of FSA, the
    Natural Resources Conservation Service, and other county-based agency
    activities to look for additional opportunities for streamlining and
    increasing the efficiency of our service to our customers.
        Mr. Chairman, this concludes my prepared statement. I will be happy
    to answer your questions and those of the other Subcommittee Members at
    any time.
                                     ______

                  Prepared Statement of August Schumacher, Jr.
        Mr. Chairman, members of the Subcommittee, I appreciate the
    opportunity to review the work of the Foreign Agricultural Service
    (FAS) and to present the President's budget request for fiscal year
    1998.
                        1996--a record year for exports
        Exporters of U.S. farm and food products posted another sales
    record in fiscal year 1996 in both volume and value. Exports climbed to
    $59.8 billion, a gain of more than $5 billion from the previous year.
    This marked the second straight year of robust trade growth. In fiscal
    1995, U.S. agricultural exports surged to $54.6 billion, up 25 percent
    from 1994.
        With the strong, back-to-back gains of the past two years, U.S.
    agricultural exports in 1996 were up by some $19 billion or close to 50
    percent since 1990. In an average week this past year, U.S. producers,
    processors and exporters shipped more than $1.1 billion worth of food
    and farm products to foreign markets, compared with about $775 million
    per week at the start of this decade.
        Fiscal year 1996 sales were up in two of the three major categories
    of agricultural exports--bulk commodities (such as grains), and
    consumer-oriented products (mainly foods and beverages). In the
    intermediate products category (semi-processed commodities, live
    animals and seeds), exports were off 4 percent from 1995's record
    level.
        The overall export gains out paced the more moderate growth in
    imports, raising the fiscal year 1996 agricultural trade surplus to a
    new record of $27.4 billion--up from $25.0 billion in fiscal 1995. In
    the most recent comparisons among 11 major industries, agriculture
    ranked No. 1 as the leading positive contributor to the U.S.
    merchandise trade balance.
        U.S. wood and fishery products didn't fare quite as well as
    agricultural products this past year. Wood product exports were valued
    at $7.1 billion, off 4 percent from 1995's record. Sales of edible fish
    and seafood, at $2.9 billion, were down about 10 percent. However,
    combined U.S. exports of agricultural, wood and fish products in fiscal
    1996 rose 7 percent to a record-high $69.7 billion.
        As you can see, we've experienced solid growth in export demand as
    our product mix becomes more diversified and as we implement the trade
    agreements that have improved market access. But we have much hard work
    ahead of us. 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.
        Today, U.S. agricultural exports support about 1 million American
    jobs--with about one third of them in the farm sector. The other two-
    thirds are off-farm in processing, marketing and transportation. These
    jobs, on average, are higher paying than non-export related jobs.
        Early forecasts of agricultural exports for the current year
    suggest a more moderate sales pace. In December, USDA analysts
    projected fiscal year 1997 exports at $56.5 billion, down about 6
    percent from 1996, but still the second highest value on record. The
    anticipated reduction mainly reflects increased foreign production of
    grains and lower average prices for wheat and coarse grains. High-value
    exports such as livestock, poultry and soybean products are forecast to
    set another record this year.
        Mr. Chairman, one of Secretary Glickman's goals for the Department
    is to expand economic security for all of our farmers and ranchers. To
    do that, we have to expand economic opportunities, and increasingly,
    these opportunities lie overseas.
        To help American agriculture tap into these opportunities, FAS
    works to:
      --identify constraints to U.S. exports and implement strategies for
            overcoming these constraints;
      --aggressively pursue reductions of trade barriers and trade-
            distorting practices on the part of key trading partners;
      --provide export assistance through expanding credit, market
            promotion and market development beyond what the private sector
            could do by itself;
      --ensure that U.S. farmers and our research community have
            information about areas of emerging foreign demand;
      --defend U.S. agricultural interests by keeping U.S. policy views
            before the international community;
      --strengthen the export knowledge and skills of producers, processors
            and exporters so they can compete more effectively in the
            international marketplace;
      --educate foreign buyers on the merits of U.S. products and how they
            can be purchased; and
      --support economic development efforts, especially in emerging
            markets and developing countries.
        Through these aggressive measures we are helping our farmers and
    ranchers meet the competitive challenges both now and in the future.
    Market Access and Development
        Much of our recent export success can obviously be linked to the
    combined effects of our trade policy initiatives, export assistance
    programs, and the market development efforts of FAS working with our
    agricultural cooperators and others, including participants in the
    Market Access Program (MAP). For over 40 years, USDA and U.S.
    agricultural producers and processors have had a unique partnership
    that allows us to pool our technical and financial resources to conduct
    market development activities around the world. When the Uruguay Round
    Agreement was reached, our cooperators had, in many cases, already laid
    the groundwork for export sales through their on-going market
    development activities. And in many instances, use of our export
    assistance programs, such as Public Law 480 and the export credit
    guarantee programs, had served to introduce quality American products
    to foreign buyers. So, in fiscal year 1996, the first full year of
    implementation of the Uruguay Round Agreement, U.S. agriculture was
    able to take advantage of the solid foundation built over the years and
    post some notable gains.
        Pork.--For the first time, Korea opened its market for pork, both
    fresh and processed. As a result of the increased market access and
    preparatory work to introduce U.S. pork by the U.S. Meat Export
    Federation, U.S. pork suppliers now have a 30-percent share of the
    Korean processed pork market, a 10-fold increase over the token 3-
    percent market share for the United States in 1994. In addition, the
    Round enabled U.S. suppliers to crack the Korean market for fresh/
    chilled pork. The first U.S. container of fresh pork was shipped in
    September 1996 and now the product is being shipped at the rate of a
    container a day.
        In the Japanese market, the U.S. Meat Export Federation has also
    been helping to pave the way for U.S. pork exporters to take advantage
    of increased access, despite stiff competition from Denmark and until
    recently, Taiwan. Several years of trade servicing, and, more recently,
    promotion directly to consumers have culminated in the United States
    capturing a phenomenal 46 percent of the market for fresh and chilled
    product valued at $950 million market.
        Beef.--In Korea, where the U.S. Meat Export Federation has also
    been active for many years, the U.S. beef industry has seen its export
    volume rise more than 50 percent as a result of a successfully
    negotiated bilateral agreement. In 1995, U.S. exporters shipped 91,000
    tons of beef to Korea, capturing 63 percent of the market.
        Rice.--Increased market access and the U.S. Rice Federation's
    success in persuading Japanese rice traders and consumers of the
    dependability of high quality U.S. supplies at competitive prices led
    to more than $125 million in U.S. sales this crop year. This accounts
    for almost half of the market--up from virtually zero in 1993.
        Soybeans and meal.--Capitalizing on increased market access to the
    Philippines, the American Soybean Association has been promoting the
    use of soybean meal to poultry and swine producers. Over the past two
    years, the value of U.S. soybean and product exports to the Philippine
    market has grown 122 percent to $160 million.
        In Indonesia, increased market access, reduced tariffs and the
    American Soybean Association's promotion of soybean meal in poultry
    rations helped to boost U.S. soybean meal exports from zero to 100,000
    tons valued at $20 million over the past two years.
        Cotton.--Under the sanitary and phytosanitary provisions of the
    Uruguay Round, Guatemala changed a phytosanitary provision that had
    increased the cost of U.S. cotton, making it uncompetitive with cotton
    from other countries. To educate Guatemalan officials about the quality
    of U.S. cotton and the thoroughness of USDA cotton inspection
    procedures, FAS organized a training program for Guatemalan plant
    health officials. Cotton Council International's sponsorship of trade
    team exchanges and technical assistance have also helped U.S. exporters
    capture 90 percent of the Guatemalan cotton market with exports valued
    at $42 million in the 1995/96 marketing year.
        Feed grains.--In the Philippines, U.S. corn exporters registered
    about $66 million in sales for the 1995/96 marketing year, capturing 75
    percent of this once-closed market. The U.S. Feed Grains Council played
    a key role through its market development and trade servicing
    activities.
        Fruit.--The California Table Grape Commission's technical
    assistance was invaluable to U.S. government negotiators in their
    successful efforts to gain access to the Korean fresh table grape
    market in 1996 and to resolve subsequent sanitary and phytosanitary
    barriers. U.S. grape exports for the first 10 months of 1996 were
    valued at $1.3 million and are expected to grow substantially in the
    future as the U.S. industry works to develop the market.
        The Agreement also opened the Korean market for oranges in 1995.
    U.S. exporters registered sales of $5.3 million in 1995, a figure that
    rose to $13.6 million in 1996. The U.S. agricultural office in Korea is
    projecting significantly higher sales for 1997.
        Processed Products.--Tariff cuts for processed products, in some
    cases substantial, provided for in the Uruguay Round Agreement are
    expected to help boost the United States' competitive position in
    markets around the world. This is especially true in markets where
    consumers are increasingly looking for convenient, ready-to-eat food
    products. For example, Thailand will cut in half its tariffs on french
    fries, potato chips and other processed potato products. The National
    Potato Promotion Board, a MAP participant, has broadened its promotion
    activities to higher-valued items such as speciality and battered/
    coated fry products, resulting in significant new sales. For example,
    U.S. frozen french fry exports to Thailand have shown steady growth,
    increasing from $2.2 million in 1994 to more than $4.4 million in 1996.
        These are just some of the gains that have come about as a result
    of the Uruguay Round Agreement and the willingness of U.S. agricultural
    exporters to devote the time and resources to develop these
    opportunities--a task that may take years, but one that pays good
    dividends when trade agreements are concluded. The Agreement represents
    real progress toward creating a trading environment where markets, not
    governments, determine the production and marketing decisions of
    farmers and exporters. But this Agreement is only the beginning of a
    process to achieve fairer trade--it is by no means the end. In 2000, we
    will continue the reform process and will begin negotiations for
    continuing the process of progressive reductions in support and
    protection, building on the successes of the Uruguay Round.
    Bilateral Trade Issues
        We also realized notable accomplishments with some of our bilateral
    trading partners. Working with other U.S. government agencies, we
    encouraged European Union (EU) and Japanese officials to decide the
    issues surrounding genetically modified organisms using scientific
    arguments. As a result, the EU approved Round-Up Ready soybeans and BT
    corn, and Japan approved seven new genetically modified products.
        Working with USDA's health and safety agencies and the USA Poultry
    and Egg Export Council, we were able to preserve our largest and
    fastest growing markets for poultry, resolving disputes with Russia and
    China. Following the discovery of Karnal bunt in the southwest U.S.
    wheat crop, FAS, working closely with other USDA agencies, the U.S.
    Wheat Associates and several state wheat commissions, overcame a
    significant threat to U.S. exports by successfully negotiating with 33
    countries and the EU on alternative phytosanitary certification
    procedures to keep U.S. wheat exports flowing to these countries. These
    markets traditionally take half of U.S. wheat exports, representing $2-
    $3 billion in annual U.S. sales.
    Overseas Offices
        Overseas, FAS field offices support USDA programs and the U.S.
    agricultural export drive in 95 locations around the globe. These
    offices continue to function as the ``eyes and ears'' for U.S.
    agricultural exporters, and the thousands of attache reports that they
    prepare each year are now available to the widest possible audience
    almost instantly via the Internet.
        FAS has moved aggressively to adjust overseas staff in line with
    the Department's Long-Term Agricultural Strategy. Over the past decade,
    we have increased staff in the Pacific Rim and Latin America, and
    decreased staff in Europe. In addition, the number of foreign national
    staff employees working primarily on market development activities has
    been increased by about 5 percent.
    Domestic Outreach
        Domestically, FAS expanded its outreach and information efforts to
    educate U.S. businesses about the tremendous potential of the
    international marketplace. A key part of this effort is the location of
    export advisors at the State level--at the California, Colorado, and
    Oregon State Departments of Agriculture and the Iowa State Office of
    USDA's Farm Service Agency.
        FAS has joined forces with cooperators and MAP participants such as
    the American Hardwood Export Council and the American Seafood
    Institute, and with local entities such as State departments of
    agriculture across the country to sponsor export seminars for small and
    new-to-export business. We have enlisted the local expertise of banking
    institutions to help explain financing options, both those supported by
    FAS and other financing tools, and have asked other Federal agencies
    such as APHIS to help explain foreign country import requirements. The
    goal of these and other activities is to excite small companies about
    the opportunities opening to them in export markets and to educate them
    to ensure their initial forays into international trade are successful.
        Last July, FAS, in conjunction with the Farm Service Agency,
    conducted outreach efforts in 47 states plus Puerto Rico. These
    outreach efforts were an outgrowth of the Global Attache Conference
    that was held July 15-19, 1996. The states hosted export events that
    were attended by one of USDA's 50 diplomats serving as agricultural
    attaches or trade officers worldwide. The events included farm and
    plant tours, along with an FAS presentation explaining the importance
    of agricultural exports to the national and local economy, global
    opportunities, and USDA services and programs. Over 2,000 people
    attended the events, bringing together producers, bankers,
    agribusinesses, exporters, freight-forwarders, university officials,
    and Federal, State and local government officials.
    Cooperation and Development
        In fiscal 1996, the Cochran Fellowship Program provided training in
    the United States for nearly 700 participants from 44 countries. A
    number of Cochran participants have furthered U.S. trade initiatives
    by, for example, assisting in resolving sanitary and phytosanitary
    issues in Korea, Mexico, and Indonesia. Participants from Russia,
    Uzbekistan, Cote d'Ivoire and China purchased U.S. agricultural
    commodities as a result of contacts made during their training. Many of
    these purchases were first-time sales to new international customers
    and could result in future sales as well. In addition, former Cochran
    participants have influenced policy within their countries. The
    privatization of state-collective farms and rural land mortgage systems
    in Russia, for example, are being implemented by former Cochran
    participants.
        FAS' Scientific Cooperation Program supports efforts to improve the
    competitiveness of U.S. farmers by developing new food and fiber
    products; developing novel processing technologies for safe,
    convenient, value-added products; and developing technologies that
    create new products from residuals, byproducts, and wastes generated by
    food and agricultural production and processing operations. So far in
    this fiscal year, the Program has awarded 35 research projects and 15
    exchange visits involving 40 different countries and representing a
    wide range of U.S. universities and USDA agencies. Priority subjects
    covered include trade barriers and phytosanitary issues, food safety,
    exotic diseases and pests, and biological control.
        Through our programs of technical assistance, research, and
    training, we've conducted over 2,200 activities in over 90 countries
    around the world. These activities helped to enhance the
    competitiveness of U.S. agriculture, preserve our natural resources,
    and assist countries in enhancing their national food security. As part
    of our key role in the international effort to increase global food
    security, FAS led the U.S. government's intensive interagency efforts
    in preparation for the World Food Summit that brought world leaders to
    Rome last November. In partnership with the U.S. private sector and
    non-government organization (NGO) communities, we will continue to play
    an important role by following through on the U.S. commitments made as
    a result of the Summit.
    Export Programs
        Our export programs and services continue to play a key role in
    supporting U.S. exporters in overseas markets. FAS constantly seeks to
    refine and expand all of its export programs to meet changing demands
    of the international marketplace and keep pace with the competition. We
    are seeking continued budget support for these programs, which will
    allow us to continue to improve these export tools and reach out to
    additional potential exporters.
        Our export credit guarantee programs provide assistance to U.S.
    exporters in emerging markets where the financial markets provide
    insufficient credit and international competitors are offering credit
    or subsidized commodity prices. Exporters using GSM-102 and GSM-103
    export credit guarantee programs registered sales totaling $3.2 billion
    for 18 countries and 5 regional markets in 1996. Mexico, our third
    largest export market, was the largest export credit guarantee program
    last year with U.S. sales totaling $1.4 billion--or over 27 percent of
    our exports to Mexico. Mexico's credit repayments are fully on
    schedule. For 1997 we anticipate total GSM export credit guarantees to
    be about the same or slightly higher than the fiscal 1996 level.
        We have launched a new export credit guarantee program--a supplier
    guarantee program--designed to help expand exports of processed and
    other high-value products. Under this program, which is a component of
    GSM-102, the Commodity Credit Corporation (CCC) guarantees a portion of
    the risk of default by an importer on short-term credits, up to 180
    days, extended by a U.S. exporter. A $50 million program has been
    authorized ($30 million has been announced) for exports to Mexico, a
    $10 million program announced for Guatemala, a $5 million program
    announced for Jamaica, and a $35 million program announced for
    Southeast Asia. Programs are also being developed for Latin and Central
    America and the Caribbean. Since this is a new activity, we are
    undertaking an extensive outreach effort to both overseas and U.S.
    audiences to expand the understanding of this activity. We are
    confident this program will help us further increase our exports of
    these products.
        Another new program to be carried out under GSM-102 authority will
    be a facilities guarantee program. We anticipate publishing an interim
    final rule this spring for this program.
        In addition, our food aid authorities--Public Law 480, Title I and
    Food for Progress--provided about 1.2 million metric tons of food
    assistance with a program value of about $370 million to 27 countries
    during fiscal year 1996.
        In 1997, funding for Public Law 480, including the Titles II and
    III grant programs, totals over $1 billion and provides about 3.2
    million metric tons of commodity assistance. This amount is sufficient
    to provide for anticipated programming needs and to more than meet our
    2.5-million-ton commitment to the international Food Aid Convention.
    Within FAS, we are seeking to improve the market development impact of
    Title I, particularly by working with private sector entities as
    authorized by the Federal Agriculture Improvement and Reform Act of
    1996.
        In the Market Access Program, we continue to hone our allocation
    procedures, particularly with respect to participant contributions and
    export performance, to target resources more effectively to those
    programs offering the best prospects for success and to encourage
    increasing private sector contributions. The success of these efforts
    is in part reflected in the growth in U.S. participant and industry
    contributions as a share of government costs. Participant and industry
    contributions rose from 48 percent in 1994 to almost 54 percent in
    1995, the most recently completed year. In addition, as directed by
    Congress, 70 percent of the resources allocated for brand promotion has
    been awarded to small companies or cooperatives.
        Among the more promising developments in fiscal 1996 was the
    virtual suspension of global export subsidies, which mask market
    signals and distort trade. The restrained use of the Export Enhancement
    Program (EEP) in 1996 allowed U.S. exporters to market their products
    unaffected by government actions. We don't consider that current world
    market conditions warrant the use of subsidies by anyone. In general,
    U.S. supplies are relatively tight and we are exporting what we have
    available without the need to use subsidies. Unfortunately, the
    responsible restraint by the United States has been tested by renewed
    EU subsidization, which began in September 1996. We must be ready to
    protect our agricultural trade interests including the resumption of
    EEP, if necessary, and, therefore, have requested full funding of the
    EEP for 1998.
        U.S. dairy exporters sold nearly 48,000 metric tons of cheeses,
    nonfat dry milk and whole milk powder with the help of the Dairy Export
    Incentive Program (DEIP) in fiscal 1996
                                challenges ahead
        As you can see, 1996 was a busy year, and 1997 and 1998 promise to
    be just as busy as we work to build prosperity for America's farmers
    and ranchers. On the trade policy front, we have set our sights on
    2000, when multilateral negotiations for continuing the process of
    progressive reductions in agricultural support and protection will be
    initiated. This year, we will begin to set the U.S. objectives and
    goals for agriculture for those negotiations.
        We will also continue to place high priority on the important work
    done in international organizations that contribute to U.S. farm
    exports. This includes science-based standard setting by the Codex
    Alimentarius Commission, the International Plant Protection Convention
    and the International Office of Epizootics.
        Bilaterally, the accession of China to the WTO is a top priority.
    We will work to ensure that we reach a commercially meaningful
    agreement with the Chinese, and we must resolve several outstanding
    sanitary and phytosanitary issues.
        In addition to China, we also face both short-and long-term
    sanitary and phytosanitary issues with other countries as well. We
    continue to work with our trading partners through the WTO and
    bilaterally to address these concerns and to ensure that such import
    restrictions are based on sound science.
        Another critical area is the trade treatment of biotechnology
    products. New developments in biotechnology have the potential to
    increase food production, lower farming costs, improve food quality and
    safety, and enhance environmental quality. However, the benefits for
    both farmers and consumers will not easily be realized without greater
    transparency and efficiency in the approval process.
        We also continue to address issues with our partners in the North
    American Free Trade Agreement (NAFTA). The road is not always smooth,
    and a number of contentious issues remain to be addressed. Work also
    continues with Congress to develop fast-track legislation to begin the
    process by which Chile will join the NAFTA.
        With our export assistance programs, we face the constant challenge
    of ensuring that our programs help exporters compete in the constantly
    changing world marketplace. For example, we are currently reviewing our
    operational requirements for the GSM programs, seeking ways to expand
    the programs' benefits to U.S. agriculture. As I noted earlier, we
    expect to launch another new export credit guarantee program--the
    facilities guarantee program--later this year. This program is designed
    to provide guarantees for the sale of capital goods and services that
    are used for the improvement or establishment of agricultural
    facilities in emerging markets.
        We are seeking to improve the market development impact of Title I,
    particularly through agreements with private sector entities as
    authorized by the Federal Agriculture Improvement and Reform Act of
    1996.
        Our work with developing countries will also be challenging. These
    countries are important to U.S. agricultural interests now and will
    become even more so as we move into the next century. Two dollars out
    of every five that U.S. farmers earn overseas come from developing
    country markets, and these markets are where the biggest growth
    opportunities lie for U.S. agriculture. So what are we doing to focus
    on them? We will follow up the work begun at the World Food Summit. In
    addition, we will continue to use all the tools available to us--the
    Cochran Fellowship program, scientific exchanges and collaborative
    research, for example--to help ready American agriculture for the next
    century.
        But in the end, we believe that open markets and expanded trade
    offer the best and surest ways to economic growth and prosperity. But
    just as we have targeted markets for export growth, so have other
    exporters, and we will continue to face stiff competition around the
    globe.
        FAS recently completed an annual review of the export promotion
    activities of 22 countries that account for our major competition. The
    study found that just like the United States, many of our competitors
    have announced ambitious export goals and are reorienting their export
    programs to attract larger numbers of small-and medium-sized firms to
    exporting. The EU and other countries assist their producers and small
    businesses to develop foreign markets through activities similar to our
    Market Access Program (MAP) and Foreign Market Development (FMD)
    Program. Market promotion by EU countries is estimated at $350.2
    million in 1995/96, with slightly less than half of that amount
    provided by EU-member governments. The rest of the funds comes from
    producer boards and other fees. Australia, Canada, and New Zealand have
    strong national government promotion agencies and rely heavily on their
    statutory marketing boards to carry out market development activities
    for producers of specific agricultural products.
        In addition to market promotion activities, the EU also carries out
    an extensive subsidy program. Of the $9 billion budgeted by the EU in
    1996 for export subsidies, over 85 percent was for exports of high-
    value products such as fresh and processed fruits and vegetables, wine,
    dairy products, and meat and meat products.
        As our study shows, our competitors are not standing still. We in
    the United States can not stand still either. Our Long-Term Trade
    Strategy and the FAS Strategic Plan we are developing in accord with
    the Government Performance and Results Act will provide the blue print
    that we are and will continue to follow to identify and meet our export
    goals. We must continue to work aggressively to meet the competitive
    challenges facing us now and in the future.
                               fas budget request
        The challenges I just described illustrate why I believe FAS must
    continue to play a prominent role in export expansion. Today's budget
    realities mean that 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 or shouldn't do, there are many
    legitimate public needs that only government can meet. Whether it's
    working to resolve trade disputes, supporting the American private
    sector as it battles in export markets against foreign competitors
    flush with funds from their national treasuries, or educating potential
    exporters, FAS has a vital role to play.
        Mr. Chairman, in the current year FAS is continuing the aggressive
    approach to achieving our fundamental objective of increasing U.S.
    agricultural exports by 50 percent by the year 2000. With the resources
    provided by this Committee, FAS is expanding market development
    activities, including the Cooperator Program and our domestic outreach
    efforts, to facilitate the entry of small and medium sized producers
    into the export market.
        Overseas, FAS is moving aggressively to adjust overseas staff in
    line with the Department's Long-Term Agricultural Strategy. We have
    recently opened an office in Hanoi, a new Agricultural Trade office in
    Indonesia, and an Agricultural Trade Office for the Caribbean region in
    Miami, Florida. Within the next few months we will open an Agricultural
    Trade Office in Moscow and an office on the U.S./Mexico border. By this
    summer, we will have augmented American staffing in Tokyo, Seoul,
    Geneva, and Moscow. The number of foreign national staff employees
    working primarily on market development activities has been increased
    by about 5 percent.
        While maintaining necessary activities in mature markets, we will
    continue to look for ways that we can strengthen USDA's presence in
    areas of the world that are experiencing the most rapid development and
    changes.
        We believe the future offers continued opportunity for the
    expansion of U.S. agricultural exports. Strengthening our ability to
    compete globally has the direct payoff of increased farm income for
    America's farmers and ranchers and the continued economic development
    of rural communities.
        The world marketplace is intense and our competitors are upping the
    stakes. For example, in fiscal year 1996, FAS expenditures for all
    activities: export promotion, trade servicing, FAS personnel and
    operating costs--everything--was less than the European Union spent
    that year just to subsidize its barley exports.
        Mr. Chairman, the fiscal year 1998 FAS budget proposes a direct
    funding level of $150.9 million and 885 staff-years, an increase of
    $15.4 million above fiscal year 1997 funding levels. The activity
    structure of the fiscal year 1998 FAS budget reflects implementation of
    the Government Performance and Results Act and transition to a
    performance-based management system. In this regard, FAS has adopted a
    new budget activity structure that incorporates the policy objectives
    of USDA's Long-term Agricultural Trade Strategy.
        Significant proposals by policy objective include:
        Strategic Outreach and Market Intelligence.--The 1998 President's
    budget proposes that funding for the operating costs of the CCC
    Computer Facility and other, related FAS information Resources
    Management costs, which in the past have been funded through a
    reimbursable agreement with CCC, shall be funded through the FAS
    appropriation. This change will shift funding for these activities from
    mandatory to the more appropriate category of discretionary spending.
    Also, future funding for these activities will no longer be subject to
    the annual limitation on CCC reimbursable agreements established by
    provisions of the 1996 Farm Bill.
        The total of the Computer Facility and other IRM costs is estimated
    at $9.7 million in 1998. The budget provides increased funding of $4.0
    million to partially meet these costs; the remaining $5.7 million will
    be met through a reduction in marketing programs carried out through
    the ATO's and increased cost-share contributions by participants in the
    Cooperator Program.
        Market Access.--The budget includes an increase of $500,000 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 products in the top 30 U.S.
    export markets. The review will lead to recommendations for overcoming
    the identified barriers to expanded U.S. agricultural exports to these
    markets These markets account for the majority of U.S. agricultural
    export trade. The catalog will include codified and non-codified
    information from the various governmental agencies regulating or
    affecting imports in these major markets.
        Long-term Market Development.--The 1998 President's budget proposes
    that technical assistance activities carried out under the Emerging
    Markets Program and authorized by section 1542(d) of the 1990 FACT Act
    be funded through FAS appropriations rather than through CCC funds made
    available to FAS under a reimbursable agreement. This change shifts the
    costs of these activities from mandatory to discretionary spending, but
    funding will remain at the currently authorized level of $10 million
    annually, which corresponds to provisions of its authorizing statute.
    The fiscal year 1998 budget also proposes to continue the Cochran
    Fellowship Program at the fiscal year 1997 level of $2.4 million.
        The budget also includes new provisions to address the difficulties
    in accurately estimating and funding wage and price increases
    associated with the operations of our overseas Counselor, Attache and
    Trade Offices. First, the budget provides an advance appropriation of
    $3 million for fiscal year 1999 to fund documented wage and price
    increases and/or exchange rate losses incurred during fiscal year 1998.
    Second, in conjunction with the advance appropriation, the budget
    proposes that funds appropriated to FAS in fiscal year 1998 be
    available for obligation through September 30, 1999.
                                export programs
        Mr. Chairman, the commercial export programs we administer are
    expected to grow in importance as the market-opening provisions of the
    Uruguay Round Agreement are implemented. Our program proposals provide
    the tools to meet these new sales opportunities, tempered by the need
    to reduce Federal spending.
        For the export credit guarantee programs, the budget proposes a
    total program level of $5.7 billion. This includes $5.3 billion for the
    GSM-102 program and $400 million for the GSM-103 program. As part of
    the GSM-102 program, the budget includes $350 million for supplier
    credit guarantees and $100 million for our new facilities financing
    guarantees. We are continuously looking at ways to use this guarantee
    authority to meet changing market needs.
        To provide a partial offset for a high priority supplemental
    appropriations request for the Special Supplemental Nutrition Program
    for Women, Infants, and Children (WIC), a $50-million rescission of
    budget authority is proposed for Public Law 480, Title. I. This
    proposal will reduce the Title I program level by $60 million and
    estimated commodity shipments by 200,000 metric tons. This proposed
    reduction does not change the country allocations already announced.
        For 1998, the budget provides a total program level of $990 million
    for Public Law 480 foreign food assistance, a reduction of $57 million
    from the revised estimate for 1997. The reduction in Public Law 480
    funding proposed for 1998 will occur in the Title I program; funding
    for Titles II and III will remain largely unchanged from 1997 enacted
    levels. The 1998 request level is expected to provide total estimated
    shipments of Public Law 480 commodities of 3.2 million metric tons,
    unchanged from the revised tonnage estimate for 1997.
        The 1998 President's budget shifts the budget and expenditures for
    the Public Law 480 Title I credit sales program from the International
    Affairs Function (Function 150) to the Agriculture Function (Function
    350) of the Federal budget. Provisions of both the 1990 and 1996 Farm
    Bills have redirected the focus of the Title I credit sales program to
    place far greater emphasis on its market development objectives With
    these changes, the importance and role of the Title I program in the
    Department's overall long-term market development strategy has
    increased. As a result, the Department strongly believes that the Title
    I program should be managed and budgeted as a part of a consistent
    package of agricultural export programs. Because all other USDA export
    programs are included in the Agriculture Function of the budget, the
    Title I program should be included in that Function as well. In
    addition, this shift in Title I to the Agriculture Function will not
    affect the overall level of U.S. foreign food aid efforts because Title
    I program activities will continue to contribute to U.S. international
    food aid commitments.
        For the Market Access Program, the budget proposes a program level
    of $90 million for fiscal 1998, the maximum program level authorized by
    the FAIR Act, and unchanged from fiscal year 1997.
        For our subsidy programs, the proposed levels for EEP and DEIP
    allow for changed market conditions and provide the necessary tools to
    respond to other governments' actions. Program activities in fiscal
    year 1996 were much lower than in previous years due to world market
    conditions. The budget provides $500 million for EEP, the maximum level
    established by the 1996 Farm Bill and $89 million for DEIP in
    anticipation of higher sales under this program.
        This concludes my statement, Mr. Chairman. I will be glad to answer
    any questions.
                                     ______

                   Prepared Statement of Kenneth D. Ackerman
        Mr. Chairman and Members of the Subcommittee, I am pleased to
    present the fiscal year 1998 budget for the Risk Management Agency
    (RMA), which supervises the Federal Crop Insurance Corporation (FCIC).
    It is my privilege to appear before you as Administrator of the newly
    formed Agency.
        Farmers today face a risk environment dramatically different from
    that which existed a few years ago. In 1996, Congress enacted the
    Federal Agriculture Improvement and Reform Act (1996 Act), which is
    designed to strengthen the Federal crop insurance program by giving
    American farmers much improved and expanded risk management tools, as
    well as education programs that will enable them to make more informed
    decisions. However, this Act and previous legislation changed the
    landscape of American agriculture by phasing out the traditional
    Federal programs that have provided a safety net to farmers for price
    and production risks over the past 60 years. Deficiency payments and ad
    hoc disaster aid have been eliminated, and a variety of other price and
    production assistance programs have been significantly reduced. To fill
    this void, producers today must take active steps to reduce their
    agricultural risks. They must rely on an increasingly wide and
    sometimes confusing array of risk management products being offered
    primarily by or through the private sector.
        RMA plays a pivotal role in fulfilling the mandates of the 1996 Act
    while assuring that American agriculture remains solid, solvent and
    globally competitive into the 21st century. To accomplish these tasks,
    RMA intends to refine existing products, create innovative, cost-
    effective tools, educate the public, and expand its partnerships with
    the agricultural community.
              organization, size and location, and field structure
        Provisions of the 1996 Act required the Secretary to establish an
    independent office responsible for supervision of FCIC, administration
    and oversight of programs authorized under the Federal Crop Insurance
    Act, and development of programs involving revenue insurance, risk
    management savings accounts, and other programs designed to help
    producers manage risk and support farm income. Consequently, RMA was
    established as an independent entity in April of 1996. The more than
    22,000 county crop programs are formulated, implemented, and monitored
    in coordination with the RMA headquarters office located in Washington,
    D.C., and the national operations office in Kansas City, Missouri. The
    programs are administered in the field through ten Regional Service
    Offices and six Compliance Offices. As of September 30, 1996, there
    were 536 employees in RMA.
                             initiatives and goals
    Revenue Insurance Products
        In fiscal year 1996, RMA witnessed a strong response from commodity
    groups, producers, and insurance agents to revenue insurance products
    which are designed to help producers manage both price and yield risks.
    In the post-1996 Farm Bill environment, American farmers need such
    programs to manage risks with confidence and security. The demand for
    these products highlights the importance of private sector alternatives
    in the risk management environment and reflects producers' awareness of
    their individual responsibilities in managing risks.
        For fiscal year 1998, RMA intends to improve the safety net for
    farmers by seeking authority to make revenue insurance available
    nationwide. RMA anticipates this will increase purchases of risk
    management tools by farmers, resulting in greater Federal outlays. To
    be cost neutral, the additional delivery expenses paid from the
    discretionary fund will be offset by reducing the reimbursement rate
    used to determine administrative expenses paid to reinsured companies.
    RMA also proposes to reduce the overall program loss ratio to offset
    the mandatory account costs of producer premium subsidy and a portion
    of the expense reimbursement.
    Risk Management Education
        In the new risk environment, RMA must not only provide producers
    with new tools to manage their risks, the Agency must also educate
    producers on the wide array of risk management tools which are
    currently available. In the past 3 years, Congress has adopted two
    provisions mandating the Department of Agriculture to establish a crop
    insurance/risk management education program geared toward orienting
    farmers about the wide array of risk management products.
        Accordingly, RMA, in conjunction with the Cooperative State
    Research, Education and Extension Service and the Commodity Futures
    Trading Commission, has developed a plan to conduct and evaluate a risk
    management education program based on a coordinated team effort of
    Federal agencies and private groups. Our goals in pursuing this
    educational effort will be to (1) develop training programs for farmers
    which integrate basic information on risk management from all relevant
    sectors (such as insurance, futures and forward contracting) and (2)
    provide a source of up-to-date information on new risk management
    products that farmers and agricultural advisors across the country can
    use when confronted with decisions, questions and solicitations. The
    delivery system for this program will rely primarily on the private
    sector, including not just the crop insurance industry, but also the
    futures industry, the farm lending community, and farm and commodity
    organizations. Costs for this initiative will be paid to the maximum
    extent possible by the FCIC insurance fund.
    Renegotiation of Standard Reinsurance Agreement
        Given the dramatic changes to the crop insurance program and the
    diverse and expanded role of RMA, we elected this year to renegotiate
    the Standard Reinsurance Agreement (SRA) which governs the relationship
    between RMA and the 17 private insurance companies participating in the
    reinsurance program. Since 1994 when the SRA was last renegotiated, the
    crop insurance program has more than doubled in size in terms of
    policies sold, acres covered, and premiums collected. Today, crop
    insurance sold and serviced through reinsured companies accounts for
    nearly 74 percent of the total number of policies and 89 percent of
    total premiums.
        Renegotiating the SRA will allow RMA to systematically resolve a
    wide range of issues. For instance, preliminary analysis suggests that
    the current SRA formula provides participating companies with too large
    an opportunity for financial gain compared with the underwriting risks
    which they bear. Questions have been raised regarding the methodology
    of providing administrative expense reimbursement (AER) to
    participating companies. Preliminary findings by the General Accounting
    Office suggest that although the current AER is set at 29 percent of
    net book premium, companies are actually spending between 25 and 27
    percent of net book premium on actual program-related administrative
    expenses. The budget contains a discretionary spending reduction of
    approximately $53 million in AER payments by proposing both a lower AER
    and providing for 10.5 percentage points of the reimbursement rate to
    be discretionary spending.
                                   fcic fund
        Under current law, the budget for the FCIC Fund proposes an
    increase of $14 million in premium subsidy for policies with buy-up
    coverage. For catastrophic risk protection, an additional amount of $7
    million in premium subsidy over the 1997 crop year will be required.
    This recognizes that indemnity payments for crops planted in the 1997
    crop year will continue to be paid in the 1998 fiscal year. Under
    proposed legislation, there would be an additional estimated increase
    in buy-up coverage subsidy of $25 million.
        Under current law, the budget also includes funding for $257
    million in mandatory account spending to reimburse the reinsured
    companies for the delivery of limited and buy-up coverage. This is a
    decrease from 1997 due to the legislative mandate that a portion of
    administrative expenses paid to the reinsured companies be transferred
    to the discretionary account. Under proposed legislation, it is
    estimated that an additional $10 million in administrative
    reimbursements to reinsured companies would be required.
                     administrative and operating expenses
        Under current law, discretionary account expenses have increased by
    $207 million from the fiscal year 1997 level. This increase is a result
    of sales commissions estimated at $203 million which will be reimbursed
    to reinsured companies and paid from discretionary funds; increases of
    $465,000 for a portion of the estimated pay increase and annualization
    of the fiscal year 1997 pay raise; and $4 million for an increase in
    full-time equivalency positions. Under proposed legislation, the
    discretionary portion of the administrative reimbursements paid to
    reinsured companies, no longer just for sales commissions, is estimated
    at $150 million which reflects a savings of $53 million.
        Staff levels for RMA have decreased dramatically in recent years as
    the program has grown in size, scope, and expectations. Overall staff
    resources, including administrative resources from the Farm Service
    Agency, have been reduced by more than 20 percent since 1993. The
    modest growth in staff positions proposed here is intended to adjust
    for recent losses and to improve our ability to service participating
    private sector companies. Funding for implementation of the reform
    costs for the new and expanded programs will increase to assure that
    the programs are implemented as expeditiously as possible.
        In closing, I appreciate the opportunity to outline the many
    positive initiatives that RMA has taken to improve the crop insurance
    program and to discuss some of the programs being proposed. Mr.
    Chairman, this concludes my testimony. I will be happy to answer any
    questions that you may have.

                          Expansion of Crop Insurance

        Senator Cochran. I notice that in your prepared statement,
    on page 2, you make the observation that you have expanded and
    improved programs to help producers manage their price and
    production risks. My question is, how have you done that?
        Mr. Smith. Mr. Chairman, much of the work in this area has
    been done with our risk management programs and our revenue
    insurance-type programs. I would like to ask the Administrator
    of our Risk Management Agency, Mr. Ken Ackerman, to expound on
    that.
        Mr. Ackerman. Thank you, Mr. Chairman.
        Very briefly, in the past 2 years, we have expanded the
    traditional Federal Crop Insurance Program from simply a
    production risk-based program to now, in many parts of the
    country, include price risk, as well, through revenue insurance
    products. There are three basic revenue products that are now
    being offered in different areas of the country on an
    experimental basis: crop revenue coverage, income protection,
    and revenue assurance.
        We anticipate that, over the next several years, sales of
    these products will increase probably nationwide. We have
    submitted a legislative proposal to that effect.

                  Expense Reimbursement in Discretionary Funds

        Senator Cochran. Is there a request now pending in the
    Congress from the administration to provide up to $200 million
    additional funding for this increased protection for producers?
        Mr. Ackerman. The request for $200 million is an existing
    request. It is not new money. The change this year is that for
    1995, 1996, and 1997, the delivery expense of reinsured
    companies for delivery of Federal crop insurance was paid for
    fully on the mandatory side of the budget. This year, a portion
    of the delivery cost is funded from the discretionary side. The
    split is part of a compromise, essentially, that was worked
    into the Crop Insurance Reform Act of 1994.
        We have proposed a reduction in that amount to help ease
    the burden. We are proposing that the expense reimbursement to
    the companies be reduced from 28 percent of premium down to
    24.5 percent. That would reduce the number you referred to from
    $200 million down to about $150 million.
        Senator Cochran. Thank you.

                           Farm Credit Funding Levels

        Mr. Secretary, on page 3 of your statement you mention the
    trend is emphasizing guaranteed loans to farmers and, I am
    assuming, in order to get away from direct lending. My question
    is, Why do you request less money for the guaranteed loans in
    the next fiscal year's budget than the current fiscal year and
    more money for direct ownership loans?
        Mr. Smith. One of the focus areas of our direct ownership
    loans is beginning farmers and socially disadvantaged farmers.
    We are focusing the direct loans in that area. Our guaranteed
    loan program is the major growth area and one of the areas in
    which we have historically experienced the fewest delinquency
    problems.
        I would like to ask Randy Weber, the Acting Administrator
    of the Farm Service Agency, to expound on that, as well.
        Senator Cochran. Randy, go ahead; proceed.
        Mr. Weber. Yes, Mr. Chairman.
        In 1997, we have a subsidy to support direct farm ownership
    loans of $28 million. Under the 1998 budget, we are requesting
    subsidies that would give us authority to loan approximately
    $31 million--a slight increase there. However, under the direct
    farm operating loans, the projected loan level is down about
    $20 million from this year.
        The activity with regard to 1997 is quite brisk right now,
    and we are likely to run out of direct operating loan money
    earlier this year than we normally do. We are looking right now
    at sometime in May.
        Senator Cochran. Will there be a supplemental request made
    by the administration for that account?

                               Emergency Funding

        Mr. Weber. We are working on that effort right now, yes.
        Senator Cochran. I have one other question, then I am going
    to yield to my colleagues for any comments or questions that
    they may have. On page 7 in your statement, Mr. Secretary, you
    say that no funds are requested for the Emergency Conservation
    Program. This is a disaster assistance program. That caught my
    eye, in view of the fact that we have had a lot of disasters
    that have occurred, that have affected agriculture producers.
        I notice you suggest that there is a $5.8 billion
    contingent reserve that the administration wants to establish
    for emergency requirements. Now, I am concerned about that part
    of the request. I wonder how we maintain our accountability to
    the taxpayers in the appropriations process if we make
    available a huge amount of money to the administration without
    any guidance or restrictions as to how it is spent. The
    President can just declare an emergency or declare that this
    was the result of a disaster and spend it for whatever the
    administration wants.
        Under this proposal, how would we guarantee that some of
    that $5.8 billion will go to agriculture producers or
    landowners under the authority of existing statutes that
    provide for these programs?
        Mr. Smith. Mr. Chairman, historically, for the Emergency
    Conservation Program, the budget has not asked for funding in
    advance, because it is very difficult to predict what
    experience we are going to have in the area of a natural
    disaster. Historically, this program has been funded through
    supplementals.
        In fact, we have an ECP supplemental request that has been
    submitted to Congress for $20 million, plus a contingency
    reserve of $17 million, to accommodate current need. So the
    fact that we do not have funding proposed in the 1998 budget is
    consistent with this past practice.
        Under the proposed $5.8 billion contingency reserve for
    emergency funding requirements, we have the Emergency Farm Loan
    Program that is part of our safety net, in addition to ECP. And
    there are continuous needs that are difficult to predict in
    advance for a particular program.
        We are currently experiencing considerable problems with
    livestock in the Dakotas and in Minnesota due to the weather
    damage there. Historically, our largest programs have focused
    on the commodity side, in terms of a safety net.
        Different disasters have different characteristics, and in
    order to have broad discretion in how to deal with these
    disasters, we are proposing to have a contingency fund that is
    not necessarily earmarked for a specific use.
        I would like to ask Mr. Kaplan if he would care to expand
    from the budget perspective on that.
        Senator Cochran. Mr. Kaplan?
        Mr. Kaplan. My understanding is that OMB would talk to the
    appropriate committees of Congress before any money is released
    out of that emergency fund, so that you would have some impact
    on how the money is spent.
        Senator Cochran. Is there any predetermined percentage that
    would go to any kind of disaster?
        Mr. Kaplan. No, sir.
        Senator Cochran. I see. Well, that is not going to happen,
    is it?
        Mr. Kaplan. No, sir.
        Senator Cochran. I do not think it is going to happen.
    [Laughter.]
        Senator Burns. Do not be so optimistic. [Laughter.]

                              FSA County Employees

        I guess I would just like to submit my statement, Mr.
    Chairman. I do not have very many questions, other than the
    fact that we sort of have a concern among our farmers in
    Montana, of trying to make your farm service agent in the local
    city an employee of USDA, rather than a member of the
    committee. They are a little bit nervous about that. Are you
    still going forth with that program?
        Mr. Smith. Senator, it is one of the proposals that we have
    under consideration within the Department. When we reorganized
    in 1994, and we pulled several functions, such as the old
    Farmers Home programs and the old ASCS programs into the same
    office for administration, we moved Federal employees at the
    county level and non-Federal employees into the same offices.
    Under the law, we cannot have a non-Federal employee
    supervising a Federal employee.
        Senator Burns. I think that is the best of all worlds, just
    personally speaking.
        Mr. Smith. And we now have functions at the local level
    that are being administered by both Federal and non-Federal
    employees.
        In order to gain efficiency in terms of our service centers
    and be responsive to the needs of our producers in those areas,
    we are looking at this proposal as one way to gain that
    efficiency, by having just one category of employee right down
    to the county level.

                        Use of CRP Funds for Crown Butte

        Senator Burns. One area that really caught everybody's
    attention is using CRP funds for Crown Butte. Anybody want to
    make a comment on that--where that is?
        Senator Bumpers. Yes; I would like to comment. [Laughter.]
        Senator Burns. I suspect you would.
        There is a lady out there that owns that land where you do
    not want her to mine. She would kind of like to have the same
    amount as the gold company got. She wants $65 million, too. Do
    you want to take that out of CRP?
        Senator Cochran. Direct your questions to the witnesses.
        Senator Burns. Oh. [Laughter.]
        Where is that? I have a hard time justifying that with my
    farmers. This was a decision that was made by this President.
    And I do not feel that that money should come from American
    agriculture or be taken out of agriculture to justify this
    action.
        Mr. Smith. Senator, I am not an expert on budget
    reconciliation and budget caps and things, but it is my
    understanding that the decision to use part of the CCC funding
    for CRP will in no way impact our ability to enroll the acreage
    that is authorized under the CRP program. We do have Dennis
    Kaplan here as an expert, and I would like to ask Dennis if he
    has a view on this.
        Senator Burns. He is about 10 degrees off plumb.
    [Laughter.]
        Mr. Kaplan. I am not an expert by any means. But all the
    proposal would do would be to delay the signup of 2 million
    acres for 1 year. Funds would not be taken out of CRP. Instead,
    the signup of 2 million acres would be postponed from 1997 into
    1998. No money is going to be taken out of farmers' pockets
    under the proposal.
        Senator Burns. OK. Well, I do not think any of it should be
    used. And I would be very disappointed if it was diverted from
    the CRP to buy out this mine to keep them from mining up there.
    I find this very interesting the way they have proposed to do
    this.

                       Announcement of Accepted CRP Acres

        Another thing in your CRP--of course, you all are not in
    the policy business, but on the CRP thing, do you think you can
    complete all of the applications for CRP by the middle of June
    or the end of June that are coming in now? Can the completions
    be made?
        Mr. Smith. Well, we were very pleased at the work of our
    county offices and the cooperation that we have had between the
    Natural Resources Conservation Service employees and the FSA
    employees at the local level, to get the producers in and get
    their bids into the system during this signup. And we feel
    pretty sure that we will also be able to go through the
    analysis within the allotted time period and announce the
    accepted acres before the middle of June.
        I would like to ask Randy to just give us an update as to
    what the agency foresees.
        Mr. Weber. Senator Burns, this week and last week, the
    counties along with NRCS are looking at the documents they
    received and are completing. We had some States in which they
    had a register after the 28th. So we have spent last week
    finalizing all of those documents.
        Everything seems to be on track right now, and we are
    hopeful that all of the records will be submitted to Washington
    at the end of next week. We then will begin the review process.
    At this point, we currently are having some problems in North
    Dakota and Minnesota because of the weather, and we may have
    some slight delays there. But we generally think we are going
    to be able to meet the deadline, and hope to have announcements
    out to farmers before June 15.
        Senator Burns. Mr. Weber, I do not have to tell you that
    this is really time sensitive.
        Mr. Weber. We fully understand that.
        Senator Burns. We could lose a crop.
        Mr. Weber. Yes.
        Senator Burns. We could completely lose a crop in the State
    of Montana and the northern tier, especially on our spring
    grains. And I think the way you are approaching this thing is
    going to, as far as the conservation acres, you are going to be
    disappointed in the fact that there is a lot of these people--
    the intention to take some of those marginal acres out of
    production, which I fully support, I think we are going to find
    just the opposite may happen, whenever we see the bids and the
    acres taken out and the way they can track or chop up a man's
    farm.
        I hope I am wrong. I just hope I am wrong. But you have
    probably heard that before, though.
        Mr. Weber. We have heard those concerns. But the
    preliminary data that we have gotten in is very good.
        Senator Burns. Well, I am very hopeful then. I am going to
    give you the benefit of the doubt.
        Mr. Weber. I am hopeful that your concerns are not going to
    be a reality.
        Senator Burns. Well, I hope you are right and I hope I am
    wrong. And I still stand corrected. But I am just afraid it may
    go the other way. It sure could awful easy. And I think we are
    time sensitive. And I will tell you, I will fight like a
    bearcat to take any CRP out of agriculture to pay a bunch of
    miners on that little deal. I will just fight like a bearcat. I
    ain't going to die in the ditch, but I will fight.
        And here is my statement. Thank you.

                               Prepared Statement

        Senator Cochran. Senator, we will make your statement part
    of the record in full. Thank you.
        [The statement follows:]

                      Prepared Statement of Senator Burns

        Thank you, Mr. Chairman. I appreciate you calling this
    hearing today.
        We have all, just in the past few days, returned from our
    States. If you had any kind of break like mine, I am sure you
    got an earful of the concerns which are facing our farmers in
    the field this year. Many of the concerns I heard about, were
    based on the actions of the Farm and Foreign Agriculture
    Services.
        The concerns which were shared with me in various locations
    around Montana, dealt with the way that the Department of
    Agriculture deals with them as producers. These concerns are
    based upon what the producer perceives as the future for his
    way of living. Our American agricultural producer is concerned
    about what they see as the trend in the Department of
    Agriculture to remove their local control over a variety of
    issues and circumstances.
        The chief among the questions asked of me, during the past
    two weeks, was why does the Department of Agriculture want to
    close their local Farm Service Agency office. Although I am not
    sure that any in Montana have been slated for closure, the word
    on the street is that there are offices that are going to
    close. With this in mind the local person begins to get the
    idea that it is their office. I must admit, I am sure that
    there are areas in this country where we have offices very
    close together and that there is a way that we could remove
    some duplication. However, in rural western America, I am not
    sure that this is what we need.
        When people have to drive hours as it is to reach their
    local USDA office, they cannot understand why they will be
    asked to drive even further in the future. It is their
    understanding that you are there to help them and to make their
    life in relation to farm programs easier.
        I have stated for all the years that I have been in this
    town that if we are going to reduce the Federal work force,
    that the first and most logical place to look is in Washington.
    We have an abundance of personnel downtown here who duplicate
    the jobs of others in the workplace at the Department of
    Agriculture.
        One of my own personal key concerns deals with the thought
    that the Department wants to make the local Farm Service agent
    a Federal employee, and take control of that person out of the
    local decisionmaking process. These people are, at this time,
    obligated to answer to the local committee and as such really
    respond to the needs of the local citizenry. If these people
    are made Federal employees, they lose this incentive to respond
    to the needs of the people in their local community. We are
    left with another level of bureaucracy in a time when we
    already have too much of it. The role of this government, in
    these times, should be to make government more localized for
    the agricultural producer.
        I have heard concerns also about the manner in which we are
    marketing our agricultural products in the foreign marketplace.
    The producer is concerned about the way in which our
    competitors are able to get the upper hand on us in so many
    deals. One thing that Congress heard loud and clear last year,
    was that get government out of our daily operation and we will
    be able to make a decent living on the farm. They also asked
    that we provide them with the tools to enable them to market
    their production in the world marketplace. Well, Congress did
    that, but the producer is still concerned about the way that
    their products are being marketed in the global economy. I
    share many of their concerns.
        Finally, we come to the issue of crop insurance. The
    producer in Montana is well aware of the perils that face them
    on a daily basis. Because of this understanding, they have been
    willing participants in the program. They have worked with my
    office and with the Federal Crop Insurance program to implement
    changes for the benefit of all producers in this country. They
    still see a need for additional changes, but overall they are
    pleased with the performance of the program.
        Mr. Chairman, I look forward to listening to the panel
    today, to hear about what they foresee of the coming year in
    their program areas. I hope that they will provide the
    committee with some explanation of the reasoning for the
    changes that they are instituting at both the national and
    local levels.
        Thank you, Mr. Chairman, I will have some questions later
    for the panel, and I may submit some afterward for written
    answers.

                                  Crown Butte

        Senator Cochran. Senator Bumpers.
        Senator Bumpers. Mr. Chairman, I wanted to ask Senator
    Burns, is the woman you refer to, is she, the landowner,
    expecting royalties?
        Senator Burns. Yes.
        Senator Bumpers. Do you know how much?
        Senator Burns. I do not know how much.
        Senator Bumpers. I would be willing to vote to give her the
    same amount of royalties you vote to give the United States
    from mining on Federal lands every year.
        Senator Burns. I would do that. We can make a deal.
        Senator Bumpers. That is zero.
        Senator Burns. I will take it. That is more than I have got
    now.
        Senator Bumpers. I am talking about the woman who owns the
    land, expecting royalties. Do you know what her contract
    provides for?
        Senator Burns. We will talk about this over coffee
    sometime.
        Senator Bumpers. You have always voted to keep the 1872
    mining law going, which allows the biggest mining companies in
    the world to mine 3 billion dollars' worth of gold a year and
    not pay the Federal Government a dime for it. So I thought we
    might treat this woman the same way.
        Senator Cochran. Senators, I am going to call the committee
    to order. [Laughter.]
        Senator Bumpers. Mr. Smith, how many Under Secretaries do
    we have down there that are acting? [Laughter.]
        Senator Burns. About one-half of them.
        Senator Bumpers. I believe there are three Acting Under
    Secretaries and one Acting Assistant Secretary.
        On the Conservation Reserve Program, Senator Burns has
    raised a concern that all of us share who come from
    agricultural States--about using Conservation Reserve money.
    Now, I want to get rid of Crown Butte Mining Co. very badly. I
    will do almost anything, short of mayhem, to keep them from
    mining that land outside Yellowstone. And my staff tells me
    that the effect of this would be to delay the use of CRP money
    by 1 year--$65 million for 1 year--is that correct?
        Mr. Kaplan. Yes, sir; that is correct.
        Senator Bumpers. You are the expert on this, Mr. Kaplan?
        Mr. Kaplan. Again, I am not an expert, but I am involved a
    little bit. [Laughter.]

                          Tentative CRP Signup Results

        Senator Bumpers. Let me put it another way. How many acres
    would we sign up under CRP this year that we would not be able
    to sign up if we give $65 million to get rid of Crown Butte?
        Mr. Kaplan. Our budget has proposed to sign up 19 million
    acres this year. So we would only sign up 17 million acres
    rather than the 19 million that is in the budget.
        Senator Bumpers. Of the 19 million you are prepared to sign
    up this year, 14.7 million of that is old acreage, is it not--
    contracts that are expiring? I think that is what you said in
    your testimony, Mr. Smith.
        Mr. Smith. The latest information, which became available
    after I submitted my statement, shows that about 18 million of
    the 26 million acres that have been offered are currently
    enrolled.
        Senator Bumpers. So the effect of this would be--I mean
    there is some damage to the farmers, who may be anticipating--
    you have got 20 million--you said in your testimony also that
    there are 20 million acres in applications right now to take up
    this 19 million that you propose to enroll, is that right, Mr.
    Kaplan? So you already have enough applications to fulfill the
    19 million?
        Mr. Kaplan. Yes, sir.
        Mr. Smith. We now have approximately 26 million
    applications as a result of the signup.
        Senator Bumpers. You do not mean applications?
        Mr. Smith. I am sorry?
        Senator Bumpers. You do not mean 26 million applications;
    you mean 26--is that what you are saying, 26 million
    applications?
        Mr. Smith. No, sir; we had 26 million acres bid during the
    signup period, of which about 18 million are acres that are
    currently in the CRP. And those contracts will be expiring
    September 30 of this year.
        Senator Bumpers. Maybe I should submit a question in
    writing to you, asking for detailed information on what the
    effect of taking $65 million--is it your information that we
    would use that $65 million this year to cut this deal with
    Crown Butte?
        Mr. Smith. My statement is that we do not believe that it
    will affect our ability ultimately to enroll the full 36.4
    million acres in the CRP over the duration of the program. I
    will point out that the 26 million acres that were bid were out
    of a pool of about 230 million eligible acres. There were about
    230 million acres that we felt were environmentally sensitive
    and eligible to be offered by producers into the CRP. So out of
    that pool we had 26 million acres offered.
        Now, as we go through and evaluate these offers, the
    acceptable offers may yield fewer than the 19 million acres
    that we had in the budget baseline. If the acceptable offers
    fall below the 17 million acres, there would be no impact from
    a decision to use part of the CRP funding for the mine.
        If the acceptable offers were to reach above the 17
    million, it would simply delay the enrollment of the additional
    acres for 1 year.
        Senator Bumpers. What is the average cost per acre on CRP
    per year?
        Mr. Weber. It currently runs about $50 an acre.
        Senator Bumpers. $50 an acre per year?
        Mr. Weber. Yes; that is what the annual rental payments
    are.
        Senator Bumpers. Now, Mr. Smith, you stated in your
    testimony that you have a new program of allowances on CRP,
    which you think will reduce your cost by $25 million. Do you
    remember saying that in your testimony? For example, haying and
    grazing; you allow haying and grazing.
        Mr. Smith. Yes, sir.
        Senator Bumpers. How will that reduce the cost of the
    program?
        Mr. Smith. Normally, when we implement haying and grazing,
    it is on the basis that the producers forfeit a portion or all
    of their CRP payment. So this would be a savings, to the extent
    that we permitted the haying and grazing.

                             Market Access Program

        Senator Bumpers. OK. You may or may not know that the old
    Market Promotion Program was one of my favorite programs. I
    tried to kill it for 6 years and have not gotten it done yet.
    Why did you change the name of the Market Promotion Program to
    the Market Access Program?
        Mr. Smith. Let me ask----
        Senator Bumpers. I want to ask everybody why you change the
    names of all these programs every 6 months. [Laughter.]
        Just about the time I get used to the acronyms, they are
    all changed again.
        Go ahead, Mr. Schumacher.
        Mr. Schumacher. Senator, thanks for your question.
        We have made quite a few changes in that program over the
    last 2 or 3 years--working with Congress. We basically
    eliminated most of the funding for the large branded companies.
    We are phasing them out. Next year there will be no money
    provided to any firm that does not meet the SPA guidelines.
        This year no money is provided directly, and we have phased
    down the indirect funding to about 4 percent of the total
    program. It is rather a different program, focusing on
    cooperatives, medium and small enterprises, to meet some of the
    vigorous competition that is coming from Europe and even the
    southern cone, in Chile and other areas.
        Senator Bumpers. Mr. Schumacher, let me give fair warning.
    I am not going to get into it now, because you really have not
    had enough experience under the new mandate of Congress on this
    program. Senator Bryan and I, last year--you are operating
    under the amendment that we got adopted last year--of making
    people put up--cost-share. Also, limiting it to small
    businesses and co-ops and things like that.
        In Mr. Smith's testimony, he stated that the program had
    been very effective. But I think I got the impression that it
    has been effective in dispersing the money. What I want to know
    is how effective is it in accomplishing the goals that we have
    set for spending the money? In other words, how is it
    enhancing--if it is in fact enhancing--our exports? And how is
    it helping small business people to export?
        Now, as I say, you have not had enough experience yet to
    really give a good answer to that question. But we oftentimes--
    these hearings are not only to review the budget, but they are
    oversight hearings to determine how well these programs are
    working so we can set the budget. But, next year, I would like
    to see some definitive numbers on what we are getting for our
    money. Are we actually increasing exports? And is this
    program--how is this program working? And is it effective, so
    far as increasing exports are concerned?

                           U.S. Agricultural Exports

        Which brings me to my next question. Why--you state that
    you expect exports to be down this year, from $59 billion--you
    think it is going to be down around 6 percent--is that about
    right?
        Mr. Schumacher. $56.5 billion is the current forecast.
        Senator Bumpers. From $59 billion?
        Mr. Schumacher. $59 billion.
        Senator Bumpers. And you state that one of the reasons for
    that is because of the increased yields in crops that some of
    the people that we export to are experiencing; is that correct?
        Mr. Schumacher. Many of our importing countries had very
    good crops--Argentina, Australia--have record crops on wheat.
    We had a light crop on wheat last year. Prices have come down.
        Senator Bumpers. Well, how much impact is the increased
    price of commodities having, if any?
        Mr. Schumacher. I do not understand the----
        Senator Bumpers. Well, let me--corn and wheat are both
    considerably higher now than they were, say, 1\1/2\ or 2 years
    ago. Is that a factor in reduced exports, or is it just the
    fact that these other people are doing better in their own
    agricultural programs?
        Mr. Schumacher. On the----
        Senator Bumpers. The importers.
        Mr. Schumacher. On the bulk, we have come down on wheat and
    corn in price and some volume. We had record corn exports--55
    to 56 million tons in 1994-95. But then the prices, of course,
    as you recall, were very, very high in many of the bulk
    commodities last year. Price had quite an effect reaching the
    $59.5 billion export level. We originally forecast a drop in
    1997 mainly on the bulk, with value-added moving very, very
    nicely--mainly meat exports.
        We have increased our projection to $56.5 billion because
    of the expected increase in value-added. And we are looking
    forward to seeing how we make out with the difficulties that
    Taiwan has had in its aftosa outbreak in Japan. We may see an
    additional increase as our pork industry gears up to meet the
    Japanese demand.
        So we think we are doing well--very well--in value-added.
    That is sort of like the Energizer Bunny. It just keeps going
    and going and going. But the bulk has been more volatile.
        There is one issue, though, I would like to bring to the
    committee's attention. And that is, as we look at our corn and
    soybean exports, one thing we have not focused on as much as I
    think we should is the amount of corn and beans that is going
    to meat. Let us assume we will do 48 million tons this year of
    corn. But we will probably do another 9 or 10 million tons in
    corn, through poultry, pork, and beef. And that was not there
    when we hit our record exports of corn, of 61 million tons, in
    1981.
        Senator Burns. Do you want to explain that again?
        Mr. Schumacher. Yes, sir; this year we are forecasting 48
    to 49 million metric tons of corn to be exported. In 1980-81,
    we hit our record of 61 million metric tons of corn that were
    exported from the United States. But back then, we were not
    exporting the amount of meat that we are exporting now.
        Senator Burns. Oh, OK.
        Mr. Schumacher. So if you look at the amount of meat that
    is going out, factor in the standard conversion ratios, we are
    hitting 9 or 10 million value-added tons that is staying here
    creating jobs and employment. This then effectively brings the
    total amount of corn fairly close to that record, and will
    exceed that if we continue the very strong meat exports that we
    have been seeing in the last few years. We expect those----

                            Outlook for Meat Exports

        Senator Bumpers. Meat exports are climbing?
        Mr. Schumacher. They are doing very well, with poultry
    particularly. Pork is going to do even better, with the
    opportunities in Japan. And the Meat Export Federation, in
    large part due to the money from the cooperators and the MAP
    Program, is going to continue to hit very, very nice markets in
    Japan, Korea, and many other countries as well, as they do
    very, very well in those markets.
        They really have done a wonderful job in meeting the food
    safety issues in Japan, and are very well positioned in
    promoting American meat as extremely safe, very high quality,
    with timely delivery, to the specifications the Japanese like
    to eat.

                            Food Aid to North Korea

        Senator Bumpers. Just two quick questions, Mr. Chairman.
        Are you prepared, if the President gives the order, to--are
    we prepared to ship commodities to North Korea? Is that
    something that is on the front burner with you all?
        Mr. Schumacher. The Commerce Department has permitted an
    order, up to 500,000 tons, to Cargill, if they were to have a
    commercial sale. Yesterday we heard that there was a barter
    arrangement for American wheat to North Korea.
        Senator Bumpers. With Cargill?
        Mr. Schumacher. With Cargill.
        Senator Bumpers. 500,000 tons?
        Mr. Schumacher. Well, 500,000 tons is the ceiling. We
    understand a modest amount was----
        Senator Bumpers. Up to 500. Well, I think the Commerce
    Department has only authorized up to 500,000, is that right?
        Mr. Schumacher. That is right.

                             Rice Exports to Japan

        Senator Bumpers. We shipped 125 million dollars' worth of
    rice to Japan last year. Do you know whether they consumed all
    of that or whether they used some of it to export to other
    countries?
        Mr. Schumacher. Under the sell/buy system, they did consume
    about 60 percent of that amount. The rest, we believe, went
    into their stocks. To our surprise, Senator, the Japanese have
    actually increased their production and particularly their
    stocks of rice.
        I have been there a number of times on this issue, giving
    speeches and talking with them, on the need to get more of our
    rice going directly to their consumers. And we are debating and
    having discussions with them on the amount of the reexport,
    through food aid, that they would have from our rice. So it is
    a lively discussion, and we are fully engaged in it.

                            State Mediation Program

        Senator Bumpers. Who is the mediation expert for the
    Mediation Program, Mr. Smith?
        Mr. Smith. Well, the Farm Service Agency has the primary
    responsibility within our mission area, so I would like to ask
    Randy to respond.
        Senator Bumpers. Mr. Weber, that program was started in
    1988, the Mediation Program, to mediate with farmers that were
    delinquent, and try to work out some kind of a payback. The IRS
    does this routinely. I thought it was a good program. We now
    have 22 States, including Arkansas, who have mediation grants.
    Let me ask you the question, How many dollars are involved,
    that are delinquent, that we are trying to mediate the
    collection of?
        Mr. Weber. We currently have $2.3 billion delinquent under
    direct loans and approximately $115 million delinquent under
    the Guaranteed Loan Program, but only a portion of these
    amounts have been mediated.
        Senator Bumpers. The Office of Inspector General has been
    critical of the program. That is what I am coming to. I
    personally think the concept is good and, so far as I know, the
    program has been working reasonably well. It has in my State,
    in any event.
        Mr. Weber. Yes; we very much support the program, and we
    believe it has been working well.
        Senator Bumpers. The average delinquent debt in my State,
    among those who are being mediated, is $400,000. That is a
    pretty high average.
        Mr. Weber. Yes, it is.
        Senator Bumpers. If we get one-half of that, it is a good
    program. But, in any event, we have 22 States doing these
    mediation programs, trying to collect these delinquent bills.
    And my question is, What was the Office of the Inspector
    General's specific complaints about the way the program is
    working? Or maybe it was about the way the money was being
    spent.
        Mr. Weber. The concern that the inspector general has had
    with regard to mediation is not being able to access some of
    the records they feel they need in order to ensure that the
    money is being spent properly. We have been cooperating with
    the inspector general, and I believe the States have been
    cooperating to the extent possible under their respective
    privacy laws. There are some concerns with regard to some
    Northern States, and those are being worked through.
        We are also in the process of changing our regulations to
    better define what mediation is and to clarify what
    requirements we intend the States to meet. We have reviewed the
    proposed changes with the inspector general, as well as the
    State mediation programs, and they generally feel that the new
    regulations will be acceptable. We are looking forward to
    putting those out very shortly, this year.
        We are also requesting a doubling of the mediation funds,
    because we believe this is a very good program.
        Senator Bumpers. Did you give me a figure a moment ago when
    I asked you how much money is delinquent that we are trying to
    mediate?
        Mr. Weber. I gave you a total of how much is delinquent.
        Senator Bumpers. Is that $3 billion?
        Mr. Weber. Yes; but I do not know how much of that is under
    mediation.
        Senator Bumpers. Well, $258 million of that is in my State.
    That is rather shocking.
        Mr. Chairman, I will not pursue this any further. Could I
    get a copy of the inspector general's report on that? Is that
    privileged in any way?
        Mr. Smith. I am not sure of the status of it, Senator, but
    we certainly will inquire when we get back to the Department
    and make it available if we can.
        Senator Bumpers. Thank you. Thank you, Mr. Chairman.
        [Clerk's note.--The Office of Inspector General's
    Evaluation Report is not printed in the hearing record but is
    available for review in the subcommittee's files.]
        Senator Cochran. Thank you, Senator.
        Senator Kohl.

                          Dairy Options Pilot Proposal

        Senator Kohl. Thank you, Mr. Chairman.
        I have a question for Mr. Ackerman, another question for
    Mr. Schumacher, and a question for Mr. Smith.
        Mr. Ackerman, when Secretary Glickman testified before this
    committee in February, we discussed what is being done to help
    dairy farmers better manage price risk, especially in light of
    the great volatility that we have seen in dairy prices over the
    last year. At that time, the Secretary indicated that he was
    reviewing a proposal for an options pilot program for dairy.
        The 1996 farm bill authorized the Secretary to establish
    pilot programs to determine whether commodity options can help
    producers deal with fluctuating prices. And it seems to me that
    dairy farmers need it the most.
        Now, why do I say it?
        Well, the dairy price support program will be phased out by
    the end of 1999, No. 1. Dairy farmers are not covered by crop
    insurance, No. 2. And unlike most commodities, they get no
    transition payments. Dairy farmers have very few ways to manage
    risk. Really, they are on their own. And that is why I think an
    options pilot program should be a high priority for USDA as you
    seek to address the dairy price problems.
        It is my understanding that the Coffee, Sugar, and Cocoa
    Exchange has submitted a dairy options pilot proposal. Mr.
    Ackerman, do you believe that this proposal has merit?
        Mr. Ackerman. Yes, Senator; we are looking at that
    proposal. We view it as a very promising proposal for many of
    the reasons that you mention. It is very consistent with the
    approach we are taking with other crops, with other areas of
    agriculture, in developing a safety net, where farmers rely
    more on private market mechanisms rather than Government
    support programs.
        Dairy, as you mention, is somewhat different in that it is
    not covered by crop insurance. The futures market mechanisms
    for dairy are relatively new. And dairy farmers do not have the
    background and experience in using these kinds of mechanisms
    for their price risk protection. A lot of work went into this
    proposal by the Coffee, Sugar, and Cocoa Exchange, with
    assistance from the dairy community. They reviewed the old
    options pilot program. They looked at a number of the problems
    that it had, and developed ways to overcome them in the new
    program.
        So we view it as a very promising proposal.
        Senator Kohl. Can you give me some indication that it is
    going to start some time in the very near future? Where is it
    in terms of your sense of priority, sense of urgency? How soon
    can we get this thing underway?
        Mr. Ackerman. I cannot give you a timetable at this point.
    We are looking at it very actively. There are a number of
    issues involved with it. There are a number of questions about
    the structure of the program that we would like to pursue with
    the dairy community including the nature of the subsidies
    involved in it. There are ways we think it can be made more
    cost effective, so that farmers can participate in it, with
    less dependence on Government subsidy.
        There is also a question of the funding source for it. The
    statute requires that the Secretary, to the maximum extent
    practicable, operate this program in a budget-neutral manner.
    We are examining what that means--how large of an obstacle that
    is and what potential budget sources would be available.
        Senator Kohl. All right. Well, as I understand it, the
    program, in its present pilot form, is intended to cost perhaps
    $10 million, which is a lot of money, but not a lot of money.
    And it could be modified somewhat if that becomes the big
    hangup. Also, moneys could be obtained from unexpended balances
    in other CCC programs. So, I guess what I am telling you is
    that I would like to hope that, beyond expressing your interest
    in the program, we in fact can get something off the ground.
    And I would like to have the opportunity to work with you to
    move that process, if you do not mind.
        Mr. Ackerman. Senator, I appreciate it. And it is something
    that we are looking at very actively. As I say, the budget-
    neutrality question is one that we are examining, to see what
    is practicable and what is doable. Once we work through that
    issue, we would like to focus on this and see what we can do.
        Senator Kohl. Thank you, Mr. Ackerman.

                           State Trading Enterprises

        Mr. Schumacher, you and I have had several conversations
    about our mutual concerns with respect to state trading
    enterprises, such as the New Zealand Dairy Board and the
    Canadian Wheat Board, and the hindrances that they pose to
    United States exports. I believe that monopoly export boards
    such as these have an unfair trading advantage over countries
    such as ours, where the standard rules of competition apply.
    But this is not just an export issue. We are now seeing
    concerns raised on the import side also, where countries like
    China have monopoly import agencies.
        I have appreciated the administration's support on this
    issue, and the strong statement made by Deputy Secretary
    Rominger at the WTO meeting in Singapore recently. Could you
    explain what the administration is doing currently with regard
    to cracking down on the activities of state trading
    enterprises? And could you tell us what, if anything, more the
    Congress can do to help on this matter?
        Mr. Schumacher. Thank you, and I appreciate that question.
        Chris Goldthwait and I are working very hard on this, along
    with Ambassador Barshefsky and her team. In Singapore, we had
    very lengthy discussions--Deputy Secretary Rominger--on the
    issue of state trading, both the exporting and importing. Under
    the Singapore agreement, we are working very hard right now in
    Geneva and in the OECD. Chris has just returned, last week,
    from those two places, and he can outline where we are
    specifically on the 1997 preparation for the 1999 round.
        We are taking it very seriously. It is also a very major
    part of our China WTO accession discussions between our STR and
    the Chinese officials, on the role of state trading. We have
    made a few breakthroughs, we believe, recently. We continue to
    make more as we go into that accession agreement.
        Mr. Goldthwait. Senator Kohl, we are taking this step by
    step. We are seeking, first of all, transparency as to the
    operation of the state trading enterprises. By that, we mean we
    want information about their sales activity, about their
    pricing. We are in the process, in the working group on state
    trading enterprises, in Geneva, of developing a questionnaire
    that all countries will agree to answer with respect to both
    their importing and their exporting state trading enterprises.
        We are making some progress, although, as of course you
    recognize, people like the New Zealanders, like the Canadians,
    are not wanting to be very forthcoming in the provision of
    information. And I think, based on the pressure we are applying
    in Geneva, the pressure we are applying in other negotiations
    that are ongoing on credit guarantees, in the OECD in Paris,
    and even the discussions that are ongoing in the Free Trade
    Area of the Americas initiative, I think we will get some
    degree of transparency.
        If we, over the next year or two, can arrive at a better
    picture of what these entities are actually doing, what their
    trade-distorting behavior is, then we will be in a position to
    formulate the negotiating demands that we will place in the
    next multilateral trade round, which, for agriculture, is due
    to begin, as Mr. Schumacher said, in 1999.
        So that is basically where we are. It is a front-burner
    issue.
        Senator Kohl. Thank you.
        Is there something more we can be doing up here on the
    Hill?
        Mr. Schumacher. Why do not we discuss this with our STR
    people, and I could come back and talk to you on that?
        Senator Kohl. All right.
        Mr. Schumacher. With someone from STR in the next week or
    so.
        Senator Kohl. I would like that.
        Mr. Schumacher. We would enjoy that, too.
        Senator Kohl. Thank you.

                  Timing of Advance Market Transition Payments

        And, finally, Mr. Smith, in order to receive advance
    transition payments under the new farm bill, farmers are being
    required to have all of their lease arrangements finalized and
    disclosed to USDA by January 15 of each year. Now, in warmer
    climates, that might be a reasonable date. But in States like
    Wisconsin, final decisions about which fields a farmer is going
    to lease are not made until the early spring.
        It seems to me that it makes more sense for farmers to be
    able to receive their advance payments whenever they meet the
    requirements, instead of having a strict deadline. It is my
    understanding that the administration may be sending a package
    of proposed farm bill technical corrections to Congress. Will
    you, Mr. Smith, be requesting a clarification in the farm bill
    language regarding that deadline of January 15?
        Mr. Smith. Senator, yes, we are. As you recall, in the farm
    bill, it specifically required that we make the AMTA payments
    on December 15 or January 15. And because of the difficulty the
    producers encounter in meeting that requirement, we are
    proposing legislation to give us more flexibility, so that we
    can accommodate the differences in farm planning across the
    country.
        Senator Kohl. So there will be a clarification, then?
        Mr. Smith. Yes, sir.
        Senator Kohl. Along the line of what I have suggested?
        Mr. Smith. Yes, sir; and I would like to ask Randy if he
    has any additional comments on how this could benefit the
    producers with regard to their leases.
        Mr. Weber. Certainly you raise a good question and a
    question that has been raised by many producers, because there
    are vast parts of the country in which leasing arrangements are
    not completed by January 15. And under current law, if the
    rental arrangement has not been made by January 15, then we
    cannot make an advance payment to a producer.
        The legislation that we are proposing would broaden the
    period of time in which producers could request advance
    payments--from November 1 through August 1. We think that would
    be broad enough to allow anyone to receive an advance payment
    and not have to wait until September 30 to receive the final
    AMTA payment.
        Senator Kohl. Well, that is good. I do appreciate that very
    much. Thank you.
        Thank you, Mr. Chairman.
        Senator Cochran. Thank you, Senator.

                              CCC Outlay Estimates

        Mr. Secretary, on page 8 of your prepared statement, at the
    top of the page, it says the 1998 budget projects that CCC
    outlays for commodity programs will increase from about $5
    billion in 1997 to $6.2 billion in 1998, and then decline
    again, to about $4 billion by 2002. What are the reasons for
    these projected increases in CCC outlays from 1997 to 1998?
        Mr. Smith. Mr. Chairman, I would like to ask either Dennis
    Kaplan or Randy to respond to that. Some of the fluctuation is
    due to repayment of advance deficiency payments, which impacted
    the CCC outlays. But I am not sure whether that accounts for
    all of it.
        Mr. Weber. Mr. Chairman, we are estimating that the total
    CCC outlays in fiscal year 1998 will be $9.9 billion, $2
    billion higher than fiscal year 1997. And that is principally
    because in fiscal year 1998 we will not receive repayments of
    advance deficiency payments, whereas in fiscal year 1997 we are
    receiving repayments of 1995-crop overpayments. CCC commodity
    assistance to producers, including loan programs, is expected
    to be about $1.1 billion higher. And then, in each of the
    succeeding years, it is going down simply because the AMTA
    payments are declining in those years.
        Senator Cochran. The what kind of payments?
        Mr. Weber. The AMTA payments.
        Senator Cochran. What is that for?
        Mr. Weber. Agricultural Market Transition Act payments.
        Senator Cochran. OK. These are the contracts that are
    entered into?
        Mr. Weber. Yes; these are the contracts that are entered
    into.
        Senator Cochran. By the producers with the Government?
        Mr. Weber. Yes; those payments decline, from a fiscal year
    1998 level of $5.8 billion, down to just slightly over $4
    billion in 2002.
        Senator Cochran. Are there assumptions made about the
    commodity prices and what effect that will have on CCC outlays?
    Or does that become irrelevant under this new program?
        Mr. Weber. Prices have much less effect under the 1996 act
    than they had under the previous farm bill, because then the
    payment rate was dependent upon whatever the market price was.
    Now, with the guaranteed payments, that is not a factor. It can
    still be a factor with regard to loan activity, however.
    Depending on where the market price is, we can have changes in
    loan activity.
        As a matter of fact, this year, despite the higher market
    prices, we still have a fairly high volume of loans, especially
    in wheat and corn. They are running higher than they did last
    year.
        Senator Cochran. Is that a surprise, or was that expected?
        Mr. Weber. Somewhat of a surprise, but it is not unusual in
    a declining market. The loan program tends to provide producers
    with a fairly favorable interest rate, and they find that this
    gives them some interim financing and allows them to more
    readily market their grain.
        Senator Cochran. We had always heard that our commodity
    programs--particularly the loan program--was a marketing tool.
    What, if anything, is going to be the practical consequence of
    the change that we have seen under the new farm program with
    respect to the marketability by producers of their commodities?
        Mr. Weber. Well, as you know, Mr. Chairman, the 1996 farm
    bill essentially freezes loan rates at the 1995 levels. In the
    case of rice, that is $6.50 per hundredweight for the entire
    duration of the farm bill. Wheat is $2.58. The only commodity
    for which there is some level of fluctuation is soybeans, and
    it has a very small range. The soybean loan rate for 1997 will
    be at its maximum of $5.26 per bushel.
        So, again, the loan rate in relation to the market prices
    will determine how much farmers use this program. But I tend to
    think, over the years, farmers do use it for interim financing.
    So even when prices are relatively high, we do have loan
    activity.
        Mr. Smith. Mr. Chairman, there is one observation I will
    make, as well, and that is with the price volatility that we
    are experiencing because of the flexibility in the planning by
    our producers domestically, and also because of the global
    demand for our agricultural commodities, our producers may
    experience more need to use the loan program as a tool, because
    they can see considerable price fluctuation between harvest
    time and the end of that loan period. And so, in order to take
    advantage of that fluctuation, you may find more producers
    parking their commodities temporarily in loans, at the low
    interest rate, to see what volatility will be introduced in the
    market in a given year.

                        Long-Range Export Market Outlook

        Senator Cochran. I know Mr. Schumacher talked about the
    record harvest in some of our competitor countries as having an
    impact on the level of our exports next year. What are the
    long-range expectations for export markets for American
    farmers?
        Mr. Schumacher. We have looked at the ERS baseline. And
    that shows that we are going to dip a little bit this year. But
    next year and the following years, it looks to be 5, 5.5
    percent growth in our value-added; 4, 4.5 percent in our bulk.
    So it looks quite steady, Senator, through the next 6 to 8
    years, to the year 2005.
        Particularly, I think, noteworthy is that we are
    projecting, under our ERS baseline, to reach $80 billion in
    exports by the year 2005, and that the trade surplus will in
    fact widen. Our export growth will move along about 5, 5.5
    percent overall. Our import growth, though, will be 3, 3.5
    percent. We are looking at a trade balance widening to $34 to
    $35 billion in exports over imports by the year 2005.

                         Trade Barriers to U.S. Exports

        Senator Cochran. Does any of this take into account efforts
    that our Government is making to break down barriers to our
    entry into markets or expansion of markets? I notice, for
    example, this annual report the U.S. Trade Representative
    filed, and which was reported in the Washington Post on April
    1, 1997, that talked about the fact that many markets around
    the world remain closed to U.S. exports and, to the extent our
    trade deficit is the result of these barriers, they must be
    reduced. That was a quote attributed to U.S. Trade
    Representative Charlene Barshefsky.
        The article says:

        In addition to 46 countries, the report of the most onerous
    trade barriers around the world also included four trading
    groups, including the 15-nation European Union. On the European
    Union, Barshefsky said she was, ``particularly concerned by the
    EU's pervasive discrimination against U.S. agriculture
    exports--including rice, wheat, wheat flour, bananas, beef,
    dairy products, and certain fruit.''

        On China, Barshefsky said that United States companies and
    farmers still faced numerous barriers trying to get into that
    huge market.
        Do these projections presume that we are going to continue
    to have these difficulties, or do they assume that we are going
    to break down these barriers? And, if so, how are we going to
    do it? And what, if anything, is the Department of Agriculture
    doing to help break down these barriers?
        Mr. Schumacher. Yes; we are, in fact, proposing some modest
    additional funding to continue to rigorously identify and then
    take action to break down these barriers. As you may be aware,
    we have quite a few problems right now with Europe. There is an
    EU veterinary team here trying to solve this difficult issue on
    our EU equivalency agreement. We are now at the WTO, awaiting
    an agreement, which we hope will be quite satisfactory to us,
    on discrimination against our beef going into Europe.
        We are gradually resolving the rice issue on the tariff
    rate quota. And we hope to make progress within the next few
    weeks on the rice cumulative recovery system. But, again, it is
    very difficult, it is very time consuming, and it is slogging-
    type work that we are undertaking very aggressively with our
    friends in the Special Trade Representative's Office.
        On China, as I mentioned earlier, we are in the midst of
    difficult negotiations on their WTO accession. So these
    barriers need to be further identified and action taken,
    especially on some of the smaller issues that do not appear all
    the time but that do have an impact. For example, we are
    working very closely in Mexico, of all things, with Christmas
    trees out of North Carolina and in the Northeast. A small
    issue, but an important issue for those growers in that area,
    as the TCK issue is in China to major wheatgrowers.
        So we are aggressive. We are tightening up our work. We are
    reallocating resources to deal with these market access
    barriers.
        On the specific question, does the ERS baseline projection
    take into account all of these? I will have to come back to you
    in writing, and talk to our friends in the Economic Research
    Service to see how much of this they have captured, and what
    they have implied in their assumptions on market access barrier
    reduction over the next 8 years.
        [The information follows:]

        The export growth projections in the ERS baseline are based
    on the current trading environment. They do not assume
    resolution of market barriers cited in the annual report of the
    U.S. Trade Representative, however, they do incorporate market
    access gained in the Uruguay Round and NAFTA agreements.
    Resolution of these numerous barriers would translate into
    greater global trade of agricultural products.

                  Effect of Possible Trade Sanctions on China

        Senator Cochran. In the case of China, there appears to be
    a huge market there. And there is a lot of controversy about
    the extent to which we ought to be trading with China. Some
    think that because they have exported missile technology and
    have done other things that we disapprove of that we ought to
    impose further sanctions. What effect, if any, would be the
    imposition of economic or trade sanctions against China with
    respect to our agriculture exports? And how will that affect
    agriculture producers here in America?
        Mr. Schumacher. Two responses, Senator. One, I think people
    forget, or they may not be looking at the data, that China, in
    fact, is a net food exporter. They export 11 to 12 billion
    dollars' worth of food and import $9 or $10 billion. Their
    grain imports have fallen from 19 million tons to our forecast
    this year of around 7 million tons. They are a strong
    competitor of the United States with value-added in the Pacific
    rim, and recently have been exporting a modest amount of corn.
        So our exports this year to China, excluding Hong Kong, are
    a little less than $2 billion, projected, primarily in the soy
    complex and in poultry. And cotton is very, very important.
    Cotton, soybean oil, and poultry, and some beef parts as well.
        Senator Cochran. So those are the commodities where we
    could see a dropoff in trade if sanctions were imposed; is that
    what you are saying?
        Mr. Schumacher. Those are the four major commodities that
    we are currently exporting to China.
        Senator Cochran. Do you know what the dollar value is for
    any of those?
        Mr. Schumacher. Chicken is about $550 million. Mostly the
    chicken feet, of all things. They eat a lot of chicken feet.
    Then the soy oil--I will have to get back to you precisely on
    that. Cotton--the other three I will get back to you on that,
    Senator.
        [The information follows:]

        Exports of U.S. soybeans, meal and oil to China totaled
    $230 million in 1996, but could easily top $1 billion this
    year. Last year cotton exports were $800 million, and hides and
    skins were $170 million. We also shipped $200 million plus in
    fruits, vegetables, and tree nuts.

        Senator Cochran. OK. The assumption, then, is that we are
    going to continue to work--and it would be good to know what
    the expectations are about the possibilities of success in
    breaking down these barriers and what that would mean in terms
    of increased exports. I think the reason it is important, from
    an Appropriations Committee point of view, is the impact that
    that might have on CCC outlays or the prices of commodities to
    producers.
        The overall effect of increasing exports ought to be to
    increase the opportunity for profit in production agriculture,
    and less and less need for farm operating loans and maybe some
    of these other programs that we use to support production
    agriculture. In the risk management area, that can have an
    impact.

                         Further Crop Insurance Reform

        Mr. Ackerman, let me ask you this. There have been
    suggestions that we expand the programs for risk management. As
    long as I have been in the Senate, we have always heard about
    the difficulties of the Crop Insurance Program, the
    unpredictability of disaster assistance when natural disasters
    occur, where there is clear evidence that crop insurance is not
    adequate to protect farmers against huge losses that are often
    sustained. What is the administration's view toward further
    reforms in this area?
        We heard your comments earlier, but I continue to hear from
    other Senators who think that this is a major problem and that
    Congress and the administration need to get together and work
    out some new program for protecting against the harmful
    consequences of natural disasters for production agriculture.
        Mr. Ackerman. Senator, I appreciate the question.
        Crop insurance has changed fundamentally in the last 3
    years. We have gone from a program that covered about 30
    percent of covered crops to one that covers almost 80 percent.
    We have gone from a program that was based on average yields to
    one that is based on individual yields. We now have a program
    that, up until the early nineties, was a perpetual money loser
    as far as underwriting fundamentals were concerned to a program
    that now has an actuarial loss ratio the past 3 years within
    our target.
        We also have a program that has expanded into new crops,
    into new pilot areas, and into new concepts like revenue
    insurance and the program that Senator Kohl was mentioning
    earlier, the options pilot program. So, I think, when you look
    at crop insurance today, it is really a very different program,
    a very different organization than what existed 3 or 4 years
    ago. The changes of the last few years, I think at this point,
    are just starting to kick in.

                         FAS Market Barrier Initiative

        Senator Cochran. In connection with the question I was
    asking about barriers to trade, I notice there is a request in
    the budget for an increase of $500,000 for a market barrier
    identification initiative. Why is this needed, if we have the
    USTR filing this annual report that I just cited and which we
    have available to us? Why do we have a proposal for a
    Department of Agriculture initiative identifying market
    barriers as well?
        Mr. Schumacher. The Special Trade Representative's Office
    is identifying quite a few of the general barriers, as I
    mentioned earlier. There are a lot of specific barriers that
    affect a number of areas in commodities in this country. I
    mentioned the issue of Christmas trees, which is not a huge
    export, but a very important one for North Carolina,
    Pennsylvania, and New York.
        We not only want to identify these specific barriers, we
    also want to start taking identifiable actions to address these
    barriers in detail through our trade policy work as we begin to
    formulate our programs at the WTO. We would like to get a lot
    of these resolved prior to getting into negotiations at the
    WTO. Those that we cannot resolve, we are going to take them up
    as we move toward the 1999 rounds.

                       Changes in the Cooperator Program

        Senator Cochran. I notice there are some changes in the
    Cooperator Program. You are suggesting an increase in the
    contribution from the private companies or groups who
    participate in that program. What is the practical consequence
    of that? Are they going to quit participating or are they going
    to come up with the extra money? What is your expectation on
    that?
        Mr. Schumacher. Well, Mr. Chairman, we are working quite
    closely with the cooperators, as the intent of Congress and the
    report language last year was to make it a bit more
    competitive. And we are looking at competitive criteria, which
    we are keen to discuss with your staff--the criteria would have
    a number of aspects to it, one, on contributions and, two, on
    measuring performance on exports.
        And I think that very few cooperators would have problems
    with this. In our discussions--we have had three meetings with
    them. It is basically adjusting the Cooperator Program to
    broadly similar competitive criteria that we have with the
    Market Access Program, as we made reforms in that program as
    well, putting them on a competitive basis.
        Senator Cochran. Well, our committee report, or at least
    the statement of managers accompanying the conference report
    for this fiscal year suggested that the Department develop
    procedures and criteria for a competitive bidding process for
    awarding these funds. Has anything been done in response to
    that suggestion?
        Mr. Schumacher. We are right in the midst of our
    discussions with our staff. And we want to also consult with
    both Houses of Congress before we implement agreements with the
    cooperators and put this into practice. We have work to do yet,
    sir, on introducing the competitor measures, and we do not want
    to do that before we have adequate consultation with the
    cooperators and with both Houses of Congress.

                           Public Law 480 Rescission

        Senator Cochran. There is a proposed rescission before the
    committee to remove $50 million in funding for the Public Law
    480 title I program--that we rescind $3.5 million of ocean
    freight differential funds and $46.5 million in subsidy budget
    authority in the Direct Credit Program. What is the reason for
    the rescission request?
        Mr. Schumacher. I would like Mr. Goldthwait, with your
    permission, to answer that question, sir.
        Mr. Goldthwait. Senator, this is one of those cases where
    we have had to make some very, very difficult decisions about
    conflicting budget demands and tradeoffs. The reason for the
    rescission that we have proposed is because of additional
    funding needs with respect to domestic feeding programs that
    are managed elsewhere in the Department.
        Senator Cochran. Is that the WIC Program particularly?
        Mr. Goldthwait. Yes, indeed.
        Senator Cochran. Let me ask you this. The domestic feeding
    programs that are funded in this budget, including the Food
    Stamp Program, seem to continue to grow in spite of reduced
    rates of unemployment, in spite of economic conditions that
    would indicate greater job opportunities, better access to
    health care, a lot of changes in our society that seem to make
    access to a higher standard of living within reach of more and
    more Americans. But yet the cost of these subsidy programs seem
    to continue to go up.
        I know that is not within the jurisdiction of this
    committee, but it seems to me that we ought to be doing the
    kind of job that manages those programs so they do reach those
    who need them. We have seen a lot of reforms made and a lot of
    changes made in the legislation. But now the administration is
    coming in with assumptions that will expand those programs even
    further in this budget year and requesting this rescission of
    funds for the Public Law 480 title I program.
        The budget indicates that commodity shipments would be
    reduced by approximately 200,000 metric tons as a result of
    this proposed rescission. But it also indicates that
    allocations of title I commodity assistance that have already
    been announced would not be affected by the rescission, because
    the reduction in program funding will be taken from a reserve
    of unallocated funds and from unobligated funds carried over
    from 1996.
        What is the total of unallocated funds and unobligated
    funds carried over from 1996?
        Mr. Goldthwait. The $50 million rescission breaks down
    roughly 50-50 between the current fiscal year reserve and the
    carryover. The carryover is actually $22 or $23 million, and
    the unallocated reserve is about $26 or $27 million. So it is
    very close to a 50-50 split there.
        As you may know, our programming practice at the beginning
    of each fiscal year is to allocate the majority of the Public
    Law 480 title I funds, but to maintain a small reserve for
    needs that cannot be foreseen at the very beginning of the
    fiscal year, but which develop in the course of the fiscal
    year. And, in effect, the proposed rescission draws on those
    funds, plus this small carryover.

                   Public Law 480 Title I Carryover Balances

        Senator Cochran. Why were Public Law 480 title I funds
    carried over from 1996? And since they were, why were they not
    included in the initial funding allocation for fiscal year
    1997?
        Mr. Goldthwait. In many years there is a small funding
    carryover. This arises for a couple of reasons. It arises when
    we have a planned program that falls through very late in the
    fiscal year, when, for one reason or another, a foreign country
    cannot complete the negotiations with us and actually sign its
    program in time to ship the commodity in a timely basis.
        It also occurs because of shifts in commodity prices and
    because of shifts in freight costs--the estimated value or the
    estimated cost associated with a particular country program is
    in fact different from the actual cost. And, indeed, the
    carryover was a little larger this year than usual. We did see
    a situation where, at the end of the fiscal year, we were
    beginning to see a reduction in commodity prices for some of
    the commodities that were heavily programmed--wheat, for
    example.
        So that is the origin of the carryover. And it was in fact
    a little larger going into fiscal year 1997 than we would have
    expected under normal circumstances.
        Senator Cochran. But it is just confusing to me that we can
    see a rescission being requested, and then the budget documents
    explain that this really does not matter. We have got carryover
    funds, and we have got unobligated funds. Why does it matter?
    Why do we just not appropriate what you are asking for next
    year?
        Mr. Goldthwait. It is not a case of not mattering. I think
    the point we were trying to get across in the budgetary
    description was that we will not find it necessary to, if you
    will, renege on any existing fiscal year 1997 commitments to
    countries that we have already made. In other words, there is
    just enough unobligated funding that is available to cover this
    rescission without having to go to any country to whom we have
    already offered a fiscal year 1997 program and saying to that
    country we are not going to be able to follow through with that
    commitment.
        Senator Cochran. But if there are any additional requests
    made, they cannot be met?
        Mr. Goldthwait. That is correct, unless some other existing
    fiscal year 1997 program fails to materialize.
        Senator Cochran. You do have the authority within the
    Public Law 480 program though to transfer funds within and
    between titles, do you not?
        Mr. Goldthwait. That is correct, within limits.
        Senator Cochran. Well, has the administration concluded
    that if unobligated and carryover funds are not required for
    title I, they also will not be required to supplement funding
    for titles II or III of the program this year?
        Mr. Goldthwait. That is our best estimate as of the current
    time.
        Senator Cochran. That is enough to give you a headache, is
    it not, trying to figure that out?

                           Cochran Fellowship Program

        I was glad to hear that you have requested $2.4 million for
    the fellowship program, which the Department, several years
    ago, described as the Cochran Fellowship Program. I just came
    back, incidentally, from a trip with Senator Stevens, chairman
    of our full Committee on Appropriations, to the Russian far
    east and to South and North Korea. I had an opportunity to meet
    with some participants in this program on that trip.
        And from what I hear from those who work in the consulates
    and the embassies around the world where there are eligible
    countries, it seems that this is a program that provides a
    unique opportunity for participants to learn more about our
    free market and economic systems. Through this program,
    developing countries and emerging democracies can learn from us
    and develop closer ties that result in better trade
    opportunities for U.S. exporters and economic development
    opportunities for the participating countries.
        I wonder the extent to which we are able to get the
    appropriated funds for this program supplemented by the
    Emerging Markets Program and by AID programs. I know that we
    have had moneys allocated from these other programs. Do we
    expect to have any money allocated in the next budget year to
    supplement these funds?
        Mr. Schumacher. Yes; because the program has been, as you
    mentioned, very successful. We are looking at $1.8 million,
    maybe $2 million, from USAID and from the Emerging Markets
    Program about $1 million. So with the $2.4 million of
    appropriated funding, we are looking at nearly $5.5 million, to
    sustain this very successful, innovative program.
        Senator Cochran. That is good to hear. One person I met,
    had come back from California to Vladivostok--that is an open
    city now, for the first time in many, many years, as everyone
    knows--where they are beginning to develop an indigenous
    agriculture productivity and food marketing capability. And
    there is a lot of excitement about the close relationship that
    exists between our west coast and the Russian east coast.
        The State of Washington, for example, is having great
    success in marketing apples in that part of the world now. We
    also are seeing other new relationships developing. Even on the
    Island of Sakhalin, I ran into an Embassy person who was very
    excited about the fact that she had been involved in recruiting
    participants for the Cochran Fellowship Program. She told me
    what a success that had been. So I am very pleased to have your
    report.
        I am submitting for the record some questions for further
    information about participant levels and examples of what the
    program has actually accomplished to date. We are hopeful we
    can get the committee to continue to support it.
        Mr. Smith. Senator.
        Senator Cochran. Yes.

                       Cochran Fellows From South Africa

        Mr. Smith. I had the pleasure of working with the program,
    primarily with the Gore and Baake binational with South Africa.
    And my experience with the Cochran fellows that have come to
    the United States from South Africa has been very rewarding.
        For example, one young man who operated a small dairy in
    South Africa came to the United States on a Cochran fellowship
    to learn how to expand his production through improving the
    feeding of his dairy herd. But on the way back, he told me he
    learned something else, and that was to focus on developing co-
    ops in his community. So he came for personal reasons and he
    left with a perspective on how to help his entire community.
    And he went back with the intent of developing a marketing co-
    op to help market not only his milk from his dairy herd, but
    his neighbors' as well.
        Senator Cochran. That is very interesting. I have had some
    other experiences in the former Eastern bloc countries, such as
    Poland, where they now have an alumni group which meets every
    month. They get together and talk about their experiences in
    the United States and what they learned. They stay together. It
    tends to generate a lot of camaraderie. But the benefits are
    that they have learned new strategies for themselves. They have
    developed a new sense of confidence in being able to succeed in
    a free market economy. It was quite something to see--the level
    of excitement and optimism that was generated by these
    participants. It seems contagious and that was very gratifying.

           Fiscal Year 1998 Export Enhancement Program Budget Request

        There are a number of other questions on various subjects
    that I have here that I am going to submit for the record. I do
    want to ask about the Export Enhancement Program though. The
    budget proposes $500 million, which is the maximum authorized
    level of funding, as you point out. This year we have a $100
    million limitation on the program that was included in the
    appropriations act. The reason for that was that our
    discussions with those who were interested in the program
    indicated that they did not think that there would be a demand
    for any more than $100 million this year.
        Why do you believe that there will be a demand for more
    than $100 million in fiscal year 1998?
        Mr. Goldthwait. Senator, we believe very strongly that we
    need the Export Enhancement Program, as Secretary Glickman has
    said, as a potential tool, in the event that we face aggressive
    subsidization by our competitors, particularly the European
    Union, although we could also face price discounting by some of
    the state trading enterprises that Senator Kohl alluded to
    earlier.
        The fact of the matter is that under their GATT allowance,
    the European Union will have, in terms of subsidy
    authorization, close to or perhaps even a little more than $10
    billion to promote their commodities through price discounting.
    We believe that we very much need to have the $500 million
    allocation to fall back on in the event that we face
    competitive conditions that are considerably more difficult
    than what we have been fortunate to face in the current year.
        As Mr. Schumacher noted earlier, this year we had somewhat
    smaller availabilities for export of wheat and some of the
    other commodities for which we traditionally use the Export
    Enhancement Program. We simply do not know, until we have a
    better idea of what Northern Hemisphere harvests are going to
    be, what we might be called upon to do in the new marketing
    year and the new fiscal year.

                         EU Trade-Distorting Subsidies

        Senator Cochran. It seems that we entered the Uruguay Round
    hoping to be able to negotiate an end to trade-distorting
    subsidies. Now we hear more about what the Europeans are doing
    to increase their allocation of funding to enhance their
    commodities in overseas marketplaces which is to our
    disadvantage. If this is not a trade-distorting subsidy by the
    EU, what is it?
        Mr. Goldthwait. It certainly is a trade-distorting subsidy.
    And in fact, in the Uruguay Round we did achieve limits on
    that. And over the life of the phase-in period, the EU will be
    required to reduce their expenditures on export subsidies by a
    total of 36 percent. The fact that here, midway through the
    process, they still have the ability, if you will, to use up to
    $10 billion simply says a lot about their starting point.
        Senator Cochran. Well, it seems that we have got our work
    cut out for us to protect our interests in this global market.
    And I am in favor of a robust and aggressive marketing program,
    where our Government works in a cooperative way with our
    private sector to ensure that we do not get mistreated by trade
    barriers being erected or unfair practices of any kind.
        So I do not know what the wishes of our committee will be
    with this particular request, but I am inclined to support what
    you are asking. I hope that we have the funds allocated to our
    committee that will permit us to make this available if needed.

                      Importance of Market Access Program

        The Market Access Program has already been discussed and
    mentioned. I am hopeful that we can continue the current level
    for that, the fully authorized permanent funding level of $90
    million which is included in the budget. Does this program
    continue to be important for us in order to promote and expand
    agricultural exports from the United States?
        Mr. Schumacher. Senator, this program is vital. As
    mentioned earlier, our value-added programs are moving forward.
    Our cooperators are being much more innovative in the wheat
    area and in corn and in soybeans. Soybeans have been terrific
    in using this money to get access in new markets like China for
    soybean oil. I mentioned earlier the Meat Export Federation did
    a marvelous job as did the cotton folks in South America on
    value-added cotton. I could go on for much more time than I
    think is appropriate here.
        I have been at this now nearly 3 years, and I am just
    excited about what is going on among our exporters, the
    cooperators, and participants in the Market Access Program. I
    can assure you the Europeans, the Chileans, the Argentineans,
    and even the Uruguayans, who were in yesterday, are very
    admiring of this program. The Minister of Agriculture
    specifically mentioned the extraordinary performance of the
    Meat Export Federation, and how they would love to duplicate
    that.
        We have market penetration because of the cumulative
    success of this program. I am going to work very, very hard to
    make that a continuing success, with our private sector.
        Senator Cochran. I appreciate hearing that good report. It
    would be helpful if we could have for the record a description
    of the program requirements for participants now. We know there
    have been legislative changes made. Senator Bumpers referred to
    them. We are familiar with them. We argued on the floor of the
    Senate, in debate, over amendments that were proposed,
    maintaining that this program could be improved. It would be
    good to have a summary of the changes that have been made and
    how they are working, so we will become better able to argue
    against any amendments that might be designed to delete the
    funds provided for this program when we get to the floor.
        I assume that Senator Bumpers is not going to give up.
    Maybe the program has not been improved enough. But whatever
    the facts are, we need to know them so we can describe what is
    going on with this program to the Senate when the bill gets to
    the floor. That would be very helpful to us.
        Mr. Schumacher. We will do that, sir.
        [The information follows:]

        Consistent with the Administration's commitment to streamline
    government programs, new MAP regulations were published on February 1,
    1995, that increased flexibility and simplified program requirements
    for the participants. The MAP regulations reflect public comments and
    changes made by the Omnibus Budget Reconciliation Act of 1993 and most
    recently, the Federal Agriculture Improvement and Reform Act of 1996.
    Specific changes in the MAP include:
      --eliminated the requirement for an applicant to show that the
            represented U.S. agricultural commodity faces an unfair trade
            practice in an overseas market;
      --give priority assistance in the allocation of brand promotion
            funding to small businesses and cooperatives;
      --established procedures for appealing compliance findings;
      --simplified contracting standards and procedures;
      --extended the time period during which expense claims may be
            submitted for reimbursement; and
      --liberalized U.S. origin identification requirements to permit the
            use of generally recognized states or regions within the U.S.
        In addition, the Department has administratively implemented the
    following improvements to streamline and expedite program management:
      --simplified reporting requirements for end-of-year contributions;
      --delegated to FAS Commodity Division Directors the authority to
            approve routine administrative issues;
      --eliminated the requirement for formal amendments to effect changes
            in approved activity plans other than those that are deemed
            ``significant";
      --delegated authority to the State Regional Trade Groups to approve
            brand company plans valued at no more than $50,000, thus
            expediting the approvals for primarily small companies
            participating in the MAP;
      --eliminated the need for all brand companies, 80 percent of which
            are classified as ``small,'' to track and report expenditures
            by multiple cost categories for brand activities.
        The Department also undertook an extensive analysis of the
    methodology and criteria used to evaluate MAP applications and allocate
    funding among participants. Based on public comments received in
    response to a Federal Register notice on proposed changes and the
    results of the analysis, the Department adopted and published revised
    evaluation criteria that included:
      --export performance criteria that is now based on three years of
            historic export data, rather that one year;
      --industry contribution levels that now include actual past
            contributions for prior year participants, not only the level
            projected for the coming year; and
      --the competitive review process was modified to compare the relative
            performance of each applicant based on four weighted criteria:
            contributions (40 percent), export performance (30 percent),
            export goals (15 percent), and accuracy of past projected
            export goals (15 percent).
        Background: In response to GAO and OMB, the regulations have also
    been tightened with regard to funding additionality and evaluation.
    Participants must certify and demonstrate that nay funds received will
    supplement, but not supplant, any private party contributions to the
    program. For evaluation, we added reference to the Government
    Performance and Results Act (GPRA) in the activity plan and evaluation
    sections. The critical point is that language now appears in the rule
    which states that ``a participant that can demonstrate additional sales
    compared to a representative base period, * * * will have met the
    overall objective of the GPRA and the need for evaluation.''
        The streamlining of the MAP has been well received, and the
    Department continues to make program modifications to further
    streamline operations and ease administrative requirements for program
    applicants and participants.

                      Credit Rules for Brazilian Importers

        Senator Cochran. You mentioned South America. I notice that
    there are some concerns about the Brazilian Government's recent
    decision to establish some different credit rules for companies
    importing agricultural commodities, compared to those who are
    purchasing commodities from domestic sources. I understand that
    exports of U.S. cotton and wheat could be particularly
    disadvantaged.
        Are you aware of this new development? Can you tell us
    about it and what we may be doing to persuade the Brazilian
    Government to treat exports in a fair way?
        Mr. Goldthwait. The Brazilians basically are setting some
    rules for the import of agricultural products that benefit from
    credit arrangements. In effect, what they are doing is applying
    limitations on the use of short-term credit, up to 1 year. In
    effect, we have been very successfully using our Credit
    Guarantee Program, the GSM-102 program, in Brazil. You have
    mentioned its success in supplying cotton. We have sold about
    12 million dollars' worth of cotton so far this fiscal year
    under the program. We have sold a total of about 20 million
    dollars' worth of agricultural commodities to Brazil under the
    program so far this fiscal year.
        We are in the process of adjusting the credit term that we
    use for our program to Brazil so that it will be a little
    longer and it will conform to the requirements of the Brazilian
    arrangements. And we believe that the credit program will
    continue to be a useful tool, with this small adjustment. And
    we intend to put out a press release that makes that adjustment
    formal within the next 2 or 3 days.

                         Boll Weevil Eradication Loans

        Senator Cochran. Speaking of cotton, we have the boll
    weevil eradication loans that were funded in the fiscal year
    1997 appropriations act. We understand that FSA has not yet
    released the money because the regulations have not been
    promulgated. It is necessary that these funds be made available
    by May 15, so that the planned programs can be continued and
    the program expansion that was contemplated can be initiated.
        APHIS tells us that they have supplied the Farm Service
    Agency with all the information the agency has requested. What
    is the problem here about getting these funds out? Does anybody
    know the answer to that?
        Mr. Weber. Mr. Chairman, we are about ready to go forward
    with publishing the rules. We are hopeful that they will be out
    in May and that we can start the program in May and have all of
    the funds obligated by the end of the fiscal year.
        Senator Cochran. Is there any timetable for making the loan
    program available to qualified users?
        Mr. Weber. We are hopeful that we can start making those
    loans available sometime in May.
        Senator Cochran. Today?
        Mr. Weber. No; sometime in May.
        Senator Cochran. Oh. [Laughter.]
        Mr. Weber. Sorry. I would like to have made it today.
        Senator Cochran. Well, I had heard that there was possibly
    a meeting today with the Secretary on this subject, or some
    subject relating to the cotton industry and the boll weevil
    program.
        Mr. Smith. Senator, I have a meeting scheduled this
    afternoon with the National Cotton Council to bring them up to
    speed as to where we are in that process of clearing the
    regulations. There are a couple of concerns that, even after we
    get our regulations out, may affect our implementing the
    program. I understand that we have a lawsuit in Texas that may
    encumber us in our ability to make a loan to that association
    until that lawsuit is settled.
        But we hope to be able to discuss those things with the
    participants. They should not hold up our regulations; they may
    just impact our ability to implement the regulations for those
    associations.
        Senator Cochran. Well, we appreciate your working with the
    industry to deal with this problem. It seems that we have a
    program now that is moving along. And if we keep it moving and
    keep the Federal agencies that have a role in it on target with
    the contributions that are being made by individual producers,
    in a concerted effort, we may be able to eradicate the boll
    weevil and increase the proficiency and productivity of our
    cotton farms across the country. That will mean a lot to our
    economy, particularly in the cotton-producing regions.
        So we appreciate your assistance and your understanding of
    the importance of these issues, and the promulgation of the
    regulations and the making available of the $34 million in loan
    authority that we have authorized for this program.

                              Submitted Questions

        Well, you all have been very patient with the questions of
    the members of our committee and with me this morning. We
    appreciate your cooperation. I have a number of questions on
    these and other subjects to submit so we can have a complete
    record that will help us explain and answer questions that we
    might have to answer when this bill comes before our committee
    and then is on the floor of the Senate for consideration.
        [The following questions were not asked at the hearing, but
    were submitted to the Department for response subsequent to the
    hearing:]
                              Farm Service Agency
                     Questions Submitted by Senator Cochran
                              farm ownership loans
        Question. How has the Farm Service Agency tried to increase
    participation in the guaranteed loan area?
        Answer. FSA has tried to increase participation by making the
    guaranteed loan program more accessible and easier to understand for
    both lenders and loan applicants. Many improvements have been made over
    the past several years. For example, we implemented a Certified Lender
    Program to provide our most experienced lenders with a streamlined
    application and quicker turnaround on guarantee requests. Also, we
    consolidated over 14 separate forms and certifications into a new
    application. In addition, we have recently issued a new Lender Manual
    to assist lenders in making and servicing guaranteed loans. This summer
    we will continue to gather suggestions for improvements and implement
    program enhancements by meeting with lenders and other parties
    interested in our program. We intend to address concerns over
    application processing time, consistency between Agency field offices,
    and application requirements for small loans. These suggestions will be
    considered as the Agency modifies its Guaranteed Program regulations.
        Question. The fiscal year 1998 budget request proposes a $4 million
    increase for emergency loans. Farmers use these low-interest loans to
    help recover from natural disasters. How did the Agency derive this
    program level for fiscal year 1998?
        Answer. The fiscal year 1998 program level was basically derived as
    an extension of the loan level amount originally requested, and
    subsequently appropriated, for the fiscal year 1997 Budget. When the
    1998 Budget was being formulated in the summer of 1996, the Department
    approved an extension for 1998 of the then-pending 1997 Budget request
    of $25 million. However, after enactment of the 1997 USDA
    Appropriations Act, the appropriated subsidy of $6,365,000 resulted in
    a supportable program level of only $20,931,000.
        Under credit reform procedures, more recent data on interest rates
    can affect actual funding levels that are available on October 1.
    Because the supportable level decreased for 1997, the 1998 Budget
    appears to be an increase of $4 million, but the original intent was to
    have $25 million available in each year.
        Question. The President's budget requests funds to support an
    increase of $766,000 in Indian tribe land acquisition loans. The
    explanatory notes show the level requested will provide 2 direct loans
    in fiscal year 1998. Who has applied for these loans?
        Answer. With the availability of funds in fiscal year 1998 for this
    program, field staffs will be able to promote and receive applications
    from Indian tribes interested in purchasing land for use by its
    members. Based upon historical interest in this program, FSA
    anticipates receiving, at a minimum, two applications for assistance.
        Question. The fiscal year 1998 budget requests an increase of $11
    million for credit sales of acquired property. The budget indicates
    that this program will be targeted to new and beginning farmers. How
    will new and beginning farmers be targeted for assistance by this
    program?
        Answer. The 1996 Farm Bill requires FSA inventory farms to be
    advertised for sale to a beginning farmer or rancher no later than 15
    days after acquisition. If no acceptable offer is received from a
    qualified beginning farmer or rancher within 75 days of acquisition,
    the property will be offered at a public sale to the highest bidder.
    FSA offers financing through the credit sales program to beginning
    farmers to purchase these properties during the 75 days in which the
    properties are advertised for sale only to beginning farmers.
                             state mediation grants
        Question. The President's fiscal year 1998 budget request is $4
    million for State Mediation Grants, an increase of $2 million from
    fiscal year 1997. The budget indicates that this request reflects the
    anticipated level of grants needed for 25 States. Currently, 22
    certified States are participating in the program. Have more than three
    States applied to participate in the program? If so, which States? And
    which 3 are proposed to receive assistance in fiscal year 1998?
        Answer. There has been considerable interest by States in
    participating in USDA's mediation program. In fact, the fiscal year
    1997 funding level of $2 million was insufficient to fund all requests
    by the 24 participating States. Florida and Missouri received
    certification of their programs in fiscal year 1997, but lack of
    Federal funding has forced these States to fund the programs
    themselves, limiting their scope. Several States have scaled back their
    programs or delayed planned expansions as a result of limited Federal
    funding. USDA anticipates that Idaho and Pennsylvania will submit
    certification applications soon, raising the total number of
    participating States to 26.
        Question. The USDA Inspector General released a report on the
    agricultural mediation program administered by the FSA. The Inspector
    General (IG) identified about ``$2.1 million in excessive or
    questionable reimbursements of operating costs for activities that did
    not involve mediation.'' The IG recommended that monitoring was needed
    in order to disburse the appropriations properly. How has FSA
    strengthened its monitoring efforts and addressed the need to institute
    cost requirements?
        Answer. FSA has reviewed the IG findings and accepts its
    recommendations on providing closer scrutiny of State programs' grant
    applications and has implemented many of these recommendations for
    fiscal year 1997 grants. FSA and State mediation officials are
    interested in jointly developing a common reporting format and uniform
    performance indicators and measures to assist in evaluating State
    programs' effectiveness. The Agency expects to publish revised
    mediation regulations this year to provide uniformity to the grant
    application and evaluation process.
        The Agency believes IG relied on the Federal administrative dispute
    resolution statute for a definition of mediation during its evaluation
    of the State mediation programs. Because this definition of mediation
    excludes various financial analysis, credit counseling, and other
    services, the IG findings pertaining to the relative costs of mediation
    by the State-certified programs overstate the questioned and
    unsupported costs cited in the report. We believe State programs should
    not be penalized over a definition of mediation that does not reflect
    the flexibility designed to meet individual State needs. It is this
    flexibility that makes the State mediation programs so successful.
        Agency and State mediation officials are working on identifying the
    information necessary to track cases for audit purposes, while at the
    same time maintaining confidentiality, a cornerstone of successful
    mediation. Certain data that is measurable and common to all State
    programs will be gathered and reported to USDA to enable better
    tracking of overall program effectiveness, efficiency, and
    accountability. We believe this can be implemented to satisfy IG audit
    needs, yet protect the integrity of mediation confidentiality.
                            dairy indemnity program
        Question. The budget requests $100,000 for the Dairy Indemnity
    Program for fiscal year 1998. How much of the fiscal year 1997
    appropriation has been obligated to date?
        Answer. Carryover fund balances of $157,305 from fiscal year 1996,
    as well as the 1997 appropriation of $100,000, are available for
    obligation needs of the program. As of April 8, the entire amount of
    $257,305 has been obligated for this program, and subsequent claims
    remains unfunded.
        Question. What is the current balance in this account?
        Answer. As of April 8, the unobligated balance is $0.
                             salaries and expenses
        Question. The fiscal year 1998 request proposes a decrease of $64
    million for FSA salaries and expenses reflecting a reduction of 1,784
    direct county office staff years. USDA Secretary Glickman has announced
    a moratorium on office closings through the end of the year.
    Approximately how many county offices would be closed at the fiscal
    year 1998 budget request level?
        Answer. The 1998 Budget Appendix made mention of a reduction of
    about 500 service centers, to 2,000, by the end of 1999. There was some
    internal FSA contingency planning associated with the proposed county
    staff year reduction because reductions of that magnitude imply some
    office closings. However, no specific number of office closings were
    built into the 1998 Budget, and no closures will occur without full
    consultation with the Congress and approval by the Secretary.
        Question. Are the proposed 1,784 direct county office staff year
    reductions a part of the Administration's plan to reduce county office
    staffing to 2,000 by the year 2000?
        Answer. The proposed 1,784 direct non-Federal county office staff-
    year reductions in the fiscal year 1998 budget estimate are a part of
    the Administration's proposal to reduce non-Federal county office
    staffing to a total of 4,879 by the end of fiscal year 2002. There are
    no plans to reduce staffing below the 4,879 FTE level.
        Question. What process will USDA use to reduce the number of county
    offices in the States?
        Answer. The total number of FSA offices within the USDA service
    centers has not yet been determined. To assure that USDA provides the
    best service possible to our customers, any decisions to close USDA
    field offices or reduce an agency presence in a USDA service center
    must be done in coordination with other agencies located at the site,
    including Rural Development and Natural Resources Conservation Service.
    The original office closing plan that was developed under Secretary
    Espy 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.
        Question. The Secretary announced that no county offices would be
    closed this year. How much savings did you anticipate as a result of
    county office closings in fiscal year 1997? Will you still achieve this
    savings?
        Answer. The fiscal year 1998 President's Budget did not assume any
    county office closures or associated savings in 1997 beyond those
    already approved under the Department's adjusted 1994 plan.
        Question. As a result of the 1996 FAIR Act have farm program
    changes decreased or increased the workload of the Farm Service Agency
    and its staffing needs?
        Answer. Generally speaking, the 1996 FAIR Act has reduced FSA
    workload. For example, the pre-Farm Bill fiscal year 1997 President's
    Budget Estimates prepared in January 1996 included county workload
    staffing needs of 13,224 FTE's for fiscal year 1996. Following passage
    of the 1996 Act in April 1996, FSA performed an internal workload
    analysis that showed lower staffing needs for 1996, down to an
    estimated 12,835 county office FTE's. The actual FTE's worked for 1996
    were 12,738. FSA's analysis also showed declining workload for fiscal
    year 1997, to 11,946 FTE's. Actual use of FTE's in 1997 will be
    somewhat less than that. For fiscal year 1998, additional workload
    decreases were projected in FSA's analysis, with workload stabilizing
    thereafter. However, an independent study will be performed that will
    seek to identify other operating efficiencies in order to achieve
    further FTE reductions.
        Question. How many RIF's and buyouts will occur in fiscal year
    1997?
        Answer. The most current data, as of April 7, 1997, shows a total
    of 1,241 separations in Federal and county offices.
        Question. What is the cost of the RIF's? What is the cost of
    buyouts?
        Answer. The total cost of the fiscal year 1997 separations is $42
    million; buyout costs were $34.7 million and RIF costs were $7.3
    million.
        Question. What additional RIF's or buyouts are assumed for fiscal
    year 1998? How will these be funded?
        Answer. The fiscal year 1998 President's Budget proposal for the
    FSA Salaries and Expenses account includes proposed funding of $56.2
    million for separation costs in order to achieve staffing reductions of
    2,119 staff years. This amount includes $6.7 million to separate 269
    Federal office employees and $49.5 million to separate 1,850 non-
    Federal county office employees. Because these separations are planned
    for approximately October 1, 1997, salary and benefit savings of the
    separated employees of about $64 million more than offset the
    separation costs.
        Question. What impacts will the proposed reductions in FSA
    personnel have on FSA's ability to serve the crop insurance needs of
    producers adequately and efficiently where the agency has maintained
    FSA delivery?
        Answer. The reductions in FSA personnel will require FSA to
    prioritize workload in order to service the needs of all producers,
    including crop insurance needs.
                        boll weevil eradication program
        Question. Boll Weevil Eradication loans were funded in the fiscal
    year 1997 Appropriations Act. The FSA has not yet released this money
    because the regulations have not been promulgated. I understand that
    the requirements for the environmental impact evaluation have been met,
    and that APHIS has supplied FSA with all information the agency
    requested. However, the regulations have not been published for
    comment. It is necessary that these funds be available by May 15 so
    that current planned programs can be continued and program expansion
    can be initiated. Please provide an estimate of the amount of the loan
    authority, which is approximately $35 million, that you expect to
    utilize if the loan program is available.
        Answer. All environmental requirements have been met and provided
    there are no serious challenges to the environmental assessment, it is
    anticipated that FSA will begin making Boll Weevil Eradication loans
    within the next 45 days. At this time, we do not know how much of the
    available loan authority will be utilized this fiscal year. A recent
    recalculation of the program's subsidy rate has increased the loan
    authority from approximately $35 million to $40 million.
        Question. If this loan program is not established in fiscal year
    1997, the money will not be available for the next fiscal year. Has the
    USDA considered proposing that this funding be made available until
    expended?
        Answer. We have not asked for the funds to be made available until
    expended. However, the Department would not object to having the funds
    made no year funds to allow for unforeseen circumstances which could
    impede utilization of the money this fiscal year.
        Question. The Committee Report accompanying the fiscal year 1997
    appropriations bill explicitly directs ``FSA local offices to require
    cotton producers to report acreage planted in cotton in post-
    eradication zones, active eradication zones, and any area in which a
    referendum is scheduled to be conducted in the next 3 years.'' Please
    provide an explanation of the status of this directive and the schedule
    for action.
        Answer. A Decision Memorandum for the Secretary on accepting
    acreage reports for the Boll Weevil Eradication Program has been
    drafted jointly by FSA and APHIS and is currently in clearance.
        Question. What is FSA's position on collecting data for this
    program?
        Answer. The FSA position is included in the Decision Memorandum,
    but we do not wish to preempt the Secretary's prerogative regarding
    compliance with the congressional directive.
        Question. Is FSA eliminating the commodity analysts subdivision
    under the guise of reorganization or is FSA consolidating this
    subdivision?
        Answer. FSA has no intent of disbanding the Economic Policy and
    Analysis Staff or any of its subgroups. Retention of a core group of
    commodity and natural resource analysts working together recognizes the
    synergy that exists between these analysts, which is necessary for
    accurate and timely response to Administration, congressional, and
    private sector concerns. Although this Staff has downsized
    significantly, from 53 slots in January 1993 to 32 slots currently,
    this downsizing reflects adjustments due to workload changes.
        Question. What is your opinion regarding the need for a cotton
    analyst in light of the Committee report language directive to collect
    all cotton acreage data for the boll weevil program?
        Answer. Regarding the collection of acreage data for purposes of
    administering the Boll Weevil Eradication Program (BWEP), the exact
    means by which the data should be collected, and by whom, are still
    under discussion. We want the BWEP to succeed, and I am sure that the
    necessary data will be collected in a manner which will meet the
    program's objectives efficiently.
                          conservation reserve program
        Question. The Conservation Reserve Program (CRP) sign-up closed on
    March 28, 1997. How many acres were offered during the sign-up for
    enrollment in the CRP?
        Answer. The preliminary results of the March signup are that
    301,649 offers were received to enroll 25,639,485.6 acres.
        Question. How many of these acres are currently enrolled in the
    CRP?
        Answer. The offers included 18,081,930 acres that are currently in
    CRP.
        Question. What amount is new?
        Answer. The offers included 7,557,555 new acres.
        Question. When will you notify the farmers that their land has been
    accepted into the program?
        Answer. We anticipate notifying producers whether their CRP offers
    are accepted by June 2, 1997.
        Question. Has Secretary Glickman made a decision whether to enroll
    the full 19 million acres or stick with the recent announcement that
    only 17 million acres would be enrolled to save money to fulfill a
    Clinton campaign promise to buy a mine on the edge of Yellowstone? If
    not, then when should we expect this announcement?
        Answer. A final decision on the purchase of the New World Mine has
    not yet been made. The Administration is still exploring various
    options for providing an offset for the costs of this acquisition, and
    an announcement will be made, hopefully in the near future, when this
    decision is reached.
                             information technology
        Question. The 1996 FAIR Act limits the use of Commodity Credit
    Corporation (CCC) funds for operating expenses. It limited the amount
    for the six year period fiscal year 1997-2002 to $275 million to be
    spent on information technologies and automated data processing. The
    fiscal year 1998 budget assumes expenditures for computer and
    telecommunications equipment will total $109 million in fiscal year
    1997 and $104 million in fiscal year 1998. Is FSA currently subject to
    the Department's moratorium?
        Answer. Yes, FSA has been operating under the information
    technology Investments Moratorium since Deputy Secretary Rominger
    issued the notification memo on November 12, 1996.
        Question. What will these monies be used for exactly?
        Answer. The estimates included in the budget were prepared prior to
    the Secretary's moratorium and do not represent spending with the
    moratorium in place. The fiscal year 1997 and fiscal year 1998 CCC
    monies in the budget reflect information technology requirements in
    support of all FSA program missions. 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, newly
    established service centers, crop insurance reform initiatives such as
    the nationwide non-insured crop disaster assistance program and
    catastrophic insurance coverage in underserved States, the Conservation
    Reserve Program, administrative support for the Environmental Quality
    Incentives Program, and realigned farm loan activities require an
    ongoing information technology infrastructure to deliver services.
        The following major budget categories show how the monies (dollars
    in thousands) are distributed in the fiscal year 1998 Budget. However,
    these estimates are subject to subsequent OMB apportionment and
    reevaluation.

                             [Dollars in thousands]
    ------------------------------------------------------------------------
                                                          Fiscal year--
                                                   -------------------------
                                                        1997         1998
    ------------------------------------------------------------------------
    Hardware and software.........................      $56,617      $19,195
    Operations and maintenance....................       21,806       26,418
    Systems analysis, programming.................       15,858       46,211
    Studies and training..........................       10,521        4,371
    Digital orthophotography......................        2,000        6,000
    Other.........................................        2,149        1,962
                                                   -------------------------
          Total...................................      108,951      104,157
    ------------------------------------------------------------------------

        FSA State and county offices mainly rely on mid-1980 information
    technology to deliver program benefits. Recent engineering upgrades to
    minicomputers supporting the 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. Approximately 10 percent of each year's budget is for
    maintenance of the current ADP delivery system in the field. 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. CCC fiscal year 1997 funding of $28.0
    million (25.7 percent of the fiscal year 1997 total) is identified
    towards purchase of a common computing platform for SC's. FSA/CCC's
    share of other SC initiatives total $20.5 million (18.6 percent) in
    fiscal year 1997 and $35.8 million (33.7 percent) in fiscal year 1998.
        During the first quarter of fiscal year 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 partner 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 SC's 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. FSA is also
    providing funding support for the acquisition of digital
    orthophotography and maximization of data sharing opportunities within
    the current systems.
        Other major efforts supported with this budget are the integration
    of FSA's divergent program and administrative information technology
    systems and support, continued operations and programming support for
    the Processed Commodities Inventory Management System ($4.75 million
    each year), modification of the financial management systems of the CCC
    (approximately $4 million each year), and continued use of contractor
    support for other agency systems that support program delivery and
    require modifications to accommodate the Year 2000 conversion project.
        Question. How much did the FSA spend on information technologies
    and automated data processing in each of the last 5 fiscal years?
        Answer. A table showing the actual amount of CCC funds used for
    equipment and other ADP-related costs for the last 5 years follows.
        [The information follows:]

                                              COMMODITY CREDIT CORPORATION
       ADMINISTRATIVE EQUIPMENT (REGULAR AND ADP) AND OTHER ADP-RELATED COSTS FUNDED BY CCC--FISCAL YEARS 1992-96
                                                         ACTUALS
                                                     [Full dollars]
    ----------------------------------------------------------------------------------------------------------------
                                                                       Fiscal year--
                                     -------------------------------------------------------------------------------
                                        1992 actual     1993 actual     1994 actual     1995 actual     1996 actual
    ----------------------------------------------------------------------------------------------------------------
              I. Equipment

    Regular equipment--CCC..........     $15,346,665      $6,208,352      $6,429,364     $13,716,592      $7,033,727
    ADP equipment--CCC..............      17,500,139      25,531,707      12,543,782      45,917,735      87,235,770
                                     -------------------------------------------------------------------------------
          Total CCC equipment.......      32,848,804      31,740,059      18,973,146      59,634,327      94,269,497
    Info Share equipment............  ..............  ..............  ..............         643,759  ..............
                                     -------------------------------------------------------------------------------
          Total CCC equipment.......      32,848,804      31,740,059      18,973,146      60,278,086      94,269,497
                                     ===============================================================================
       II. Other ADP-related costs

    Space/site prep./utilities......         109,913         109,381  ..............  ..............  ..............
    Supplies/transportation.........         439,657       1,085,131       1,198,131       1,844,226       1,988,662
    Commercial services.............      26,472,158      27,858,848      23,838,608      29,438,603      54,458,169
    Inter/intra agency services.....         743,170         933,159       9,626,048       2,241,000       5,160,828
    Kentucky Pilot (SCIT)...........  ..............  ..............  ..............  ..............         103,849
                                     -------------------------------------------------------------------------------
          Subtotal..................      27,764,898      29,986,519      34,662,787      33,523,829      61,711,508
                                     ===============================================================================
    Info Share--Other costs:
        Legacy System...............  ..............  ..............  ..............  ..............  ..............
        Fast Track..................  ..............  ..............  ..............         959,403  ..............
                                     -------------------------------------------------------------------------------
          Subtotal..................  ..............  ..............  ..............         959,403  ..............
                                     ===============================================================================
          Total other costs.........      27,764,898      29,986,519      34,662,787      34,483,232      61,711,508
                                     ===============================================================================
          Grand total, CCC..........      60,613,702      61,726,578      53,635,933      94,761,318     155,981,005
    ----------------------------------------------------------------------------------------------------------------

                         non-insured assistance program
        Question. Since the inception of the non-insured assistance program
    (NAP), problems have arisen regarding the geographic area used to
    determine a loss and trigger payment, the delivery of payments once a
    disaster is declared, and a general misunderstanding of the program.
    What is the status of NAP?
        Answer. FSA has received 979 NAP area requests/recommendations for
    the 1995 and 1996 crop years. Of these, 705 have been approved, 105
    have been disapproved, 73 were either withdrawn or canceled, and 96 NAP
    area recommendations remain on hand.
        Question. Has the agency taken any action to address the problems
    mentioned above?
        Answer. FSA issued multiple program directives to State and county
    offices in 1996 to provide updated instructions that addressed new
    program provisions as well as issues raised by field offices. Many of
    these directives provided clarifications to procedures for assembling
    NAP area recommendations and addressed crop and producer eligibility
    issues.
        FSA also provided on-going training to State office specialists by
    rotating these personnel into headquarters on two-week temporary
    assignments. This initiative had a significant impact on improving the
    knowledge and expertise of FSA staff who were delivering the program at
    the field office level. FSA issued a new NAP handbook, 1-NAP, on March
    28, 1997. In addition, FSA is conducting national NAP training April 8
    through April 11, 1997. State offices will provide subsequent training
    to county office personnel immediately following the national training
    sessions.
        Handbook 1-NAP and the national training were critically needed.
    Improvements in the quality of analyses and documentation provided in
    support of NAP area requests are already apparent. The instruction and
    training provided to FSA personnel will help expedite NAP area
    recommendations and delivery of the program.
        Notwithstanding the progress made over the past 12 months, there is
    unfinished work. FSA plans to provide improved automated tools at all
    levels that will support information management initiatives, perform
    computations of eligibility, and process loss claims, applications for
    payment, and annually reported acreage and production data.
        One difference between NAP and the former ad hoc disaster payment
    programs is ``area eligibility.'' Prior to 1995, an individual producer
    of a crop suffering a loss due to eligible disaster conditions was
    basically eligible for payment consideration without regard to whether
    the crop, and possibly other disinterested producers, suffered an
    aggregate area loss in excess of some threshold. The NAP concept of
    extending disaster-type assistance only in cases where a widespread
    catastrophic loss occurred in a geographical area was somewhat new to
    many producers and FSA offices. We believe employees and producers are
    becoming more familiar with this concept.
                                     ______

                      Questions Submitted by Senator Burns
                            farm loan delinquencies
        Question. It is my understanding that a moratorium is in effect on
    farm foreclosures. What I would like to know is the number of farm
    loans and dollar amounts that are delinquent for one year, five years,
    ten years, fifteen years, and over fifteen years?
        Answer. We are unable to provide the information in the detail you
    requested. However, the following reflects delinquency status of direct
    loans as of March 31, 1997. Number of borrowers: One payment
    delinquent, 18,252; two payments delinquent, 2,946; and more than two
    payments delinquent, 4,756.
        Question. As a supporter of the family farmer, I do have some
    concern over the number of delinquent loans. What kind of message does
    this send to farmers who are paying their loans or to other government
    borrowers who pay their loans?
        Answer. The FSA is sending this message to its borrowers: we expect
    repayment of funds lent to you. We will work with borrowers who are
    experiencing a temporary inability to make regular repayments through
    circumstances that are not their fault.
        Question. When will the moratorium be lifted and what plans does
    your agency have for loans that are multi-year delinquent?
        Answer. FSA does not have a moratorium on foreclosures. The
    Secretary has suspended foreclosure sales until a review is completed
    to make sure that no program inconsistencies or discrimination is
    found. This demonstrates that the Agency is performing the task
    assigned to it by Congress in making every effort to eliminate any
    inequitable treatment in the delivery of its programs.
        Under current statute, the Agency is required to notify all
    borrowers who are 60 days delinquent of their right to apply for
    Primary Loan Servicing to resolve those delinquencies within the
    Agency's authority to reschedule, defer, or write down the loans. If
    their operations cannot show a possibility of success even with these
    options, they are offered the opportunity to purchase their debt at the
    current market value of the security. Only after these options have
    been considered does the law allow the Agency to proceed to
    foreclosure. With the right to appeal at every step of the process,
    this procedure can take several years. When all other possibilities are
    exhausted, the Agency does pursue foreclosure in accordance with the
    laws of the State in which the borrower lives.
        Question. When and how does your agency determine that a loan is so
    seriously delinquent that there is no possibility of repayment?
        Answer. If a delinquent loan cannot be brought current through
    rescheduling, deferral or write down, or debt cancellation in exchange
    for a conservation contract, the Agency assumes that repayment is not
    possible, and the borrower is provided the opportunity to purchase it
    at the market value of the security. If this cannot be accomplished,
    other methods of debt settlement are discussed with the borrower and
    then foreclosure is pursued, if necessary.
                                use of auctions
        Question. Your agency has been reluctant to use auctions when
    selling foreclosed farms; what is your reasoning for not using auctions
    more often?
        Answer. Federal law requires the Agency to advertise its inventory
    farms suitable for agriculture to new and beginning farmers at their
    current market value, based on an FSA appraisal. If there is more than
    one such applicant, the winner is chosen by a random drawing; no
    bidding is allowed between these applicants. Auctions, sealed bids and
    other methods of sale can be and are pursued only if no new or
    beginning farmer expresses an interest in purchasing the farm.
        Question. I have been told that before a farm property can be sold
    at auction, the use of an auction must be approved by headquarters in
    Washington. Other sales methods do not have to be approved by
    Washington, why is that requirement in place for auctions?
        Answer. There is no such requirement. Auctions may be used at the
    option of the respective State Office, as long as no new and beginning
    farmers have applied or been found qualified to purchase the farm. If
    the cost of an auction firm exceeds the State's authority to contract
    for small purchases, the sale would require approval from Washington
    for contracting reasons, but not for the use of an auction as such.
                              crp and crown butte
        Question. In questioning it was stated that there would be no
    impact on the farmer in the use of CRP funds to pay for Crown Butte. I
    would like to hear your reasoning on this and how you would explain
    that to a farmer that is expecting payment of CRP land this year, that
    might lose out due to this action?
        Answer. The proposal has no impact on acreage currently under
    contract but would delay the enrollment of acreage for one year. Since
    all offers to participate in CRP are evaluated in comparison to the
    environmental benefits and costs of other offers, whether or not an
    offer is accepted is primarily dependent on the quality of the offer.
                fsa field office closures and personnel changes
        Question. In the hearing you stated that it is not proper to have
    county committee personnel overseeing Federal personnel. Is this law,
    and what would be necessary to make the current operation legal?
        Answer. The Federal Crop Insurance Reform and Department of
    Agriculture Reorganization Act of 1994 provides that Federal and non-
    Federal employees can be used interchangeably, but a non-Federal
    employee cannot supervise a Federal employee. Operating a dual employee
    delivery system at the county level has been difficult. Recently, the
    USDA Civil Rights Action Team (CRAT) recommended that the FSA county
    committee system be modernized by converting all county non-Federal
    positions to Federal status. The Secretary will be submitting a
    legislative package later this year to Congress supporting the
    conversion of all FSA non-Federal positions to Federal status.
        Question. I can understand the need for closing offices in areas of
    high concentration, but does the agency propose closing offices in
    highly rural areas with long distances between offices, and what is the
    rationale for these closures?
        Answer. Workload levels reflect the staffing resource needs at a
    given location and not necessarily whether a physical presence is
    needed. A large workload office is generally more efficient than a
    small workload office because of the numbers of employees available to
    perform specialized services and the general efficiencies associated
    with volume transactions. A criterion such as a minimum 25 mile limit
    between offices reflects an assumption associated with all producers
    having reasonable access to service. In the 1930's when most USDA
    offices were established, local transportation was limited. Today, with
    the significant improvements in transportation and the technological
    capabilities available, the distance a producer would travel to receive
    services can be increased without any significant hardship. Workload is
    certainly an important factor in determining staff levels for field
    offices and will be considered in FSA's analysis of ways it will
    operate within budget realities and how it will apply staff reductions.
    However, 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 the Natural Resources Conservation
    Service.
                                     ______

                     Questions Submitted by Senator Bumpers
                              disaster assistance
        Question. Do the estimates in the supplemental request for the
    Emergency Conservation Program (ECP) reflect losses from tornadoes in
    Arkansas, flooding along the Ohio River, and other events that have
    occurred since March 1st?
        Answer. On March 19, 1997, the President submitted a $20 million
    supplemental request to Congress for the Emergency Conservation Program
    and a request for an additional $17 million in contingency funding. The
    estimates partially reflect losses due to natural disasters since March
    1st. The amount being requested will fund losses in the western States
    due to the January flooding but fund only part of the pending requests
    due to tornado damage in Arkansas and flood damage along the Ohio
    River. Estimates related to flooding in North Dakota, South Dakota, and
    Minnesota cannot be made until the flood waters have receded.
        Question. Do the estimates include anticipated damage from the snow
    melt in the upper plains?
        Answer. The $17 million contingency was for ``spring flooding,''
    including flooding due to snow melt.
        Question. Do you believe the contingency amounts included in the
    request will be adequate, especially given the fact that these
    estimates were made far in advance of receding flood waters or more
    recent storm events?
        Answer. We don't really know the magnitude of the need at this
    time, given the more recent storms occurring in various locations
    across the country.
                              emergency farm loans
        Question. I further note the supplemental request includes no
    funding for emergency farm credit. Do you think the carryover of
    emergency farm credit will be adequate given the magnitude of current
    and anticipated losses?
        Answer. The supplemental request did not include additional funding
    for FSA's emergency loan program since, at the time it was prepared,
    FSA believed that it had adequate funds available to cover the flooding
    in the Northwest assuming no further widespread disasters occurred. The
    recent blizzards and flooding in the Midwest could not have been
    anticipated. Given the magnitude of these new disasters, the remaining
    emergency loan funds will not be sufficient to meet the demand for
    loans for the remainder of this fiscal year.
        Question. Could you please provide State by State estimates of
    identified and projected needs for all emergency assistance under the
    jurisdiction of your agency relating to those events?
        Answer. It is too early in the disaster recovery process for many
    areas to project the need for emergency assistance for the remainder of
    the year. We are still assessing the scope of potential loan demand.
                          disaster contingency reserve
        Question. Rather than requesting an amount for ECP in fiscal year
    1998, you suggest the establishment of a contingency reserve for
    disaster assistance. Who would have the authority to use this reserve
    and how would it be triggered?
        Answer. The President's budget proposes that the Congress
    appropriate $5.8 billion as a contingency fund for use through
    specified disaster assistance programs including the Emergency
    Conservation Program. The proposed contingency fund would be
    administered by the Office of Management and Budget on behalf of the
    President, but only the President could make funds available. The
    release of any amount of the contingency fund could not occur until 15
    days after the President has officially notified the Congress. This
    built-in constraint is designed to give Congress time to respond, but
    also ensures that the Government will be able to assist communities
    stricken by a natural or other disaster in a timely way.
        Question. Which appropriations subcommittee would likely be
    responsible for funding?
        Answer. Since the contingency funds would be appropriated to the
    President, we assume that the funding request would be considered by
    the House and Senate Appropriations Subcommittees on Treasury, Postal
    Service, and General Government.
                            section 11 reimbursables
                                      crp
        Question. You indicate you will notify producers by mid-June of CRP
    enrollments using NRCS technical assistance. Do you intend to reimburse
    NRCS for that service using section 11 authorities?
        Answer. In fiscal year 1997, no Section 11 CCC funds will be used
    to pay CRP technical assistance for NRCS. Unobligated funds from the
    appropriated CRP account will be for used for NRCS and Forest Service
    CRP technical assistance until the funds are fully expended.
        Question. Would you be able to enroll those areas if NRCS was not
    provided funds through this subcommittee for any technical assistance
    for those programs converted to direct spending from the CCC?
        Answer. As noted above, the source of funding for NRCS technical
    assistance for the fiscal year 1997 CRP program is unobligated CRP
    appropriated funds. NRCS would be unable to provide the necessary
    technical support needed to implement the CRP without any technical
    assistance funds.
        Question. Is the fact that the fiscal year 1997 and 1998 estimates
    for section 11 transfers are below the 1995 amounts an indication that
    the conservation technical assistance is not needed to implement CRP
    and WRP and similarly situated programs as much as in previous years?
    If so, how can that be true in light of the new ``environmental
    benefits'' test for CRP which, I would imagine, will require an
    extensive analysis by NRCS?
        Answer. The budget projects annual spending under the cap on
    Section 11 reimbursable agreements will total $41.2 million in fiscal
    year 1997 and $35.6 million in fiscal year 1998. CCC obligations for
    Section 11 activities in fiscal year 1995 were $45.6 million. The
    fiscal year 1997 level is below fiscal year 1995 because CRP and
    Wildlife Habitat Incentives Program technical assistance costs in
    fiscal year 1997 are being funded from unobligated funds in the CRP
    appropriated account and not Section 11 transfers. Fiscal year 1997 CCC
    transfers would have been at the 1995 level without this ability to use
    CRP unobligated funds for technical assistance costs in fiscal year
    1997. The fiscal year 1998 level of $35.6 million is $10 million below
    the fiscal year 1995 level because of the proposed shift in FAS'
    Emerging Markets Technical Assistance program from the CCC Section 11
    reimbursable agreement to an FAS appropriation. In subsequent years,
    the full $45.6 million will be available for expenses, with the
    Emerging Markets funded elsewhere.
        Question. You estimate that you have used $83 million in carryover
    funds from CRP to fund the technical assistance portion of that program
    and that you estimate you will use $24 million in carryover funds in
    fiscal year 1998. How much is left in the CRP carryover account?
        Answer. At the end of fiscal year 1996, there was approximately
    $111 million in unobligated funds in the CRP appropriated account. The
    budget also projects that $4 million in refunds of prior year payments
    will be credited to the CRP account in both fiscal years 1997 and 1998.
    Only a small amount of funds will be left in the CRP account after 1998
    since $12.5 million will also be used for the Wildlife Habitat
    Incentives Program as authorized by Section 387(c) of the Federal
    Agriculture Improvement and Reform Act of 1996.
        Question. What do you intend to use for this purpose when the
    carryover funds are depleted?
        Answer. It is estimated that a very small amount of carryover funds
    from the CRP account (resulting from refunds of prior year payments)
    will be used in fiscal years 1999 through 2002 to pay CRP technical
    assistance costs. Section 11 funds will be used to pay technical
    assistance as long as the total level of CCC Section 11 transfers does
    not exceed $45.6 million. In some years it may be possible for
    technical assistance needs to exceed available funding.
                          flood risk reduction program
        Question. What has been your experience with the Flood Risk
    Reduction Program in fiscal year 1997?
        Answer. Regulations are currently being drafted to seek comments on
    program implementation. It is anticipated that the program will be
    offered beginning October 1, 1997.
        Question. Why are you not providing an estimate for fiscal year
    1998?
        Answer. The funding source is the CCC AMTA funding. Participants
    earn 95 percent of their AMTA payments in one up-front payment. The
    President's Budget assumed that the one up-front payment would be made
    in fiscal year 1997 with no payments in subsequent years. However,
    based on current estimates, the one up-front payment will be made in
    fiscal year 1998 instead of fiscal year 1997. FSA economists estimate
    4.7 million acres classified as frequently flooded to be eligible for
    the Flood Risk Reduction Program. Flood risk reduction payments in
    fiscal year 1998 would be about $266 million, offset by reductions in
    production flexibility contract payments of about $284 million during
    fiscal years 1998-2002.
        Question. Why was this program not assigned to NRCS along with
    other conservation programs?
        Answer. The Flood Risk Reduction Program (FRRP) is not a
    conservation program. The Secretary assigned FSA the responsibility of
    administering the FRRP because FRRP contracts are offered as an
    alternative only to those producers with production flexibility
    contracts (PFC) administered by FSA under the Agricultural Market
    Transition Act. FRRP payments are directly correlated to the PFC
    payments issued by the Commodity Credit Corporation that the producer
    would otherwise receive. Also, the majority of program benefits that
    FRRP participants are required to forgo are administered by FSA. FRRP
    participants must meet the highly erodible land and wetland
    conservation provisions. However, there are no other conserving use or
    other conservation requirements for producers who enroll in FRRP.
                            boll weevil eradication
        Question. What is the status of implementing the Boll Weevil Loan
    Program for fiscal year 1997?
        Answer. It is currently projected that FSA will begin accepting
    applications for the Boll Weevil Eradication Loan program in the next
    45 days provided that no unforeseen circumstances delay its
    implementation.
        Question. Why did FSA not include this program in the budget
    request for fiscal year 1998?
        Answer. With regard to fiscal year 1998 funding, it is the
    Department's understanding that the Boll Weevil Eradication Loan
    program was not intended to replace the cost-share grants provided by
    APHIS to the foundations that operate the boll weevil program at the
    State level. Rather, the program was intended to allow the foundations
    to finance their share of the program costs, at a minimal Federal
    subsidy cost. In the past, the Department has worked with some of the
    foundations in response to inquiries about using the business and
    industry guaranteed loan program to assist in obtaining credit from
    private lenders. It remains the Department's position that the credit
    needs of the boll weevil eradication program can be adequately
    addressed through existing programs, such as the business and industry
    guaranteed loan program, and that there is no reason to maintain a
    separate program for this purpose.
                                  farm credit
        Question. Since enactment of Beginning Farmer legislation earlier
    this decade, what has been the rate of graduation?
        Answer. Regulations for implementing the graduation provisions of
    the Beginning Farmer legislation went into effect last year. Between
    October 1, 1996, and March 31, 1997, a total of 2,517 borrowers has
    graduated to commercial credit. This figure represents some duplication
    for individual borrowers with more than one type of loan, such as an
    operating loan and a farm ownership loan.
                               loan subsidy rates
        Question. You mentioned you expect a reduced cost of farm credit
    programs due to efforts to reduce loan delinquencies. Do you know if
    CBO is willing to translate those efforts into lower subsidy rates?
        Answer. The Agency is unaware of any CBO requirements related to
    subsidy rates. The subsidy rates are calculated following OMB's
    requirements as stated in OMB Circular A-11, Preparation and Submission
    of Budget Estimates, dated June 1996. The calculation of loan subsidy
    costs is based on two factors: (1) explicit technical terms and
    conditions, and (2) the Treasury discount interest rate. Loan
    delinquencies are only one of many explicit technical terms and
    conditions used to calculate the subsidy rate. The Treasury discount
    rate is provided directly by OMB, and all explicit technical terms and
    conditions, including reduced loan delinquencies, are approved by OMB
    before use in the President's Budget.
        Question. Also, recent shifts in interest rates indicate that the
    program level per dollar of BA may be falling. In order to prevent
    program levels from falling below your budget estimates, will you
    provide this subcommittee current reestimates of loan subsidy costs to
    better coordinate the effective program level in these accounts for the
    coming fiscal year?
        Answer. Although the Agency could, with OMB approval, provide
    current reestimates for fiscal year 1998 loan subsidy costs, any
    revision to the Treasury interest rate component would again be an
    estimate. The actual program level for fiscal year 1998 will not be
    known until the Treasury interest rates in effect on October 1 are
    published through the Commerce Economic Bulletin Board.
        Explicit technical terms and conditions used in the President's
    Budget to calculate loan subsidy costs cannot be changed except by
    permission of OMB and only to reflect enacted legislation and any
    regulatory action which affects the making or guaranteeing of loans.
    Currently, the only change allowed between the subsidy cost estimated
    for the President's Budget and the actual subsidy cost calculated on
    October 1 is the difference between the Treasury discount rate
    estimated by OMB for budget formulation and the Treasury rate in effect
    on October 1, 1997.
                            state mediation program
        Question. Can you document the Federal savings achieved by the
    State Mediation Program, on an annual basis, since the program was
    first established?
        Answer. Federal savings achieved by the State Mediation Program
    remains a difficult area to assess. Depending on what assumptions are
    used, the amount can vary greatly. Savings to the Federal Government is
    apparent when mediation results in a restructured loan which offers a
    greater return than a net recovery buy out. Mediation also saves staff
    time and effort by quickly resolving the dispute outside of the appeals
    or court system. However, these savings are difficult to quantify
    because the costs can vary substantially depending on the nature and
    complexity of the issues involved.
        The Marketing and Economics Division at the Alabama Department of
    Agriculture and Industries reported in its September 30, 1995, annual
    report that their benefit-to-cost ratio for agricultural mediation is
    estimated to be $8.00 in benefits for every $1.00 of mediation costs.
    Researchers at Texas Tech University studying the Texas Agricultural
    Loan Mediation program reported that creditors in Texas received an
    estimated $4.14 in benefits for every $1.00 in providing mediation
    services. The Oregon Department of Agriculture reported in its
    September 1995 annual report that the benefit-to-cost ratio was
    estimated at $2.56 to $1.00 for mediation program expenditures.
        Annual funding has been $2 to $3 million for the State Mediation
    Program. A high estimate of net annual Federal savings, using the
    Alabama benefit-to-cost ratio of 8 to 1 and an annual funding level of
    $3 million, is $21 million. A low estimate of net annual Federal
    savings, using the Oregon benefit-to-cost ratio of 2.56 to 1 and an
    annual funding level of $2 million, is $3.12 million. Legal fees and
    costs for administering or selling a property through foreclosure or
    bankruptcy and the added costs of maintaining a non-performing asset on
    the books are often avoided by mediation but are difficult to estimate
    and are not included in these estimates.
        Question. Are you aware of the OIG report released to this
    subcommittee on March 4, 1997?
        Answer. Yes, we are.
        Question. I understand that one of the findings of the OIG was that
    State agencies administering this program would not release mediation
    documents when, in fact, State statutes clearly provide for the
    confidentiality of such records and provide for a means, through the
    courts, for parties such as OIG to obtain them. To your knowledge, did
    OIG make attempts to secure records pursuant to the means provided by
    law?
        Answer. OIG conducted audits of State mediation programs in
    Michigan, Minnesota, North Dakota, and Texas. Program officials in
    these States denied OIG access to certain mediation records considered
    confidential under their State laws. State laws governing mediation
    confidentiality vary, but most State programs are subject to such laws.
    OIG has not pursued such records by issuing subpoenas under its
    subpoena authority. State mediation officials have advised FSA that
    they will comply with any court order to release mediation records to
    OIG, as this will satisfy their State confidentiality statutes.
        Question. Why is confidentiality important to the integrity of the
    mediation process?
        Answer. Confidentiality in the mediation process is very important.
    The basic concept of mediation is to allow parties a free and open
    forum in which to air differences without the fear of retaliation.
    Confidentiality is the cornerstone of successful mediation in each
    State and without this assurance, participants cannot feel comfortable
    in expressing their feelings and discussing personal information.
        Question. Has your agency had any difficulty obtaining necessary
    information from the State administrating agencies?
        Answer. Each State is able to generate a list of producers with
    whom FSA has entered into mediation. The case files of each of these
    producers are available for USDA review in the FSA county office. FSA
    believes that these records will allow USDA to evaluate program actions
    resulting from the mediation process.
        The structures and formats of State programs differ greatly and
    were designed to reflect individual State needs. FSA has worked and
    continues to work with State mediation officials to improve the
    information reporting on mediation services. Certain data that is
    measurable and common to all State programs will be gathered and
    reported to USDA to enable better tracking of overall program
    effectiveness, efficiency, and accountability. Reporting requirements
    will need consideration, so as not to overburden State programs with
    excessive paperwork which might divert scarce funds and staff from the
    field work of providing the actual mediation services.
                        ccc reimbursement for net losses
                          actual status of ccc losses
        Question. Since the reimbursement for net losses in fiscal year
    1999 is estimated at $9 billion (compared to $784 million for fiscal
    year 1998) due to changing the reimbursement period from a one-year to
    a two-year timeframe, what does this really tell us about the current
    state of net losses?
        Answer. In recent years, the appropriations to CCC have been
    gradually reducing the large balances of unreimbursed losses from
    previous years. Cumulative unreimbursed realized losses decreased from
    $26.9 billion at the end of fiscal year 1993 to $2.3 billion at the end
    of fiscal year 1996. The fiscal year 1996 appropriation completed this
    process by fully restoring all cumulative unreimbursed realized losses
    through fiscal year 1995 and a portion of fiscal year 1996 losses. In
    prior years, the request for appropriations to reimburse the CCC for
    net realized losses has been based on an estimate of losses incurred
    one year earlier which have not been previously reimbursed. The
    estimate could exceed or fall short of the actual amount of loss.
    Beginning in 1998, in response to OIG recommendations, the request for
    appropriations to reimburse CCC for net realized losses will cover the
    actual amount of all unreimbursed losses incurred two years earlier.
    The 1998 budget requests $784 million for the balance of 1996 losses
    not reimbursed through appropriations in 1996 and 1997. 1996 losses
    totaled $7.8 billion, of which $5.5 billion was restored by
    appropriations in 1996 and $1.5 billion was restored by appropriations
    in 1997, leaving a balance of $784 million to be restored in 1998.
    Appropriations to reimburse CCC for net realized losses incurred in
    1997, currently estimated to total $9.002 billion, will be requested in
    the 1999 budget at their actual recorded level.
        Question. In other words, what would the fiscal year 1998 estimate
    be if we continue a one-year basis for reimbursements?
        Answer. The fiscal year 1998 estimate would be $9.786 billion if we
    continued a one-year basis for reimbursements. This would include $784
    million for the balance of 1996 losses not reimbursed through
    appropriations in 1996 and 1997, and $9.002 billion for net realized
    losses estimated to be incurred in fiscal year 1997. While this
    approximate level would keep the Corporation essentially fully
    reimbursed at the time of appropriation, CCC's available borrowing
    authority will continue to be adequate to finance expected expenditures
    on the two-year basis for loss reimbursement.
                         higher cost of freedom to farm
        Question. Have you been able to determine what your fiscal year
    1997 and fiscal year 1998 outlays from CCC would have been without the
    changes in the 1996 Farm Bill, specifically the so-called Freedom To
    Farm payments?
        Answer. The 1996 farm bill made profound changes in the way direct
    payments are made to producers. First, production flexibility contract
    payments under the new farm bill are no longer tied to market prices
    and are determined by amounts specified in law. Second, crop payments
    are now made in 1 fiscal year, unlike under the 1990 farm bill
    provisions when payments were issued over 2 or more fiscal years.
        Due to the timing differences of deficiency payments under an
    extended 1990 farm bill versus the production flexibility contract
    payments, a comparison of spending by fiscal years would be misleading.
    Therefore, we have estimated what direct payment outlays would have
    been under an extension of the 1990 farm bill provisions for the 1996
    and 1997 crops.
        In projecting what the costs of an extension might have been,
    certain assumptions were made. We assumed that prices under an
    extension of the 1990 farm bill would not be much different than
    current prices except for rice, and, therefore, prices were set to
    equal the prices in the May 1997 ``World Agriculture Supply and Demand
    Estimates'' except that we used internal price projections for cotton
    because the Department is prohibited from publishing cotton price
    projections. Rice prices were lowered about 15 percent because
    additional acreage would have been planted under an extension of
    previous law. Acreage reduction percentages were assumed to be zero for
    all commodities.
        Production flexibility contract payments for 1996 equaled about
    $5.4 billion. If an extension of the 1990 farm bill provisions were
    applicable to the 1996 crop, deficiency payments would have been less
    than $0.7 billion, about $4.7 billion less than the contract payments.
    Deficiency payments for wheat, corn, barley and oats would have been
    zero because farm prices exceeded their target prices, but payments
    would have been made for rice, cotton and sorghum.
        Production flexibility contract payments for 1997 are about $6.4
    billion. 1997 crop deficiency payments would have been about $2.7
    billion, $3.7 billion less than the contract payments. Deficiency
    payments would have been issued for all crops, except oats.
                 farm safety net--extension of commodity loans
        Question. You want discretionary authority to extend commodity
    loans by 6 months. Historically, cotton loans have been extended for
    longer periods than other commodities. Do you intend to provide for
    this historical trend to continue?
        Answer. Under current law, we have no authority to extend any crop
    loans. To provide a safety net for farmers under adverse price
    circumstances, we proposed that the Secretary be granted authority to
    extend loans for cotton and other commodities for 6 months. Should that
    proposal be enacted, we would have no authority to treat cotton any
    differently from other commodities.
           farm safety net--fruit and vegetable planting flexibility
        Question. Why do you plan to change the flexibility provisions for
    fruit and vegetable planting on transition acres?
        Answer. We believe a legislative change permitting the planting of
    fruits and vegetables (FAV's) following a contract commodity that is
    prevented from being planted or has failed due to adverse weather
    (ghost-crop provision) without a reduction in AMTA payment is
    warranted. Enactment of this change 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.
        Question. Does this reflect a change in your position during the
    1996 farm bill debate?
        Answer. No.
        Question. What effect will this change have on traditional fruit
    and vegetable producers?
        Answer. None. Since the proposal is an extension of law that was in
    place prior to 1996, there would be no impact on fruit and vegetable
    plantings.
                    salaries and expenses (office closings)
        Question. Since one of the goals of USDA reorganization has been to
    reduce more of the headquarters positions than those in the field, why
    is the percentage of reduction of non-Federal (county) employees so
    much larger than the proposed reductions for Federal employees?
        Answer. The FSA has been making staffing reductions over the past
    several years. From fiscal year 1993 to the current fiscal year 1997,
    the Agency has reduced total staffing 21 percent. These reductions
    reflect an overall 19 percent reduction in Federal staff years,
    including 27 percent at Headquarters, and a 22 percent reduction in
    non-Federal staff years. Overall, the Headquarters staff reduction
    percentage exceeds the field staff reduction. As you stated, fiscal
    year 1998 and the years through fiscal year 2002 reflect major proposed
    decreases in FSA non-Federal staff years. The fiscal year 1998 Budget
    proposes a reduction of 2,119 staff years for fiscal year 1998, of
    which 269 are Federal staff years and 1,850 are non-Federal staff
    years. It should be noted that although non-Federal staffing is being
    reduced by the programmatic impacts of the 1996 Act, rather than
    reorganization, the projected fiscal year 1998 Federal work force of
    5,877 includes approximately 2,265 employees at the county level
    performing Agricultural Credit program workload for direct and
    guaranteed loans. Furthermore, there are an additional 1,463 Federal
    FTE's at the State office level, including personnel that support farm
    credit activities as well as CCC activities, that perform program
    oversight, supervisory, and other support functions. In general then,
    Federal should be not be construed to mean Headquarters rather than
    field personnel.
        Question. Is this a reflection of action already taken to reduce
    Federal positions?
        Answer. No. Although I indicated earlier that relatively large
    reductions in Federal employment, especially at Headquarters, have
    taken place, the proposed reduction of non-Federal employees in 1998 is
    not an attempt to ``catch up'' on any ratio. Rather, it simply reflects
    that earlier years' reductions were driven by reorganization and
    government-wide streamlining objectives, while the more recent
    reductions in 1996 and 1997 (and the proposals for 1998) are driven
    solely by the programmatic impacts of the 1996 Farm Bill, which impacts
    employment more directly at the service delivery point.
        Question. Since you now have buyout authority, why do you
    anticipate a further Reduction In Force of 1,589 employees?
        Answer. The estimate of a further reduction in force of 1,589
    employees reflects the assumption that reductions-in-force will make up
    75 percent of the total 2,119 separations in the Budget, since the
    number of employees eligible for buyouts has declined due to the major
    use of buyouts within the Agency in 1995 and early 1997.
        Question. How will that RIF be achieved?
        Answer. No specific plans have been approved concerning the RIF.
    However, we will be formulating options and involving our employee
    unions soon in order to have approved procedures in place since the
    funding in the 1998 Budget assumes salary savings begin early in the
    fiscal year.
        Question. How will you determine who has the benefit of the buyout
    and who will be subject to the RIF?
        Answer. The Farm Service Agency will use buyouts to reduce the
    number of employees who must be involuntarily separated. However, the
    number of those eligible has declined substantially due to two earlier
    buyouts. The Agency will soon be formulating its buyout plan for fiscal
    year 1998 in concert with RIF procedures. It is anticipated that most
    employees will be offered the opportunity to apply for a buyout.
    However, employees in certain job categories may not be selected for
    buyouts due to the critical nature of their position. Those critical
    positions will also not be targeted for RIF's.
                             county office workload
        Question. Will there not be regional differences in FSA county
    office workload, especially when comparing areas where there is
    substantial landlord-tenant activity and other areas where there is
    historically a single owner-operator where there are likely to be fewer
    program changes over the course of the 1996 Farm Bill?
        Answer. Production flexibility contract payment shares on a leased
    farm may only be designated for years covered by the lease. This is
    true whether or not the same tenant ultimately remains on the farm.
    Most leases are annual leases.
        Although producers with leases that do not cover the life of the
    contract can only designate payment shares for the years covered by the
    lease, they are only required to update other forms or records if there
    are changes in their farming operations. It is possible that regional
    differences in the amount of tenant turnover and other changes in
    farming operations from year to year may ultimately be identifiable.
    However, since 1996 was the first year of the program, there is
    insufficient information available at this time to determine regional
    differences regarding landlord-tenant activity.
        Question. Would you please provide information to explain, on a
    regional basis, what the current and projected workload will be among
    county FSA offices?
        Answer. Tobacco and peanut States would have a constant workload
    because the 1996 Act did not reduce the workload associated with
    tobacco or peanuts. In addition, States that have significant numbers
    of producers who plant fruits or vegetables and are participating in
    the AMTA Program would have greater activity concerning acre-for-acre
    fruit and vegetable payment reductions. Other workload, such as
    workload associated with conservation programs, would only vary by
    regions if eligibility or qualification for the program is specific to
    a region or otherwise pertains only to certain regions.
        Question. Do your projections for staff reductions exceed the
    levels recommended by GAO in order to meet the mandates of the 1996
    Farm Bill and if so, why?
        Answer. No, our projected staff-year reductions approximated GAO's.
    The basis of the GAO report is that the new farm programs enacted in
    the 1996 Act will reduce FSA workload. We agree that, generally, this
    is true. For example, the pre-Farm Bill fiscal year 1997 President's
    Budget estimates prepared in January 1996 included county workload
    staffing needs of 13,224 FTE's for fiscal year 1996. Following passage
    of the 1996 Act in April 1996, FSA performed an internal workload
    analysis that showed lower staffing needs for 1996, down to an
    estimated 12,835 county office FTE's. The actual FTE's worked for 1996
    were 12,738. FSA's analysis also showed declining workload for fiscal
    year 1997 and for fiscal year 1998, but stabilizing thereafter. Beyond
    fiscal year 1998, the Administration believes further workload
    reductions can be achieved, and, as mentioned, we will be initiating an
    independent study this year of how such efficiencies might be
    accomplished.
        Question. You suggest the creation of an outside contract to study
    further streamlining of FSA and NRCS. Where will the funding come from
    to pay for that study?
        Answer. The funding for the study is being negotiated by the
    Department and the agencies involved in the study.
                          deferral of crp enrollments
        Question. The administration has proposed deferring for one year
    the enrollment of 2 million acres of the CRP in order to achieve
    savings necessary to resolve an issue regarding the Crown Butte mine in
    Montana. What effect would this have on the CRP program?
        Answer. The proposal, if approved, would defer, for 1 year, the
    opportunity to enroll 2 million acres in the CRP. This action only
    serves to postpone the sign-up of a small portion of the projected
    acreage, not to reduce the size of the program. The Administration's
    goal of enrolling 36 million acres by the year 2000 will not change.
        Question. Is it likely that this action would result in the
    termination of any CRP acreage enrollment that would otherwise have
    been re-enrolled in 1997?
        Answer. Assuming 17 million acres are enrolled, at least 1 million
    acres under contract now would be impacted. The actual impact for
    acreage under existing contracts could be greater based on the
    competitive nature of the program.
        Question. Because of the flooding experienced now in many parts of
    the country, would it be possible to defer the 2 million CRP acres and,
    instead, provide farmers greater participation in fiscal year 1997
    through the Flood Risk Reduction Program and still achieve your budget
    objective?
        Answer. Expansion of the Flood Risk Reduction Program (FRRP) in
    fiscal year 1997 is not considered a viable option because it is
    anticipated that the program will not be offered until October 1, 1997.
    The funding source is from the CCC AMTA funding, and there is not a
    separate appropriation for the FRRP. Participants earn 95 percent of
    their AMTA payments in one up-front payment. In sum, this concept would
    not increase producer participation and achieve the Administration's
    budget objective.
                                     ______

                       Question Submitted by Senator Kohl
        Question. The 1996 FAIR Act included provisions that have made it
    impossible for farmers to receive any new Federal farm loans, if they
    had ever had previous loans restructured. In many cases this seems
    inappropriate, especially when it was the Federal Government itself
    that was encouraging farmers to restructure their loans during the
    1980's. I have been particularly alarmed to learn that some of my
    constituents in Wisconsin have even been denied disaster loans as a
    result of the new farm bill provisions. Given these concerns, will you
    be requesting any changes in these 1996 FAIR Act provisions when the
    Administration sends its proposed farm bill technical corrections to
    Congress? When can we expect to see those proposed technical
    corrections?
        Answer. Borrowers who have had FSA loans restructured, but have had
    no debt forgiveness are not precluded from receiving additional loans.
    Provisions of the 1996 Act prohibit making direct or guaranteed loans
    to anyone who has previously received debt forgiveness, except for
    recipients of debt write down, who are only eligible for annual
    production loans. The Department supports changes to moderate this
    unreasonably harsh limitation. The Department will propose legislation
    to allow recipients of debt forgiveness who have reestablished an
    acceptable credit record over a period of time to recover eligibility
    for FSA loans.
                                     ______

                          Foreign Agricultural Service
                     Questions Submitted by Senator Cochran
                             market access program
        Question. Changes have been made in the Market Access Program (MAP)
    to make it more targeted and to increase small business participation
    in the program. Secretary Glickman indicated in his testimony before
    this Committee that ``additional program improvements have recently
    been made which are designed to broaden participation, clarify program
    participation criteria, strengthen evaluation and accountability, and
    simplify program requirements for participants.'' Can you briefly
    summarize the changes made and the reasons for those changes.
        Answer. Consistent with the Administration's commitment to
    streamline government programs, new MAP regulations were published on
    February 1, 1995, that increased flexibility and simplified program
    requirements for the participants. The MAP regulations reflect public
    comments and changes made by the Omnibus Budget Reconciliation Act of
    1993, and most recently, the Federal Agriculture Improvement and Reform
    Act of 1996. Specific changes in the MAP include:
      --published the evaluation criteria and the corresponding percentage
            weight factors for allocating funds;
      --eliminated the requirement for an applicant to show that the
            represented U.S. agricultural commodity faces an unfair trade
            practice in an overseas market;
      --give priority assistance in the allocation of brand promotion
            funding to small businesses and cooperatives;
      --established procedures for appealing compliance findings;
      --simplified contracting standards and procedures;
      --extended the time period during which expense claims may be
            submitted for reimbursement; and
      --liberalized U.S. origin identification requirements to permit the
            use of generally recognized states or regions within the U.S.
        In addition, the Department has implemented the following
    improvements administratively to streamline and expedite program
    management:
      --simplified reporting requirements for end-of-year contributions;
      --delegated to FAS Commodity Division Directors the authority to
            approve routine administrative issues;
      --eliminated the requirement for formal amendments to effect changes
            in approved activity plans other than those that are deemed
            ``significant'';
      --delegated authority to the State Regional Trade Groups to approve
            brand company plans valued at no more than $50,000, thus
            expediting the approvals for primarily small companies
            participating in the MAP;
      --eliminated the need for all brand companies, 80 percent of which
            are classified as ``small,'' to track and report expenditures
            by multiple cost categories for brand activities;
        In response to GAO and the Government Performance and Results Act
    (GPRA), the MAP regulations were also tightened with regard to funding
    additionality and evaluation. Participants must certify and demonstrate
    that any MAP funds received will supplement, but not supplant, any
    private or third party contributions to the program. With regard to
    evaluation, FAS allocates funds in a manner that effectively supports
    the decision-making initiatives of the GPRA. In addition, each
    participant is required to conduct an annual program evaluation to
    determine the effectiveness of the participant's strategy in meeting
    overall goals. Participants must identify goals to be met within a
    specified time, a schedule of measurable milestones for gauging
    success, and plans for achievement of results at regular intervals. The
    evaluation results are analyzed by FAS and help guide the development
    and scope of a participant's program and direct changes in program
    strategy or design.
                       ccc funds shift/cooperator program
        Question. The fiscal year 1998 budget request proposes that the
    Foreign Agricultural Service (FAS) directly fund two activities
    currently supported by the Commodity Credit Corporation. These include
    the Emerging Markets Program and CCC Computer Facility operating costs.
    To fund these activities, the budget requests an increase in FAS'
    appropriation of $14 million and a reduction of $5.7 million in funding
    for the Cooperator Program.
        The budget proposes to shift the cost of the Emerging Markets
    Program and Computer Facility operations from the CCC to FAS so that
    these two activities would no longer be subject to the annual
    limitation on CCC reimbursable agreements. How would this limitation be
    more restrictive than the limitation on discretionary appropriations
    which might force the FAS to absorb the cost of these activities within
    its current funding level?
        Answer. The 1996 Farm Bill limits reimbursements from CCC to the
    fiscal 1995 level of $45.6 million. While both the Emerging Markets
    Program and support for the CCC Computer Facility were funded in 1995
    out of the $45.6 million base, a number of priority activities,
    including the costs of technical assistance associated with new CCC-
    funded conservation programs, were not. As such, competition for
    limited CCC funds is keen. Shifting funding for Emerging Markets
    Program and support for the CCC computer facility to discretionary
    funding provides a larger base from which to fund these activities and/
    or to identify tradeoffs. This is evidenced by the fact that the 1998
    President's budget requests an increase in FAS discretionary funds to
    help offset a major portion of these costs.
        Question. To partially offset $5.7 million of the cost of shifting
    support for these activities from the CCC to FAS, the fiscal year 1998
    request proposes increased rent collections from those using FAS
    Agricultural Trade Offices and an increased cost-share factor for
    participants in the Foreign Market Development Cooperator Program.
        Please explain what rent increases will be imposed on those using
    FAS Agricultural Trade Offices and how the Cooperator Program cost-
    share factor will be changed to reduce costs by $5.7 million.
        Answer. In fiscal year 1998, FAS will modify the current policy on
    rents to begin charging Cooperator's rent for the space they occupy in
    Agricultural Trade Offices. This change will create a uniform policy
    for treatment of rent expenses among all cooperators, including those
    which are located in commercial space, and is necessary for purposes of
    implementing the new competitive allocation criteria for the FMD
    program.
        With respect to the cost-share factor, the President's budget
    proposes a funding level of $22 million for FAS's contribution to the
    FMD program in 1998. In order to maintain current Cooperator overseas
    offices, program activities and services, it will be necessary for
    Cooperators to assume responsibility for those costs which will no
    longer be funded through FAS appropriations.
        Question. Fiscal year 1997 funding of $27.5 million was made
    available for the Cooperator Program. What is the proposed fiscal year
    1998 requested funding level for the Cooperator Program?
        Answer. The President's fiscal year 1998 budget includes $22.0
    million for FAS's contribution to the Cooperator Program.
        Question. What will be the impact of the proposed fiscal year 1998
    funding reduction on participants in the Cooperator Program?
        Answer. The 1998 President's budget proposals reflect a policy of
    shifting a greater share of the costs of the FMD program on the
    participants who benefit, i.e., the cooperators. The budget assumes
    increased contributions from cooperators of $5.5 million in order to
    maintain overseas FMD activities at current levels.
        Question. What is the projected Foreign Market Development
    Cooperator Program carryover balance from fiscal year 1997 to fiscal
    year 1998? What is it from fiscal year 1998 to fiscal year 1999?
        Answer. Currently, we are forecasting net carryover balances at the
    end of fiscal year 1997 to total $10.4 million. Assuming an
    appropriation of $22.0 million for fiscal year 1998 and no change in
    marketing plan levels, currently at $34.0 million, the net carryover
    balance would decline to an estimated $1.3 million by the end of fiscal
    year 1998.
        Question. Please provide for the record a breakdown of how the
    funds for the Foreign Market Development Cooperator Program were
    allocated in fiscal years 1996 and 1997.
        Answer. I will provide that information for the record.
        [The information follows:]

     FAS CONTRIBUTIONS TO THE FOREIGN MARKET DEVELOPMENT COOPERATOR PROGRAM
                             [Dollars in thousands]
    ------------------------------------------------------------------------
                                                          Fiscal year--
                  Name of cooperator               -------------------------
                                                        1996         1997
    ------------------------------------------------------------------------
    Cotton Council International..................       $1,000         $850
    American Seed Trade Association...............          139          165
    American Soybean Association..................        5,461        4,500
    National Peanut Council.......................          352          450
    National Sunflower Association................          100          160
    National Cottonseed Products Association......          116          116
    Papaya Administrative Committee...............           45  ...........
    Western Growers Association...................           13           10
    Millers National Federation...................           13            5
    USA Rice Federation...........................          718        1,250
    U.S. Feed Grains Council......................        3,972        9,100
    National Dry Bean Council.....................           61           65
    USA Dry Pea & Lentil..........................           50          185
    Protein Grain Products International..........           10            5
    National Hay Association......................           42           35
    U.S. Wheat Associates, Inc....................        5,883        4,250
    National Renderers Association, Inc...........          985          750
    Leather Industries of America.................          125          160
    Mohair Council of America.....................            4           20
    U.S. Meat Export Federation...................        1,000        1,100
    U.S. Beef Breeds Council......................           70           70
    USA Poultry & Egg Export Council, Inc.........        1,100        1,000
    American Sheep Industry Association, Inc......          110          100
    U.S. Hides, Skin & Leather Association........           30           35
    National Dairy Promotion & Research Board.....          250          250
    U.S. Livestock Genetics Exports...............          400          368
    American Forest and Paper Association.........        1,800        2,000
    Southern U.S. Trade Association...............           75           75
    Mid-America International Agr.-Trade Council..           80           75
    Eastern U.S. Ag. and Food Export Council......           50           60
    Western U.S. Agricultural Trade Association...           75          105
    National Association of State Dept. of
     Agriculture..................................          150          186
                                                   -------------------------
          Total...................................       24,279       27,500
    ------------------------------------------------------------------------

                    public law 480--fiscal year 1998 request
        Question. The fiscal year 1998 request proposes to maintain funding
    for Titles II and III of the Public Law 480 program but to reduce
    funding available for Title I credit sales. Direct credit authority is
    reduced from the fiscal year 1997 level of $227 million to $113 million
    (reduction of $114 million); the subsidy appropriation is reduced from
    $186 million to $88 million (reduction of $98 million); and ocean
    freight differential costs are reduced from $14 million to $10 million
    (reduction of $4 million). The budget also proposes to transfer budget
    and expenditures for the Title I concessional sales program from the
    international affairs function to the agricultural function. The
    rationale given for this shift is to allow the Title I program to be
    managed and budgeted as part of a consistent package of agricultural
    export programs. Why does the fiscal year 1998 request propose to
    reduce funding for the Public Law 480 Title I program?
        Answer. The reduction in the Public Law 480 Title I program level
    reflects the Administration's commitment to achieving a balanced budget
    and the need to reduce discretionary spending.
        Question. Is the proposed reduction in funding for Title I of
    Public Law 480 in fiscal year 1998 in any way related to the transfer
    of the program from the international affairs function to the
    agricultural function of the budget?
        Answer. No. The proposed reduction in funding for Title I of Public
    Law 480 in fiscal year 1998 is not related to the transfer of the
    program to the agricultural function of the budget. In fact, the
    transfer should help us support funding for the program in future
    years.
        Question. Are you requesting that this Committee take any action
    with respect to the function reclassification of the Public Law 480
    Title I program or are you simply notifying the Committee in the budget
    materials of this change?
        Answer. We are not requesting that the Committee take any action.
    The President's budget has already transferred the Title I credit
    account to the agriculture function.
          proposed fiscal year 1997 public law 480 title i rescission
        Question. The Administration proposes a $50 million total reduction
    in fiscal year 1997 appropriations for Public Law 480 Title I (a $3.5
    million rescission of title I ocean freight differential funds and a
    rescission of $46.5 million in subsidy budget authority in the direct
    credit program). The budget indicates that commodity shipments would be
    reduced by approximately 200,000 metric tons as a result of this
    proposed rescission. However, it also indicates that allocations of
    Title I commodity assistance that have already been announced for
    fiscal year 1997 would not be affected by the proposed rescission
    because the reduction in program funding will be taken from a reserve
    of unallocated funds and from unobligated funds carried over from
    fiscal year 1996. Isn't it common that there would be a reserve of
    unallocated funds at this point for fiscal year 1997, i.e., that it has
    been the practice not to allocate all the funds but to reserve an
    amount for emergencies that may arise later in the fiscal year?
        Answer. Yes. Our practice in the past has been to maintain a
    reserve in Title I in order to meet unanticipated food aid needs.
    However, upon enactment of the rescission, just over $7 million will
    remain in the ocean freight differential account for fiscal year 1997
    and these funds are likely to be used due to increasing costs of
    meeting cargo preference requirements.
        Question. Please indicate for the record the number, amount, and
    timing of Title I funding allocations which have been made in each of
    the last five fiscal years.
        Answer. I will be glad to provide that information for the record.
        [The information follows:]

       PUBLIC LAW 480 TITLE I COMMITMENTS BY COUNTRY AND SIGNED AGREEMENT
                             DATES--FISCAL YEAR 1992
    ------------------------------------------------------------------------
                                                                   Total
                     Country                    Signed date     commitment
                                                                   value
    ------------------------------------------------------------------------
    Jamaica.................................        10/15/91     $30,000,000
    Morocco.................................        11/04/91      45,000,000
    Tunisia.................................        11/05/91      15,000,000
    El Salvador.............................        12/09/91      30,000,000
    Guyana..................................        12/19/91       7,500,000
    Egypt...................................         1/09/92      40,410,000
    Philippines.............................         2/03/92      20,000,000
    Congo...................................         2/12/92       5,000,000
    Sierra Leone............................         3/04/92      13,400,000
    Jordan..................................         3/05/92      20,000,000
    Cote d'Ivoire...........................         3/13/92      10,000,000
    Sri Lanka...............................         3/17/92      13,000,000
    Guatemala...............................         3/19/92      15,000,000
    Suriname................................         4/10/92       8,000,000
    Zimbabwe................................         6/02/92      40,000,000
    Lithuania...............................         6/05/92      10,000,000
    Latvia..................................         6/09/92      10,000,000
    Estonia.................................         6/10/92      10,000,000
    Romania.................................         7/17/92      10,000,000
    Moldova.................................         8/17/92      10,000,000
    Tajikistan..............................         8/21/92      10,000,000
    Belarus.................................         9/09/92      24,000,000
                                                             ---------------
          Total.............................  ..............     396,310,000
                                                             ===============
    Title I Funded Food for Progress:
        Albania.............................        10/02/91      27,500,000
        Panama..............................        12/02/91       4,000,000
        Nicaragua...........................         2/18/92      25,000,000
        Armenia.............................         8/25/92      23,000,000
        Georgia.............................         9/01/92      14,000,000
        Kyrgyzstan..........................         9/11/92      10,000,000
                                                             ---------------
          Total.............................  ..............     103,500,000
                                                             ===============
          Grand total, 28 countries.........  ..............     499,810,000
    ------------------------------------------------------------------------

       PUBLIC LAW 480 TITLE I COMMITMENTS BY COUNTRY AND SIGNED AGREEMENT
                             DATES--FISCAL YEAR 1993
    ------------------------------------------------------------------------
                                                                   Total
                     Country                    Signed date     commitment
                                                                   value
    ------------------------------------------------------------------------
    Costa Rica..............................        11/06/92     $15,000,000
    Jamaica.................................        11/10/92      30,000,000
    Zimbabwe................................        12/11/92       5,000,000
    Morocco.................................         1/25/93      20,000,000
    Lithuania...............................         2/12/93      25,000,000
    Cote d'Ivoire...........................         3/03/93      10,000,000
    Belarus.................................         3/04/93       5,000,000
    Sri Lanka...............................         3/12/93      10,000,000
    Jordan..................................         3/19/93      30,000,000
    El Salvador.............................         3/23/93      33,400,000
    Suriname................................         4/05/93       3,500,000
    Turkmenistan............................         4/06/93      10,000,000
    Moldova.................................         4/19/93      10,000,000
    Romania.................................         4/21/93      10,000,000
    Bulgaria................................         4/23/93      15,000,000
    Tunisia.................................         4/28/93       5,000,000
    Philippines.............................         4/30/93      20,000,000
    Pakistan................................         6/03/93      40,000,000
    Yemen...................................         6/15/93      10,000,000
    Ukraine.................................         7/21/93      20,000,000
    Guatemala...............................         8/03/93      15,000,000
    Tajikistan..............................         8/05/93      14,000,000
                                                             ---------------
          Total.............................  ..............     355,900,000
                                                             ===============
    Title I funded Food for Progress:
        Armenia.............................         2/11/93      20,600,000
        Georgia.............................         3/12/93      50,400,000
        Kyrgyzstan..........................         3/17/93      18,000,000
        Albania.............................         5/20/93      23,000,000
                                                             ---------------
          Total.............................  ..............     112,000,000
                                                             ===============
          Grand total, 26 countries.........  ..............     467,900,000
    ------------------------------------------------------------------------

       PUBLIC LAW 480 TITLE I COMMITMENTS BY COUNTRY AND SIGNED AGREEMENT
                             DATES--FISCAL YEAR 1994
    ------------------------------------------------------------------------
                                                                   Total
                     Country                    Signed date     commitment
                                                                   value
    ------------------------------------------------------------------------
    Morocco.................................        12/29/93     $15,000,000
    Belarus.................................         1/04/94      27,500,000
    Suriname................................         1/04/94       5,500,000
    Jamaica.................................         1/07/94      20,000,000
    Sri Lanka...............................         2/07/94      18,000,000
    Turkmenistan............................         2/07/94      10,000,000
    Jordan..................................         2/25/94      15,000,000
    Ukraine.................................         3/04/94      20,000,000
    Lithuania...............................         3/14/94      15,000,000
    Moldova.................................         4/05/94      20,000,000
    Guatemala...............................         5/09/94      15,000,000
    Croatia.................................         5/09/94      10,000,000
    Congo...................................         5/18/94       6,000,000
    Philippines.............................         6/01/94      15,000,000
    Cote d'Ivoire...........................         6/20/94      15,000,000
    Angola..................................         7/11/94       8,000,000
    Macedonia...............................         8/09/94       7,000,000
                                                             ---------------
          Total.............................  ..............     242,000,000
                                                             ===============
    Title I Funded Food for Progress:
        Albania.............................         6/03/94      15,000,000
        Armenia.............................         2/15/94      25,000,000
        Georgia.............................         3/07/94      24,000,000
        Kyrgyzstan..........................         2/15/94      16,000,000
        Tajikistan..........................         8/31/94      10,000,000
                                                             ---------------
          Total.............................  ..............      90,000,000
                                                             ===============
          Grand total, 22 countries.........  ..............     332,000,000
    ------------------------------------------------------------------------

       PUBLIC LAW 480 TITLE I COMMITMENTS BY COUNTRY AND SIGNED AGREEMENT
                             DATES--FISCAL YEAR 1995
    ------------------------------------------------------------------------
                                                                   Total
                     Country                    Signed date     commitment
                                                                   value
    ------------------------------------------------------------------------
    Ukraine.................................        11/21/94     $25,000,000
    Jamaica.................................        12/05/94      14,000,000
    Sri Lanka...............................         1/13/95      19,500,000
    Belarus.................................         1/27/95      2O,000,000
    Suriname................................         2/21/95       6,000,000
    Jordan..................................         3/02/95      15,000,000
    Pakistan................................         4/07/95      10,000,000
    Moldova.................................         4/13/95      10,000,000
    Lithuania...............................         6/13/95      10,000,000
    Congo...................................         6/22/95       6,000,000
    Croatia.................................         7/12/95       5,000,000
    Cote d'Ivoire...........................         7/12/95      10,000,000
    El Salvador.............................         8/01/95      10,000,000
    Guyana..................................         8/22/95       3,000,000
    Turkmenistan............................         8/29/95      15,000,000
    Bolivia.................................         8/31/95       5,000,000
    Angola..................................         9/05/95       7,000,000
    Angola..................................         9/21/95       3,980,000
                                                             ---------------
          Total.............................  ..............     194,480,000
                                                             ===============
    Title I funded Food for Progress:
        Albania.............................         8/21/95       5,000,000
        Armenia.............................        12/29/94      31,900,000
        Georgia.............................         2/21/95      24,700,000
        Kyrgyzstan..........................         5/19/95      19,500,000
        Tajikistan..........................         5/11/95       7,000,000
                                                             ---------------
          Total.............................  ..............      88,100,000
                                                             ===============
          Grand total, 22 countries.........  ..............     282,580,000
    ------------------------------------------------------------------------

       PUBLIC LAW 480 TITLE I COMMITMENTS BY COUNTRY AND SIGNED AGREEMENT
                             DATES--FISCAL YEAR 1996
    ------------------------------------------------------------------------
                                                                   Total
                     Country                    Signed date     commitment
                                                                   value
    ------------------------------------------------------------------------
    Guyana..................................        12/12/95      $9,000,000
    Belarus.................................        12/20/95       9,966,802
    Turkmenistan............................        12/21/95      10,000,000
    Armenia.................................        12/27/95      15,000,000
    El Salvador.............................        12/27/95      15,000,000
    Jamaica.................................        12/27/95      15,000,000
    Bolivia.................................        12/28/95      10,000,000
    Sri Lanka...............................        12/28/95      10,000,000
    Jordan..................................        12/28/95      21,000,000
    Lithuania...............................        12/28/95      10,000,000
    Congo...................................        12/29/95       5,000,000
    Cote d'Ivoire...........................        12/29/95      10,000,000
    Suriname................................        12/29/95       5,000,000
    Philippines.............................        12/29/95      15,000,000
    Ukraine.................................        12/29/95      20,000,000
    Moldova.................................         5/31/96       8,500,000
    Pakistan................................         8/05/96      10,000,000
    Moldova.................................         9/06/96       6,500,000
    Congo...................................         9/18/96       3,000,000
    Angola..................................         9/20/96       5,000,000
    Angola..................................         9/23/96       5,000,000
                                                             ---------------
          Total.............................  ..............     217,966,802
                                                             ===============
    Title I Funded Food for Progress:
        Georgia.............................        12/20/95      28,800,000
        Albania.............................        12/28/95       5,000,000
        Kyrgyzstan..........................        12/29/95      15,000,000
        Tajikistan..........................        12/29/95      11,000,000
                                                             ---------------
          Total.............................  ..............      59,800,000
                                                             ===============
          Grand total, 24 countries.........  ..............     277,766,802
    ------------------------------------------------------------------------

        Question. Why weren't Public Law 480 Title I funds carried over
    from fiscal year 1996 included in the initial funding allocation for
    fiscal year 1997?
        Answer. The funds carried over from fiscal year 1996 were not
    included in our initial funding allocations for fiscal year 1997
    because, while the funds apportioned by OMB included an estimate of
    carryover funds, the actual carryover balances were not known until
    late November or December. We did not want to announce Title I
    programming funded from carryover balances until we knew the actual
    balances carried over from fiscal year 1996.
        Question. Please provide for the record the amount of Title I funds
    carried over in each of the past five fiscal years and indicate when
    those carryover balances were allocated.
        Answer. Funds carried into subsequent years from fiscal years 1992
    through 1994 were $4.4 million, $4.7 million, and $16.9 million,
    respectively. In fiscal year 1995, $28.0 million was used to reimburse
    CCC for wheat released from the Food Security Wheat Reserve and $24.7
    million was carried forward into fiscal year 1996. The amount of
    appropriation carried from fiscal year 1996 into fiscal year 1997
    totaled $32.9 million. The $32.9 million will be used in fiscal year
    1997 to fund a portion of the proposed $50 million Public Law 480 Title
    I rescission.
                         expansion of overseas offices
        Question. Funding of $1.5 million was made available for fiscal
    year 1997 to enable the FAS to expand overseas offices. Priority was to
    be given to posts serving expanding markets in Asia and Latin America.
    Where have offices been established with the additional funds provided?
        Answer. In fiscal year 1997, FAS has opened Agricultural Trade
    Offices 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 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 ATO's in both Seoul and Tokyo, all of which will take place
    this summer.
        In conjunction with this increased American officer presence, FAS
    will have increased foreign national contract employee staffing at the
    following 15 offices in the course of fiscal year 1997.

    Brussels, Belgium-U.S. Mission to the E.U.
    Caribbean Basin ATO (Miami)
    Guangzhou, China ATO
    Hanoi, Vietnam
    Jakarta, Indonesia ATO
    Kuala Lumpur, Malaysia
    Lagos, Nigeria
    Manila, Philippines
    Nuevo Laredo, Mexico
    Sao Paulo, Brazil
    Seoul, Korea
    Shanghai, China ATO
    St. Petersburg, Russia
    Taipei, Taiwan
    Tokyo, Japan ATO

        FAS is presently conducting its annual review of overseas
    resources. FAS will continue to adjust staffing to take advantage of
    medium- and long-term opportunities for U.S. agriculture.
        Question. Please provide for the record a list of FAS' counselor/
    attache, and trade offices overseas and the amount of funding and full-
    time equivalent staffing levels provided for each in each of fiscal
    years 1990 through 1996, and estimated for fiscal years 1997 and 1998.
        Answer. I will provide a list of FAS' counselor/attache, and trade
    offices for the record.
        [The information follows:]

    ------------------------------------------------------------------------
      Counselor/attache U.S.
               head                                ATO's
    ------------------------------------------------------------------------
    Argentina, Buenos Aires
    Australia, Canberra
    Austria, Vienna
    Belgium, Brussels (USEU)
    Brazil, Brasilia
    Brazil, Sao Paulo
    Bulgaria, Sofia
    Canada, Ottawa
                               Caribbean Basin (Miami)
    Chile, Santiago
    China, Beijing
                               China, Guangzhou
                               China, Shanghai
    Colombia, Bogota
    Costa Rica, San Jose
    Cote d'Ivoire, Abidjan
    Denmark, Copenhagen
    Dominican Republic, Santo
     Domingo
    Egypt, Cairo
    France, Paris
    Germany, Bonn
                               Germany, Hamburg
    Greece, Athens
    Guatemala, Guatemala City
                               Hong Kong
    India, New Delhi
    Indonesia, Jakarta
                               Indonesia, Jakarta
                               Italy, Milan
    Italy, Rome
    Italy, Rome (FODAG)
                               Japan, Osaka
    Japan, Tokyo
                               Japan, Tokyo
    Kenya, Nairobi
    Korea, Seoul
                               Korea, Seoul
    Malaysia, Kuala Lumpur
    Mexico, Mexico City
                               Mexico, Mexico City
    Morocco, Rabat
    Netherlands, The Hague
    New Zealand, Wellington
    Nigeria, Lagos
    Pakistan, Islamabad
    Peru, Lima
    Philippines, Manila
    Poland, Warsaw
    Russia, Moscow
                               Saudi Arabia, Riyadh
                               Singapore
    South Africa, Pretoria
    Spain, Madrid
    Sweden, Stockholm
    Switzerland, Geneva (WTO)
    Taiwan, Taipei
                               Taiwan, Taipei
    Thailand, Bangkok
    Tunisia,Tunis
    Turkey, Ankara
                               U.A.E. Dubai
    United Kingdom, London
    Venezuela, Caracas
    Vietnam, Hanoi
    ------------------------------------------------------------------------

                                                                  FOREIGN AGRICULTURAL SERVICE OVERSEAS PERSONNEL--FISCAL YEARS 1990-98
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                       Fiscal year--
                                                     -----------------------------------------------------------------------------------------------------------------------------------------------
                Region: Country location                   1990            1991            1992            1993            1994            1995            1996            1997       1998 estimated
                                                     -----------------------------------------------------------------------------------------------------------------------------------------------
                                                        US      FSN     US      FSN     US      FSN     US      FSN     US      FSN     US      FSN     US      FSN     US      FSN     US      FSN
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    Austria, Vienna.................................       2       1       2       1       2       1       3       1       3       1       3       1       3       1       3       1       3       1
        Czech Republic, Prague......................  ......  ......  ......  ......  ......  ......  ......       1  ......       1  ......       1  ......       1  ......       1  ......       1
        Hungary.....................................  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......       1  ......       1  ......       1
    Belgium, Brussels...............................       2       2  ......       2  ......       2  ......       2  ......       1  ......       2  ......       1  ......       1  ......       1
        USEU Brussels, Brussels.....................       5       1       5       1       5       1       5       1       5       1       5       1       5       2       5       2       5       2
    Bulgaria, Sofia.................................  ......  ......  ......  ......  ......  ......       2       1       2       2       2       2       2       2       1       2  ......       2
        Serbia, Belgrade............................       2       3       2       3       2       3  ......       2  ......       1  ......       1  ......       1  ......       1  ......       1
    Denmark, Copenhagen.............................       1       3       1       3       1       3       1       3       1       3       1       3       1       2  ......       2  ......       2
    France, Paris...................................       4       4       4       4       4       4       4       4       4       4       4       4       4       4       3       4       3       4
    Germany, Berlin.................................       1       1       1       1       1  ......       1  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......
    Germany, Bonn...................................       3       5       3       5       3       5       2       5       3       4       3       4       3       4       3       4       3       4
    Greece, Athens..................................       1       2       1       2       1       2       1       2       1       2       1       2       1       2  ......       2  ......       2
    Ireland, Dublin.................................  ......       1  ......       1  ......       1  ......       1  ......       1  ......       1  ......       1  ......       1  ......       1
    Italy, Milan....................................       1       1       1       1       1       1       1       1       1       1       1       1       1       1  ......  ......  ......  ......
    Italy, Rome.....................................       3       4       3       4       3       4       3       4       2       4       2       4       2       4       2       4       2       4
        FODAG Rome..................................       1  ......       1  ......       1  ......       1  ......       1  ......       1  ......       1  ......       1  ......       1  ......
    Netherlands, The Hague..........................       2       3       2       2       2       4       2       4       2       3       2       3       2       3       2       3       2       3
    Norway, Oslo....................................  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......
    Poland, Warsaw..................................       3       1       3       1       3       1       2       2       2       2       2       2       2       2       2       2       2       2
    Portugal, Lisbon................................       1       2       1       1       1       2       1       2  ......       2  ......       2  ......       2  ......       2  ......       2
    Romania, Bucharest..............................  ......       1  ......       1  ......       1  ......       1  ......       1  ......       1  ......       1  ......       1  ......       1
    Spain, Madrid...................................       2       4       2       4       2       4       2       4       2       4       2       4       2       4       2       4       2       4
    Sweden, Stockholm...............................       1       3       1       3       1       3       1       3       1       2       1       3       1       3       1       3       1       3
        Latvia, Riga................................  ......  ......  ......  ......  ......  ......  ......  ......  ......       1  ......       1  ......       1  ......       1  ......       1
    Switzerland, Bern...............................       1       2       1       2       1       2       1       1  ......       1  ......       1  ......  ......  ......  ......  ......  ......
    Switzerland, Geneva.............................       3  ......       3  ......       3  ......       3  ......       3  ......       3  ......       3  ......       4  ......       4  ......
    Turkey, Ankara..................................       1       2       1       2       1       2       1       2       2       2       2       2       2       2       2       2       2       2
    Turkey, Istanbul................................       1  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......
    United Kingdom, London..........................       3       3       3       3       3       3       3       2       3       4       3       4       3       3       2       3       2       3
    Russia, Moscow..................................       4  ......       4  ......       4  ......       5  ......       5  ......       5       3       5       3       6       3       6       3
        Kazakhstan, Almaty..........................  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......       1  ......       1  ......       1  ......       1
        Ukraine, Kiev...............................  ......  ......  ......  ......  ......  ......  ......  ......  ......       1  ......       1       1       1       1       1       2       1
                                                     -----------------------------------------------------------------------------------------------------------------------------------------------
          Subtotal..................................      48      49      45      47      45      49      45      49      43      49      43      55      44      53      40      52      40      52
                                                     ===============================================================================================================================================
    Algeria, Algiers................................  ......  ......  ......  ......  ......  ......  ......  ......  ......       1  ......       1  ......  ......  ......  ......  ......  ......
    Bangladesh, Dhaka...............................  ......       1  ......       1  ......       1  ......       1  ......       1  ......       1  ......       1  ......       1  ......       1
    Cote d'lvore, Abidjan...........................       2       2       2       2       2       2       2       2       1       2       1       2       1       2       1       2       1       2
    Egypt, Cairo....................................       3       2       3       2       3       2       2       2       2       2       2       2       2       1       2       1       2       1
    India, New Delhi................................       3       4       3       4       2       5       2       4       2       5       2       5       2       5       2       5       2       5
    Israel, Tel Aviv................................  ......       1  ......       1  ......       1  ......       1  ......       1  ......       1  ......       1  ......       1  ......       1
    Kenya, Nairobi..................................       2       1       2       1       2       1       2  ......  ......       1       2       1       1  ......       1  ......       1  ......
    Morocco, Rabat..................................       1       2       1       2       1       2       1       1       1       1       1       2       1       1       1       1       1       1
    Nigeria, Lagos..................................       1       1       1       1       2       2       2       1       1       2       1       2       1       1       1       1       1       1
    Pakistan, Islamabad.............................       1       2       1       2       1       2       1       2       1       2       1       2       1       2       1       2       1       2
    South Africa, Pretoria..........................       1       2       1       2       1       2       1       2       1       2       2       4       2       4       2       4       2       4
    Syria, Damascus.................................  ......       1  ......       1  ......       1  ......       1  ......       1  ......       1  ......       1  ......       1  ......       1
    Tunisia, Tunis..................................  ......  ......  ......  ......  ......  ......  ......  ......       1       2       1       2       1       2       1       2  ......       2
                                                     -----------------------------------------------------------------------------------------------------------------------------------------------
          Subtotal..................................      14      19      14      19      14      21      13      17      10      23      13      26      12      21      12      21      11      21
                                                     ===============================================================================================================================================
    Australia, Canberra.............................       1       2       1       2       1       2       1       2       1       3       1       2       1       2       1       2       1       2
    China, Beijing..................................       3  ......       3  ......       3  ......       3  ......       5  ......       4  ......       4  ......       4  ......       4  ......
    China, Shanghai.................................  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......       1  ......       1  ......       1  ......       1  ......
    Indonesia, Jakarta..............................       3       2       3       2       3       2       3       2       3       2       3       2       2       2       2       2       2       2
    Japan, Tokyo....................................       5       8       5       8       5       8       5       7       5       7       5       7       5       7       5       7       5       7
    Korea, Seoul....................................       2       3       2       3       2       3       1       3       2       3       3       5       3       5       3       5       3       5
    Malaysia, Kuala Lumpur..........................       1       2       1       2       1       2       1       2       1       2       1       2       1       2       1       2       1       2
    New Zealand, Wellington.........................       1       2       1       2       1       2       1       2       1       2       1       2       1       1       1       1       1       1
    Philippines, Manila.............................       2       3       2       3       2       3       2       3       2       3       2       3       2       3       2       3       2       3
    Thailand, Bangkok...............................       2       3       2       3       2       3       2       3       2       3       2       3       2       3       2       3       2       3
        Burma, Rangoon..............................  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......       1  ......       1  ......       1
    Vietnam.........................................  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......       1  ......       1  ......       1  ......
                                                     -----------------------------------------------------------------------------------------------------------------------------------------------
          Subtotal..................................      20      25      20      25      20      25      19      24      22      25      23      26      23      26      23      26      23      26
                                                     ===============================================================================================================================================
    Argentina, Buenos Aires.........................       2       3       2       3       2       3       2       3       2       3       2       3       2       3       2       3       2       3
    Brazil, Brasilia................................       4       6       3       6       3       6       3       6       2       2       2       2       2       2       2       2       2       2
    Brazil, Rio de Janeiro..........................  ......  ......  ......  ......  ......  ......  ......  ......  ......       2  ......       2  ......  ......  ......  ......  ......  ......
    Brazil, Sao Paulo...............................  ......  ......  ......  ......  ......  ......  ......  ......       1       2       1       2       1       3       1       3       2       3
    Canada, Ottawa..................................       2       3       2       3       2       3       2       3       2       3       2       3       2       3       2       3       2       3
    Chile, Santiago.................................       1       2       1       2       1       2       1       2       1       2       1       2       1       2       1       2       1       2
    Colombia, Bogota................................       1       3       1       3       1       3       1       3       1       3       1       3       1       3       1       3       1       3
    Costa Rica, San Jose............................       1       2       1       1       1       2       1       2       1       2       1       2       1       2       1       2       1       2
    Dominican Republic, S.A.........................       2       1       2       1       2       1       2       1       2       1       2       1       2       1       1       1       1       1
    Ecuador, Quito..................................       1       2  ......       2  ......       2  ......       2       1       2       1       2  ......       2  ......       2  ......       2
    Guatemala, Guatemala City.......................       2       2       2       2       2       1       2       1       2       1       2       2       2       2       2       2       1       2
    Panama, Panama City.............................  ......  ......  ......  ......       1       1       1       1  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......
    Peru, Lima......................................       1       3       1       3       1       3       1       3  ......       2  ......       2       1       2       1       2       1       2
    Mexico, Mexico City.............................       3       5       3       4       2       4       3       6       3       6       3       6       3       6       3       6       3       6
    Venezuela, Caracas..............................       1       1       1       1       1       1       1       1       1       1       2       3       2       3       2       3       2       3
                                                     -----------------------------------------------------------------------------------------------------------------------------------------------
          Subtotal..................................      21      33      19      31      19      32      15      25      19      32      20      35      20      34      19      34      19      34
                                                     ===============================================================================================================================================
    Caribbean Basin.................................  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......       1  ......       1  ......
    Algiers, Algeria................................       2       1       2       1       2       1       2       1  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......
    Bahrain, Manama.................................       1       2       1       2       1       2       1       2  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......
    Germany, Hamburg................................       1       2       1       2       1       2       1       2       1       2       1       2       1       2       1       2       1       2
    Italy, Mllan....................................  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......       1       1       1       1
    United Kingdom..................................       1       2       1       2       1       2       1       1  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......
    Russia, Moscow..................................  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......       1  ......
    Irag, Baghdad...................................       1  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......
    Nigeria, Lagos..................................       1       1       1       1  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......
    Tunisia, Tunis..................................       1       2       1       2       1       2       1       2  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......
    U.A.E., Dubai...................................  ......       1  ......       1  ......       1  ......       1       1       3       1       3       1       3       1       3       1       3
    Saudi Arabia, Jeddah............................  ......       2  ......       1  ......       1  ......       1  ......       1  ......       1  ......       1  ......       1  ......       1
    Saudi Arabia, Riyadh............................       1  ......       1       1       1       1       1       1       1       1       1       1       1       1       1       1       1       1
    Mexico, Mexico City.............................  ......  ......  ......  ......       1  ......       1  ......       1  ......       1  ......       2  ......       2  ......       2  ......
    Venezuela, Caracas..............................       1       2       1       2       1       2       1       2       1       2  ......  ......  ......  ......  ......  ......  ......  ......
    China, Beijing..................................       1  ......       1  ......       1  ......       1  ......       1  ......       1  ......  ......  ......  ......  ......  ......  ......
    China, Shanghai.................................  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......       1  ......       1  ......       1  ......
    China, Guangzhou................................       1  ......       1  ......       1  ......       1  ......       1  ......       1  ......       1  ......       1  ......       1  ......
    Hong Kong, Hong Kong............................       2       2       2       2       2       2       2       2       2       1       2       2       2       2       2       2       3       2
    Indonesia, Jakarta..............................  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......       1  ......       1  ......
    Japan, Osaka....................................  ......  ......  ......       1       1       1       1       1       1       1       1       1       1       2       1       2       1       2
    Japan, Tokyo....................................       1       3       1       3       2       3       2       3       2       3       2       3       2       3       2       3       3       3
    Korea, Seoul....................................       1       1       1       1       1       2       1       2       1       2       1       2       1       2       1       2       2       2
    Singapore, Singapore............................       2       2       2       2       2       2       2       2       2       2       2       2       2       2       2       2       1       2
                                                     -----------------------------------------------------------------------------------------------------------------------------------------------
          Subtotal..................................      18      23      17      24      19      24      19      23      15      18      14      17      15      18      18      19      21      19
                                                     ===============================================================================================================================================
          Total.....................................     121     149     115     146     117     151     111     138     109     147     113     159     114     152     112     152     114     152
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

             FOREIGN AGRICULTURAL SERVICE GENERAL AUTHORIZATIONS AND AMERICAN SALARIES--FISCAL YEARS 1990-98
                                               [In thoursands of dollars]
    ----------------------------------------------------------------------------------------------------------------
                                                                      Fiscal year--
                  Post              --------------------------------------------------------------------------------
                                       1990     1991     1992     1993     1994     1995     1996     1997     1998
    ----------------------------------------------------------------------------------------------------------------
      FOREIGN AGRICULTURAL AFFAIRS

    Austria........................      277      291      371      533      552      606      663      675      675
    Czech Rep......................  .......  .......  .......       21       31       41       36       45       45
    France.........................      860      828      968    1,041      973    1,033    1,002      919    1,014
    Greece.........................      202      231      251      271      286      307      364      296      296
    Israel.........................       66       82       92      112      109      121      110      129      129
    Italy, Emb.....................      718      846    1,015      932      778      827      840      706      706
    Italy, Fodag...................      153      162      194      200      180      187      203      206      206
    Portugal.......................      290      222      274      287      153      192      433      177      177
    Spain..........................      669      783      848      818      764      767      804      862      957
    Switz, Bern....................      235      233      251      195       87      106       86       59       59
    Switz, Gen.....................      378      468      506      555      551      594      614      725      725
    Belgium, E.....................      344      238      276      271      255      274      332      217      217
    Belg. USEU.....................      765      806      919    1,019      946      968    1,001    1,169    1,169
    Denmark........................      291      330      354      401      421      429      337      273      273
    United Kingdom.................      618      586      686      574      505      986      734      683      683
    Germany........................      644      646      783      738      671      728      764      794      794
    Berlin.........................      149      158      197      129  .......  .......  .......  .......  .......
    Ireland........................      124      139      147      123      125      137      147      158      158
    Netherlands....................      470      535      632      627      640      703      727      704      704
    Sweden.........................      202      235      324      309      272      295      318      360      360
                                    --------------------------------------------------------------------------------
          Total....................    7,455    7,819    9,088    9,156    8,299    9,301    9,515    9,157    9,347
                                    ================================================================================
    Argentina......................      395      488      548      558      597      652      688      715      715
    Brazil.........................      659      705      748      808      710      852    1,161      744      744
    Canada.........................      336      362      408      358      729      409      414      451      451
    Chile..........................      152      182      206      226      236      266      319      355      355
    Colombia.......................      248      234      255      262      349      357      350      416      416
    Costa Rica.....................      141      169      220      278      274      310      309      346      346
    Dom. Rep.......................      253      268      318      339      354      364      393      307      307
    Ecuador........................      115       61       70       98      274      291      177      136      136
    Guatemala......................      314      373      411      439      438      501      538      566      566
    Mexico.........................      445      549      733      712      700      616      647      708      708
    Panama.........................  .......      111      191  .......  .......  .......  .......  .......  .......
    Peru...........................      304      308      469      308      149      177      246      317      317
    Venezuela......................      128      164      192      196      185      457      418      439      439
                                    --------------------------------------------------------------------------------
          Total....................    3,490    3,974    4,769    4,582    4,995    5,252    5,660    5,500    5,500
    ----------------------------------------------------------------------------------------------------------------

                    FOREIGN AGRICULTURAL SERVICE GENERAL AUTHORIZATION HISTORY--FISCAL YEARS 1990-97
                                               [In thoursands of dollars]
    ----------------------------------------------------------------------------------------------------------------
                                                                      Fiscal year--
                  Post              --------------------------------------------------------------------------------
                                       1990     1991     1992     1993     1994     1995     1996     1997     1998
    ----------------------------------------------------------------------------------------------------------------
      FOREIGN AGRICULTURAL AFFAIRS

    Algeria........................  .......  .......  .......  .......      231       44       16       30       30
    Bulgaria.......................  .......  .......      258      326      294      312      381      267      172
    Bangladesh.....................       60       38       48       34       33       33       34       60       60
    Cote D'Ivoire..................      317      381      419      471      261      237      255      311      311
    Egypt..........................      358      323      423      340      334      328      380      380      380
    India..........................      357      352      319      337      346      312      420      403      403
    Kenya..........................      171      198      265      240       47      262      188      228      228
    Morocco........................      137      162      193      188      219      224      215      223      223
    Nigeria........................      130      126      246      247      313      345      347      348      348
    Pakistan.......................      174      182      274      214      182      196      217      239      239
    Romania........................       20       15       29       31       30       31       26       30       30
    Syria..........................       32       39       43       52       32       42       42       56       56
    Serbia-Mont....................  .......  .......  .......  .......  .......       22       36       40       40
    S. Africa......................      159      186      228      256      262      421      412      566      566
    Tunisia........................  .......  .......  .......  .......      190      219      205      232      232
    Turkey.........................      195      236      217      278      368      454      413      496      496
                                    --------------------------------------------------------------------------------
          Total....................    2,110    2,238    2,962    3,014    3,142    3,482    3,587    3,909    3,814
                                    ================================================================================
    Australia......................      250      239      294      267      287      295      307      325      325
    PRC............................      318      269      423      556      789      787    1,023      922      922
    Indonesia......................      301      322      385      650      543      509      476      434      434
    Japan..........................    1,001    1,138    1,372    1,428    1,546    1,582    1,584    1,611    1,611
    Korea..........................      360      310      358      374      430      531      587      602      602
    Malaysia.......................      146      168      186      206      203      223      231      228      228
    New Zealand....................      130      136      151      151      180      168      172      201      201
    Philippines....................      235      247      318      386      351      412      460      511      511
    Poland.........................      204      299      440      359      377      380      411      482      482
    Russia.........................      320      459      692      961      907      757      770      957      957
    Thailand.......................      266      314      518      511      596      568      638      637      637
    Ukraine........................  .......  .......  .......  .......  .......      155      142      154      249
    Vietnam........................  .......  .......  .......  .......  .......  .......      198      268      268
    Yugoslavia.....................      123      147      119       33       20  .......  .......  .......  .......
                                    --------------------------------------------------------------------------------
          Total....................    3,654    4,048    5,256    5,882    6,229    6,367    6,999    7,332    7,427
                                    ================================================================================
          Total, FAA...............   16,709   18,079   22,075   22,634   22,665   24,402   25,761   25,898   26,088
                                    ================================================================================
       AGRICULTURAL TRADE OFFICES

    Algiers, Algeria...............      479      448      476      554  .......  .......  .......  .......  .......
    Manama, Bahrain................      295      323      366      362  .......  .......  .......  .......  .......
    Caribbean basin................  .......  .......  .......  .......  .......  .......  .......      132      132
    Beijing, China.................      281      206      230      272      190  .......  .......  .......  .......
    Shanghai, China................  .......  .......  .......  .......  .......      301      580      553      553
    Guangzhou, China...............      181      212      209      536      316      307      348      406      406
    Hamburg, Germany...............      471      498      533      537      855      556      483      433      433
    Hong Kong......................      547      590      645      666      814      777      967      845      845
    Jakarta, Indonesia.............  .......  .......  .......  .......  .......  .......      105       97       97
    Baghdad, Iraq..................      221  .......  .......  .......  .......  .......  .......  .......  .......
    Milan, Italy...................  .......  .......  .......  .......  .......  .......  .......      255      255
    Tokyo, Japan...................    1,266    1,540    1,646    1,740    1,439    2,207    1,994    1,930    1,971
    Osaka, Japan...................  .......      141    1,937    1,144    1,268    1,943      417      451      451
    Seoul, Korea...................      245      528      710      655      672      773      891      918      959
    Mexico.........................  .......  .......      856      743      777      755      883    1,010    1,010
    Lagos, Nigeria.................      103      115  .......  .......  .......  .......  .......  .......  .......
    Moscow, Russia.................  .......  .......  .......  .......  .......  .......  .......  .......  .......
    Riyadh, Saudi Arabia...........      266      261      285      263      288      287      312      326      326
    Singapore......................      703      725      782      821      891      928      999      962      921
    Tunis..........................      178      175      212      222  .......  .......  .......  .......  .......
    Instanbul, Turkey..............       56       67  .......  .......  .......  .......  .......  .......  .......
    London, U.K....................      821    1,219    1,313    1,298  .......  .......  .......  .......  .......
    Caracas, Venezuela.............      229      321      319      351      265  .......  .......  .......  .......
    Dubai, U.A.E...................  .......  .......  .......  .......      427      327      320      306      306
                                    --------------------------------------------------------------------------------
          Total, ATO...............    6,342    7,369   10,519   10,164    8,202    9,161    8,299    8,624    8,665
                                    ================================================================================
          Grand total..............   23,051   25,448   32,594   32,798   30,867   33,563   34,060   34,522   34,753
    ----------------------------------------------------------------------------------------------------------------

                            FOREIGN AFFAIRS ADMINISTRATIVE SUPPORT \1\--FISCAL YEARS 1990-98
                                               [In thoursands of dollars]
    ----------------------------------------------------------------------------------------------------------------
                                                                      Fiscal year--
                  Post              --------------------------------------------------------------------------------
                                       1990     1991     1992     1993     1994     1995     1996     1997     1998
    ----------------------------------------------------------------------------------------------------------------
    Foreign Agricultural Affairs...    5,120    3,320    4,143    4,500    4,392    4,858    4,853    5,133    5,133
    Agricultural Trade Offices.....    1,850    1,660    1,413    1,770    1,525    1,434    1,320    1,362    1,362
    ----------------------------------------------------------------------------------------------------------------
    \1\ Reimbursennent to State Department.

                     proposed appropriations bill language
        Question. The fiscal year 1998 budget proposes new appropriations
    bill language to provide up to a $3 million advance appropriation to
    fund overseas wage and price increases, subject to documentation by
    USDA of actual overseas inflation and deflation. How has the FAS
    managed the impact of overseas inflation and exchange rate variations
    in past years?
        Answer. In previous budgets, requests for adjustments for
    anticipated overseas wage and price increases and exchange rate
    fluctuations were included 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 levels estimated and conversely, budgets were presented that did
    not include sufficient funding to maintain current services overseas.
        Question. Why is the agency now seeking authority to use up to $3
    million in 1999 to compensate for any net 1998 overseas inflation?
        Answer. The proposed advance appropriation will eliminate the
    significant budgetary uncertainties associated with attempting to
    accurately forecast wage and price increases as well as currency
    fluctuations 18 to 24 months in advance. Upon demonstration as to the
    extent that the U.S. exchange rate fell relative to other currencies
    overall in fiscal year 1998, OMB will make available some or all of the
    fiscal year 1999 advance appropriation. In addition, having the fiscal
    year 1998 appropriation available for obligation for two fiscal years
    will allow for the subsequent use of an unobligated balances that
    remain where the U.S. exchange rate rises relative to other currencies.
        Question. What FAS activities would be impacted by reserving this
    $3 million to possibly be spent in fiscal year 1999?
        Answer. The proposed fiscal year 1999 advance appropriation would
    cover increases in overseas operations costs due to unavoidable wage
    and price increases and/or currency fluctuations in fiscal year 1998.
    By having these funds appropriated in advance, no FAS activities would
    be impacted should our overseas offices experience higher operating
    costs due to these macro-economic factors. In fact this proposal would
    eliminate the potential that FAS currently faces of having to reduce
    FAS export expansion efforts in the current fiscal year to offset
    unanticipated and unavoidable overseas cost increases.
        Question. How would the agency notify this Committee that it had
    documented actual overseas inflation and deflation?
        Answer. Using publicly available exchange rates and other factors,
    FAS will construct a weighted index that indicates the loss of buying
    power the agency faces overseas. Needed funds out of the $3 million
    advance appropriation will be used to compensate for the change. The
    Committee would be informed ahead of time before any action is taken,
    as well as given an opportunity to comment on the exchange rate index.
                      market access barrier identification
        Question. The fiscal year 1998 request includes an increase of
    $500,000 for a Market Barrier Identification initiative. Under this
    initiative, FAS would 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
    products in the top 30 U.S. export markets.
        For fiscal year 1998, FAS is seeking $500,000 for a Market Barrier
    Identification initiative. The explanatory notes indicate that this
    initiative will lead to recommendations for overcoming the identified
    barriers to expand U.S. agricultural exports. Why is the development of
    a catalog necessary to do this? How do you identify and overcome these
    barriers now?
        Answer. The term catalog in this situation implies a much broader
    meaning--not simply short descriptions of identified trade problems in
    a country. The initiative's goal is to more systematically and
    comprehensively identify technical barriers all the way from very minor
    barriers up through the obvious major issues. Many barriers are minor
    irritants which are sporadic and in fact overcome by commerce without
    major fuss. Other barriers are critical blockages which effectively
    stop trade. The initiative envisions a broad-base engagement to better
    facilitate private trade's and government's ability to identify and
    navigate around these hurdles and eliminate the unjustified ones. The
    end result will provide U.S. exporters with more systematic,
    comprehensive, timely and definitive solutions for their export
    interests on the one side, and will help facilitate resolution of
    outstanding barriers on the other.
        Question. Doesn't this annual report identify barriers to the
    expansion of U.S. agricultural exports? Why does the USDA need to do a
    separate catalog?
        Answer. This initiative does not represent a duplicate listing of
    barriers on an annual basis. It serves both daily market servicing and
    outreach as well as strategic issue resolution.
        Question. Who are the intended users of this proposed catalog?
        Answer. U.S. agricultural product exporting firms are targeted as
    the primary beneficiaries of this initiative.
        Question. Please provide a detailed justification of the $500,000
    requested for this initiative.
        Answer. A major gain in the Uruguay Round was agreement to include
    disciplines on technical barriers to trade. Elaboration of the specific
    disciplines in both the Agreement on Technical Barriers to Trade and
    the Agreement on the Application of Sanitary and Phytosanitary Measures
    is continuing, especially with regard to harmonization, equivalency and
    consistency. Clearly a starting point for a meaningful discussion of
    all these is knowing how transparent or non-transparent a market is.
    This initiative takes a more comprehensive, detailed approach to
    transparency issues with respect to U.S. agricultural export interests
    in the top 30 U.S. markets. Transparency is to know in advance what
    will be expected if I want to export x product to y country. This
    information is not always readily available. This initiative is in line
    with the objectives of improved government services, more systematic
    servicing and outreach to current and potential U.S. agricultural
    exporters.
                           cochran fellowship program
        Question. Please provide a breakdown by country and funding source
    of the fiscal year 1996 and estimated fiscal year 1997 Cochran
    Fellowship participant levels.
        Answer. In fiscal year 1996, a total of 676 participants from 44
    countries received training under the Cochran Fellowship Program. Of
    the total, 287 participants (39 percent of the total) were funded by
    appropriations, 207 participants (31 percent of total) were funded by
    USDA's Emerging Markets Office (EMO), and 182 participants (27 percent
    of the total) were funded by the U.S. Agency for International
    Development (USAID) under the Freedom Support Act. Appropriations were
    used in 29 countries of Asia, Latin America, Africa, and Eastern
    Europe. EMO funds were used in Eastern Europe (excluding Turkey), South
    Africa and Namibia, and Russia, Ukraine and Kazakstan. Freedom Support
    Act funding was used in the 12 New Independent States.
        The following provides the fiscal year 1996 participant levels by
    region and by country:
      --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 Republic (10), Slovakia (15),
            Albania (7), Bulgaria (22), Slovenia (16), Croatia (8), Latvia
            (10), Estonia (10), Lithuania (6), and Romania (8).
      --Latin America: 85 participants from seven North, Central, and South
            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 (22), 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).
        In fiscal year 1997, the Cochran Fellowship Program will work in
    the above mentioned countries except Belarus and possibly Albania. In
    addition, pilot programs will be started in Brazil, Kenya, and Bosnia.
    The program in Vietnam will be expanded using EMO funding. We expect to
    provide training to more than 700 participants in fiscal year 1997.
        Question. Also, please provide examples of achievements, by
    country, the Program has documented in 1996.
        Answer. The Cochran Fellowship Program provides an effective method
    of providing U.S.-based training for international agriculturists and
    business persons. The program is a tool for expanding U.S. contacts
    within the country, addressing important policy and trade-related
    issues, and in promoting contact with the U.S. agribusiness sector. The
    following provide examples of the success of the 1996 program.
        Vietnam.--The Cochran Fellowship Program was initiated in Vietnam
    in 1996.The Agricultural Attache in Hanoi states: ``FAS/Hanoi is
    extremely pleased with the development of the Cochran Fellowship
    Program in Vietnam. The program has served to expand our contacts and
    increase our knowledge and understanding of the agricultural sector.
    The implementation phase of the program will help develop the linkages
    necessary to expand the market for U.S. agricultural products here in
    Vietnam.''
        Korea.--The FAS Agricultural Office in Seoul reports that Cochran
    Programs in food safety have helped improve mutual understanding of
    food safety and technical issues: ``The end result has been fewer
    misunderstandings, relatively fewer problems, and improved access for
    U.S. agricultural products. This has been especially true for high-
    valued U.S. agricultural products, an area that is the fastest growing
    and approaching $1 billion annually.''
        Korea.--The Oregon Department of Agriculture reports that Korea has
    approved the Oregon Export Service Center as the foreign testing center
    for pre-clearance of U.S. products going to Korea. ``We are the first
    organization that Korea has ever considered to certify as a foreign
    testing organization. This is a milestone for us and the Cochran
    Program helped us a great deal in achieving this goal.'' Twenty-two
    (22) Cochran-sponsored officials from the Korean Ministry of Health &
    Social Welfare and Food & Drug Administration have visited the Oregon
    Export Service Center over the past three years.
        China.--The FAS Agricultural Trade Office in Guangzhou, China
    reports that a 1995 Seafood Team ``produced excellent contacts with an
    enormous industry with which the U.S. had limited previous contacts. At
    a quantified minimum, hundreds of thousands--possibly millions--of
    dollars worth of trade has resulted directly from that one team.''
        Malaysia.--A Senior Advisor from the Prime Minister's Office in
    Malaysia reports that as a result of his Cochran Halal Bilateral
    Education Program he is forming a Halal Coordination Council for
    Malaysia (HCCM) in Chicago. Once established HCCM would be able to
    approve U.S. Halal slaughter facilities without Malaysian authorities
    having to physically inspect the facilities. They are working to have
    HCCM be recognized by other Muslim countries such as Saudi Arabia. This
    could greatly facilitate poultry and other livestock exports to Muslim
    countries.
        Thailand.--The Thai Tanners Association identified their
    participation in Cochran Programs several years ago as the major reason
    Thai importers of hides and skins switched to U.S. suppliers. Exports
    of U.S. hides and skins to Thailand have shown tremendous gains over
    the past five years.
        Mexico.--Over the past six months, the Cochran Program in
    conjunction with FAS Export Credits, CoBank in Denver, and the National
    Cattle Breeders Association has provided training to Mexican bankers on
    the GSM-103 livestock program for Mexico. Since the initial training,
    five sales of U.S. livestock have been registered with USDA for about
    $2.2 million and at least two other sales of $3 and $4 million
    respectively are being negotiated.
        Colombia.--Two Colombian alumni who trained in the U.S. in 1992 and
    1993 report purchases of more than 1,500 breeding sows. Colombian food
    retailers reported purchases of popcorn ($500,000), cookies ($250,000),
    and dried beans after their Cochran program.
        Venezuela.--FAS Caracas reports that a Venezuelan cattleman learned
    how to perform embryo transplants and has already purchased U.S.
    Brahman embryos and equipment used in embryo transplants. In another
    example, two Venezuelan Ministry of Agriculture officials learned how
    commodity boards of trade operate. This training will assist in
    establishing a commodity board of trade in Venezuela, which will
    strengthen market-oriented policies and promote trade.
        Panama.--A 1995 Cochran participant developed a new store layout,
    better displays and advertising, and a more consumer-oriented attitude
    after his supermarket training. This has led to a faster turnover of
    products, which includes new purchases of deli meat, hams, fresh
    produce, and cheeses from the United States.
        Poland.--Poland required imported oak logs to be debarked prior to
    shipping because they were concerned about pests in the bark. Debarked
    logs, however, often became damaged during shipment and thus became
    unsuitable for use in veneer. The Polish General Director for Plant
    Quarantine observed U.S. fumigation methods and was convinced that
    with-bark-on logs from the U.S. were not a threat if the logs were
    properly fumigated. The regulations to allow with-bark-on logs became
    effective in February 1996.
        Regional East Europe.--The FAS Agricultural Attache in Vienna
    states that ``the Cochran Program is one of the most beneficial tools
    available in promoting goodwill, building contacts, and promoting trade
    opportunities in the region.''
        Slovenia.--The FAS Agricultural Attache in Vienna reports that a
    joint 1996 Cochran/American Soybean Association training activity on
    the use of soybean meal in livestock feed has resulted in sales of
    25,000 metric tons of U.S. corn and 5,000 metric tons of U.S. soybean
    meal valued at about $7 million.
        Turkey.--A Turkish participant reported that his company is
    concluding a long-term contract with a Californian supplier of sauces,
    mustard, mayonnaise, and sweet corn after attending the FMI/NASDA Food
    Showcase. He stated: ``I believe this program to be of utmost
    importance in promoting U.S. products for the simple reason that we had
    no intention of importing U.S. products until we came under the
    program.''
        Albania.--The FAS Agricultural Office covering Albania reports that
    Cochran seed certification training has helped convince Albanian import
    authorities of the quality of U.S. certified seed: ``Despite very tight
    Albanian import requirements, the (first shipment of U.S. certified)
    seeds had no problem with entry or registration.''
        Uzbekistan.--A 1995 Cochran fellow from Uzbekistan started a small
    food store in a joint venture with a U.S. company. He imported $130,000
    worth of U.S. consumer products in 1996. The participant will pay his
    own way to the 1997 Food Marketing Institute (FMI) Food Expo in Chicago
    in order to become familiar with additional U.S. consumer ready foods.
        Russia.--A businessman from the Russian Far East attended the
    Produce Marketing Association meeting in San Diego and purchased, on a
    trial basis, more than $220,000 worth of U.S. apples, pears, and other
    fruits. If successful in the trial market, the participant promises to
    import that much per month. Another businessman from the Russian Far
    East is importing 1,200 metric tons per month of flour from a Seattle
    flour company he visited during his 1995 Cochran program.
        Cote d' Ivoire.--The Agricultural Attache in Cote d' Ivoire reports
    that Cochran alumni have already imported or plan to import $20 million
    of brown rice under Public Law 480 Title I and about $30 million on
    commercial terms. A banker, who was part of a Cochran GSM-103
    Agricultural Export Credit Team, reports that his bank facilitated the
    financing for the above purchases, and is working on financing 6,000
    metric tons of U.S. soy oil.
                            export subsidy programs
        Question. Please provide the total amount of bonus awards to U.S.
    exporters under the Export Enhancement Program, the Dairy Export
    Incentive Program, and the Sunflower and Cottonseed Oil Assistance
    Programs in each of fiscal years 1995 and 1996 and estimated for fiscal
    year 1997.
        Answer. I will be glad to provide that information for the record.
        [The information follows:]

               EXPORT ENHANCEMENT PROGRAM--AWARDS FOR FISCAL YEARS
    ------------------------------------------------------------------------
                   Commodity                 Quantity (MT)     Mean bonus
    ------------------------------------------------------------------------
    Fiscal year 1995:
        Barley malt.......................         112,700     $3,740,640.00
        Barley or malting barley..........          75,000      1,963,750.00
        Eggs..............................  \1\ 63,781,720     13,178,873.47
        Feed grains.......................         396,208     11,483,323.04
        Frozen pork.......................          21,030     12,704,714.00
        Frozen poultry....................          40,243     20,823,145.00
        Rice..............................         112,747      5,047,393.00
        Wheat.............................      13,906,704    243,133,273.97
        Wheat Flour.......................         309,799     27,409,110.48
                                                           -----------------
          Total...........................  ..............    339,484,222.96
                                                           =================
    Fiscal year 1996: Frozen poultry......          11,125      5,152,850.00
                                                           -----------------
          Total...........................  ..............      5,152,850.00
                                                           =================
    Fiscal year 1997: There are no awards
     for fiscal year 1997 to date.
    ------------------------------------------------------------------------
    \1\ Dozen.

             DAIRY EXPORT INCENTIVE PROGRAM--AWARDS FOR FISCAL YEARS
    ------------------------------------------------------------------------
                   Commodity                 Quantity (MT)     Mean bonus
    ------------------------------------------------------------------------
    Fiscal year 1995:
        Andydrous milkfat.................          15,243     $7,941,756.20
        Butter............................          12,904      6,009,871.50
        Butteroil.........................           2,239      1,185,533.00
        Butteroil and/or anhydrous milkfat           8,164      6,450,435.50
        Cheddar cheese....................           1,359      1,834,105.00
        Mozzarella cheese.................           1,839      1,964,077.00
        Nonfat dry milk...................         186,898     97,655,598.60
        Processed American cheese.........             227        182,482.28
        Whole milk powder.................          19,384     17,000,948.75
                                                           -----------------
          Total...........................  ..............    140,224,807.83
                                                           =================
    Fiscal year 1996:
        Cheddar cheese....................             158        162,740.00
        Cream cheese......................             290        109,360.00
        Mozzarella cheese.................           1,139      1,006,620.00
        Nonfat dry milk...................          42,674     16,817,678.93
        Processed American cheese.........             904        776,929.64
        Whole milk powder.................           2,580      1,550,938.78
                                                           -----------------
          Total...........................  ..............     20,424,267.35
                                                           =================
    Fiscal year 1997 (through April 14,
     1997):
        Anhydrous milkfat.................             863        741,190.00
        Butter............................             120         64,456.50
        Cheddar cheese....................              76         50,426.00
        Mozzarella cheese.................             722        500,588.00
        Nonfat dry milk...................          38,604     30,116,043.15
        Processed American cheese.........             498        287,456.40
        Whole milk powder.................           1,496      1,509,381.50
                                                           -----------------
          Total...........................  ..............     33,269,541.55
    ------------------------------------------------------------------------

                   QUANTITY AWARDED UNDER THE COTTONSEED OIL AND SUNFLOWERSEED OIL ASSISTANCE PROGRAMS
                                           [Date of agreement for fiscal year]
    ----------------------------------------------------------------------------------------------------------------
                                                                         Quantity/     Estimated \1\    Actual \2\
                                 Country                               awarded (MT)    bonus awarded    bonus paid
    ----------------------------------------------------------------------------------------------------------------
                      Cottonseed Assistance Program

    Fiscal year 1995: Egypt (515A-1)................................           1,200      $16,800.00      $16,796.78
                                                                     -----------------------------------------------
          Total.....................................................           1,200       16,800.00       16,796.78
                                                                     ===============================================
    Total bonus value:
        Sunflowerseed oil...........................................  ..............       16,800.00       16,796.78
        Cottonseed oil..............................................  ..............  ..............  ..............
                                                                     -----------------------------------------------
          Total.....................................................  ..............       16,800.00       16,796.78
                                                                     ===============================================
    Fiscal year 1996: There were no awards for fiscal year 1996.
    Fiscal year 1997: There are no awards for fiscal year 1997.
    ----------------------------------------------------------------------------------------------------------------
    \1\ During fiscal years 1989-1991, the bonus was paid in physical stocks of oil. For these years, the Estimated
      Bonus Awarded represents the estimate of the cost of the bonus oil on the date of the Agreement. For later
      years, this column shows the bonus on the quantity awarded exclusive of shipment tolerances.
    \2\ The Actual Bonus Paid reflects the cost of the bonus oil purchased in fiscal years 1989-1991. In later years
      it reflects bonus payments on the quantity exported, inclusive of tolerances.

                                     ______

                      Questions Submitted by Senator Burns
                          foreign agricultural service
        Question. It is my understanding that your agency does not approve
    of the line item budget for the Foreign Market Development account. It
    has been stated that you are not able to place more funds into the
    account than what is the line item of appropriations, basically that
    you can not put more money in than what is legal. Yet your agency has
    never put any more money in the account in the past, why should this
    Senator and the cooperators believe you would deposit more money in the
    account now?
        Answer. It has been FAS policy to provide the maximum level of
    support possible to the Foreign Market Development Cooperator Program.
    In six of the past ten fiscal years, FAS has provided additional
    funding for the program beyond the baseline level for that particular
    year and we have every intention of continuing this policy.
        Question. FAS intends to assist American agriculture to increase
    the value of farm, food, fish, and forestry exports by 50 percent over
    1994 levels by the year 2000. To meet this goal, FAS will conduct a
    ``demand-driven export strategy, deploying five major policy objectives
    to execute the strategy while integrating commodity and country market
    priorities for allocating scarce export assistance resources.'' How
    does strategic outreach and market intelligence fulfill the strategy of
    doing more with less? In other words, why invest in efforts to increase
    domestic awareness of export opportunities/global consumer quality and
    safety expectations, as well as educating foreign buyers about the
    merits of U.S. products and how they may be purchased, when the
    private-sector is already doing these things without additional federal
    expenditure?
        Answer. Dunn and Bradstreet reports there are approximately 150,000
    companies in the United States producing, manufacturing, packing or
    marketing agricultural products, yet fewer than 10,000 are actually
    engaged in exporting. With sales to the export market growing at three
    times the rate of the domestic market it is very important that U.S.
    companies be alerted to overseas opportunities and the potential for
    profit. Increased exports create jobs in both urban and rural
    communities, provide a safety net for farm income, and contribute
    positively to the balance of trade. It is clearly in the best interest
    of the national economy that the Government engage in increasing
    domestic awareness of global market opportunities, consumer quality and
    safety expectations, and educate foreign buyers about the merits of
    U.S. products. The USDA using its extensive communication network and
    relationships with universities, export assistance centers and, in
    particular, the State Departments of Agriculture is effectively
    conveying the message to small, medium and new-to-export companies and
    cooperatives alike that real export opportunities exist, and that USDA
    can be a full partner to the private sector in expanding sales,
    developing new markets and promoting new products. Frequently,
    companies are reluctant to attempt the export market because of the
    greater risks and higher demands for new market information and country
    specific knowledge. These barriers reduce possible exports without
    Federal encouragement and support. The private sector is neither
    organized nor equipped to conduct the type of information campaign
    needed to be effective in reaching such a diverse and wide-spread
    target audience.
        Question. Consistent with the implementation of the Government
    Performance and Results Act (GPRA), FAS has articulated a ``General
    Goal No. 2: Increase Foreign Demand for U.S. Agricultural, Fish, and
    Forest Product Exports through Market Development and Promotion
    Activities.'' Aside from the obvious question of why this is not the
    agency's number 1 goal, why does FAS propose to cut FAS foreign market
    development activities, particularly from Foreign Market Development
    Cooperator Program to fund the CCC Computer Facility?
        Answer. The 1996 FAIR Act includes provisions that limit CCC
    funding made available each year to other agencies through reimbursable
    agreements. Because of this limitation and the nature of the activities
    involved, the budget proposes to shift the annual operating costs of
    the CCC Computer Facility and related IRM activities as well as the
    Emerging Markets Program, with a combined fiscal year 1998 budget of
    $19.7 million, from mandatory funding to discretionary funding in the
    FAS annual appropriation. FAS, currently uses about half of the total
    section 11 cap, which is needed to fund other CCC activities,
    activities more relevant to the CCC mission in NRCS and FSA. However,
    the President's commitment to achieving a balanced budget by 2002 has
    also placed constraints on discretionary spending and, as a result, the
    FAS budget includes an increase of $14.0 million for these activities,
    with $5.7 million balance to be absorbed through reductions in FAS
    market development activities. This was not a decision that was made
    lightly. However, this reduction can be ameliorated by increased cost-
    sharing by participants in the Foreign Market Development Program.
        Question. FAS proposes an increase of $500,000 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 products in the top 30 U.S. export
    markets. Presumably, the private-sector representatives faced with
    these barriers to trade are better able to identify the problem and
    propose solutions to these market access problems. Why devote the time
    and effort at this time to the compilation of a catalog of barriers to
    trade?
        Answer. FAS receives daily numerous questions regarding various
    types of market access issues. These range from persons wanting to
    start-up in the export market to current high-volume exporters with a
    newly identified (minor or major) barrier. Servicing these questions in
    a systematic and consistent manner will remain an ongoing challenge.
    Providing FAS and its key export development partners with improved
    tools is a key function of this initiative. It will serve both daily
    market servicing and outreach as well as strategic issue resolution.
        A major gain in the Uruguay Round was agreement to include
    disciplines on technical barriers to trade. Elaboration of the specific
    disciplines in both the Agreement on Technical Barriers to Trade and
    the Agreement on the Application of Sanitary and Phytosanitary Measures
    is continuing, especially with regard to harmonization, equivalency and
    consistency. Clearly a starting point for a meaningful discussion of
    all these is knowing how transparent or non-transparent a market is.
    This initiative will take a more comprehensive, detailed approach to
    transparency issues with respect to U.S. agricultural export interests
    in the top 30 U.S. markets.
        Transparency is to know in advance what will be expected if I want
    to export x product to y country. This information is not always
    readily available. This initiative is in line with the objectives of
    improved government services and more systematic servicing and outreach
    to current and potential U.S. agricultural exporters.
        Question. In fiscal year 1996, FAS located staff with the
    California, Colorado, and Oregon State Departments of Agriculture and
    the Iowa State Office of USDA's Farm Service Agency. How has the
    expenditure for these domestically located FAS personnel resulted in
    increased exports? Can you quantify this?
        Answer. Increased agricultural exports are generated by established
    exporters and new-to-export companies and cooperatives. USDA is engaged
    in a massive domestic awareness campaign highlighting export
    opportunities, and the supportive nature of USDA export assistance
    programs. USDA established the four domestic offices for FAS personnel
    to be closer to provide first hand export counseling. This counseling
    and use of USDA export assistance programs has gotten some companies to
    take the first step. The resultant sales represent tangible evidence of
    USDA's commitment to expanding the number of exporting companies and
    can be linked to the efforts of our domestic offices in partnership
    with State Departments of Agriculture.
        Question. How does ``Outreach'' to small, medium and new-to-export
    businesses help U.S. farmers? Is this function better provided by the
    Commerce Department?
        Answer. Targeting small, medium and new-to-export companies in
    addition to cooperatives has led to a higher rate of export
    participation among these groups. USDA continues to expand its
    distribution of knowledge and information on export opportunities and
    export markets to a wide range of target groups and trade-assistance
    organizations. USDA is clearly best suited to assist established
    exporters and new-to-export companies in gaining entry to new markets
    and successfully selling new products because of an extensive
    agricultural attache network system overseas, the largest export
    information network in the world, and corresponding export programs and
    services designed specifically for agricultural companies and
    cooperatives. The expertise of the Department of Commerce, and focus of
    their export assistance and information network is strictly non-
    agricultural. In addition, USDA's partners with the Department of
    Commerce to provide a seamless delivery system to companies seeking to
    export such non-agricultural, yet related, products as fertilizer,
    pesticides or agricultural equipment. The USDA has in place solid
    industry partnerships, and a efficient and effective delivery system to
    serve agricultural companies wishing to export overseas which is second
    to none.
        Question. How much did the 48 outreach events cost per the
    approximately 2,100 participants?
        Answer. As part of the 1996 USDA Global Attache Conference, FAS in
    partnership with FSA and the State Departments of Agriculture held 48
    outreach events in 46 States plus Puerto Rico. Approximately 2,100
    people attended, but thousands more were indirect participants
    contacted via extensive local television, radio and newspaper and
    magazine articles. The cost of the participating attaches at each of
    the events was minimized by arranging for many to simply stop at a
    selected state on the way to the conference or returning to their
    foreign post. The events, while organized and publicized by State
    Department of Agriculture officials, offered opportunities for local
    news coverage touting the success of a community business or
    highlighting the potential impact of exports on local transportation,
    manufacturing or financial services. The overall cost for attache
    participation which would include any additional air fare, per diem,
    and related expenses was under $100,000, but the extent of contact,
    that is the inclusion of indirect participants, far exceeds the
    impression provided by the 2,100 estimate and must be factored in
    accordingly.
        Question. The FAS budget request reads as follows: ``With the
    privatization of many markets and the more disciplined use of export
    subsidies in the post Uruguay Round environment, the value of the more
    traditional marketing effort of the FMD (Foreign Market Development
    Cooperator Program) will take on an increasingly important role in the
    U.S. Long Term Agricultural Trade Strategy (LATS). While the nature of
    these mid-to long-term marketing programs tends to make measuring the
    overall success of the program difficult, it is quite clear that the
    FMD will play a key role in implementing the LATS and reaching the
    Department's Export Goal 2000. The FMD has already contributed to this
    effort, with the value of U.S. exports of bulk commodities (wheat,
    course grains, rice, soybeans, cotton, tobacco, pulses, peanuts, and
    others) having increased from $18 billion to $26 billion in the years
    1991-1996.'' Why are you cutting the budget for this program from $27.5
    million to $22 million?
        Answer. The decision to propose reduced funding for the FMD was not
    easy to make but simply reflects the fiscal realities we all face as we
    move toward the objective of a balanced budget by the year 2002. The
    constraints on both the mandatory and discretionary accounts required a
    number of difficult choices to be made, including the proposal to
    reduce funding for the FMD program as well as other market development
    activities. The impact of the reduced level of federal contribution can
    be offset by higher contribution levels from program participants.
        Question. Under the heading Research and Scientific Activities, FAS
    noted that it recruited a California confectionery company to form a
    joint venture with an Irish counterpart using economic growth and job
    creation as a ``common ground upon which lasting peace can be built.''
    Further, it noted that ``discussions are still underway with a
    recruited Fortune 500 agricultural company to form a similar
    relationship in Ireland.'' What did this cost and how did/will U.S.
    farmers benefit from this activity?
        Answer. FAS costs were minimal in this effort, consisting only of a
    small portion of one staff person's time, to help develop a list of
    American food companies and agricultural cooperatives that were
    interested in exploring investment opportunities in Ireland. This
    included preparations for the White House Conference on Trade and
    Investment with Ireland. While the joint venture of the California and
    Irish confectionery companies was promising, they have since terminated
    their partnership due to a lack of agreement on whether the U.S.
    company would be a partner or a customer for distribution of product.
    No sales of U.S. agricultural products resulted from the partnership.
        With regard to the Fortune 500 agricultural companies recruitment
    efforts, no partnership has resulted.
                                     ______

                     Questions Submitted by Senator Bumpers
                         value-added v. bulk commodity
        Question. Shouldn't the higher levels for value-added products help
    offset the lower levels for rough grains?
        Answer. Yes. For fiscal year 1997, USDA is expecting overall U.S.
    agricultural exports will decline to $56.5 billion, down roughly $3.5
    billion from the record level set in 1996. This overall expected
    decline is entirely attributable to lower bulk commodity exports, led
    by wheat and coarse grain exports which are forecast to fall by a
    combined $5.4 billion. Partially offsetting this bulk commodity
    decline, U.S. exports of value-added (or high-value) agricultural
    exports are projected to rise $2.5 billion to a new record high of $33
    billion.
        While 1997 is expected to be a disappointing year for wheat and
    coarse grains, the longer term prospects for these and other bulk
    commodities are decidedly more bullish. By the year 2002, USDA baseline
    estimates project the volume of U.S. wheat exports will rise by 47
    percent from 1997 levels and coarse grains will rise by 35 percent.
    With high-value exports expected to grow by 27 percent during the same
    period, this means U.S. agricultural exports will be advancing along a
    broad front as we enter the 21st century with total farm product
    exports approaching $70 billion by 2002.
        Question. What are the ratios for these categories of exports?
        Answer. In fiscal 1997, U.S. exports of bulk commodities are
    forecast to total $23.5 billion, representing 41.5 percent of total
    agricultural exports. High-value products are forecast to reach $33
    billion, accounting for the 58.5 percent of total exports.
        Question. How much has each category increased or decreased from
    the previous year?
        Answer. Bulk commodities' share of total U.S. agricultural exports
    has declined, from 48 percent in 1996 to 41.5 percent projected for
    1997. Conversely, high value products' share of the total has increased
    from 52 percent in 1996 to a projected 58.5 percent in 1997. These
    developments are part of a longer term trend that has seen bulk
    commodities' share of total U.S. agricultural exports fall from 70
    percent in 1980 to the current estimate of 41.5 percent, while high-
    value products have gone from 30 percent in 1980 to almost 58.5 percent
    projected for 1997. By 2002, USDA projects high-value products will
    account for 60 percent of total agricultural exports.
                    food safety of imports as a trade issue
        Question. Because we are entering a global food market, what can be
    done to prevent problems like we have seen last week with the case of
    tainted strawberries from Mexico?
        Answer. FAS is very actively engaged in the international processes
    fostering trade in agricultural and food products. FAS focuses
    attention on rules, procedures and guidelines to expand U.S.
    agricultural exports, but we are also keenly aware these same rules
    must apply to U.S. imports. The experience with strawberries again
    reminds us that no process is perfect. Within its mission goal as a
    trade agency, FAS has taken on this and other similar food safety
    issues (such as E. coli in apple juice to Japan): within hours FAS
    responded definitively to foreign countries' concerns that U.S. shipped
    product may have included unsafe lots of specific products. FAS will
    continue to work with other regulatory agencies to provide foreign
    partners these types of timely, valuable information. FAS also
    continues to work within established U.S. inter-agency processes to
    further international standardization for food safety concern.
                   importance of exports to u.s. agriculture
        Question. Is the fact that the agricultural sector is twice as
    dependent on exports (and projected to be 2.5 times as dependent by the
    year 2000) than other sectors of our economy a good sign or a bad sign?
        Answer. We feel this is a good sign as it reflects the growing
    competitiveness of the U.S. agricultural sector in the global market
    place. Furthermore, the expansion of U.S. agricultural trade results in
    increased employment for U.S. citizens and increased profits for U.S.
    companies. It also allows U.S. companies to realize significant
    economies of scale, which can lower prices for U.S. consumers. Without
    the positive stimulus of a expanding export market, many U.S.
    agricultural industries would be forced to contract significantly.
    Exports represent the future of American agriculture. This is why USDA
    is so keenly interested in opening foreign markets and using its export
    programs to counter the efforts of competitor governments who use their
    own well funded programs to give their producers an advantage in the
    global battle for market share. In the wake of the FAIR Act, increasing
    export opportunities is one of USDA's highest priorities since export
    expansion has become a key component of the safety net for our
    producers.
        Question. Does this mean that agriculture is more vulnerable to the
    often disruptive nature of foreign markets and foreign governments'
    trade policies?
        Answer. There is no denying that as our producers become more fully
    integrated in the global food market, the possibility of facing
    disruptions rises. This is an inherent risk with doing business
    internationally. However, USDA is doing everything in its power to
    ensure that disruptive actions are minimized. For example, the USDA
    puts a premium not only on opening foreign markets but ensuring there
    is no backsliding on prior commitments by our trade partners. We see
    the biggest threat coming from sanitary and phytosanitary (SPS)
    barriers where governments in the past have resorted to unsound science
    to justify restricting other countries' access to their markets. For
    that reason, we have increased the level of our resources devoted to
    monitoring other countries actions in this area and, if problems arise,
    we will do whatever is necessary to negotiate a solution that protects
    our industry's interests as we did when U.S. poultry exports to Russia
    were halted.
                    clarification of aquaculture v. seafood
        Question. You indicated the $2.9 billion sales in edible fish and
    seafood was in addition to ``agricultural'' exports. Why are they not
    considered part of ``agricultural'' exports?
        Answer. Traditionally, exports of products such as seafood and
    solid wood products were handled by the Department of Commerce and,
    therefore, have not been included as ``agricultural'' exports. In terms
    of FAS programs, Congress has defined fishery products as agricultural
    products. Now that we are actively working to open and develop markets
    for fishery products, we will explore incorporating fishery products
    trade in the agricultural statistics.
        Question. Why did the edible fish and seafood exports fall from the
    95 level?
        Answer. The value of exports fell primarily because of lower prices
    for salmon and crab. Large increases in farmed salmon production in
    Norway and Chile have depressed world salmon prices in general and
    increased competition, weakening prices to our number one market,
    Japan.
        Question. What was the balance of trade in edible fish and seafood
    for that year?
        Answer. We imported $6.6 billion of seafood products in 1996
    resulting in a trade deficit of $3.7 billion. Shrimp accounted for 37
    percent of these imports.
        Question. How is the domestic demand for these products affecting
    our export and import activities?
        Answer. Many of our exports consist of products where our supply
    exceeds U.S. demand (e.g., monkfish, squid, dogfish, frozen salmon) and
    include products such as sockeye salmon and monkfish livers which are
    exported for top dollar. Primarily we import products that are not
    readily available in the U.S. (i.e., shrimp, year-round fresh salmon,
    swordfish, etc.)
                          developing markets for pork
        Question. What will be the short and long term effect of the Taiwan
    pork health problems for US exports and US producers of pork and other
    agricultural commodities?
        Answer. The immediate effect of the foot-and-mouth disease (FMD)
    outbreak in Taiwan has been an increase in orders from Japan for U.S.
    fresh/chilled pork. The sharpest impact is expected to occur beginning
    in July, when Japan's stocks of frozen pork are drawn down, and Japan's
    gate price (minimum import price) for pork is reduced. Total U.S. pork
    exports for 1997 are now forecast to increase by 44 percent over 1996.
    This represent an increase of 23 percent over pre-FMD estimates.
        Taiwan is expected to remain out of the pork exporting business for
    3 to 5 years, and will find it difficult to reestablish its dominant
    position in the Japanese market. This absence will provide U.S.
    exporters the opportunity to improve their trade contacts within the
    Japanese industry and make permanent gains in market share.
        U.S. pork producers are likely to see improved prices this year.
    Increased domestic demand for corn and soybeans will likely offset any
    reduction in demand from Taiwan.
        The outbreak of foot-and-mouth disease among Taiwan's swine
    population now affects 3,255 of Taiwan's estimated 25,000 hog farms.
    Taiwanese government policy requires the destruction of all hogs on
    infected farms, a number that now totals over 2.7 million head.
    Estimates for the recovery of Taiwan's pork industry range from 3 to 5
    years.
        The ban on exports of Taiwanese pork has left a substantial gap in
    Japan's supply of imported pork. This gap has created an opportunity
    for U.S. pork exporters to increase their market share in Japan. U.S.
    pork exports to Japan are forecast to increase an additional 123,000 MT
    in 1997. This would raise U.S. pork exports from 6.5 to 8 percent of
    total domestic production in 1997.
                          developing markets for beef
        Question. Can U.S. beef gains in Korea offset our problems with the
    EU?
        Answer. We do not expect sales of U.S. beef to the EU to decline
    dramatically. As a matter of fact, U.S. beef exports to the EU have
    recovered since the imposition of the beef hormone ban, increasing from
    $18 million in 1989 to about $30 million in 1996. U.S. sales of beef to
    Korea, our third largest beef market, are expected to grow in 1997, as
    Korean imports are forecast up 19 percent for the year to 234,000
    metric tons. This year, we expect U.S. beef exports to increase 19
    percent to $330 million. The U.S. should maintain its majority share in
    1997 as U.S. beef does well in the Hotel/Restaurant (HRI) sector. This
    sector accounts for over 60 percent of total beef consumed in Korea.
    Also, some chilled beef imports are expected to enter Korea this year,
    which should benefit the United States. We expect continued growth in
    beef exports, as market access increases under the U.S.-Korea Beef
    Agreement. Under this agreement, the amount of beef permitted to be
    imported for private sector sales will increase annually until January
    1, 2001. At that time, all non-tariff barriers to beef imports,
    including state trading, will be removed.
        Question. What is the state of beef and other commodity access to
    the EU?
        Answer. We work to preserve or expand market access for a variety
    of products, both through the WTO and through bilateral contact with
    the Commission and EU member states. The EU remains the second largest
    export market for U.S. agricultural products (after Japan) and over the
    last five years, the value of agricultural exports to the EU has grown
    17 percent to $9 billion. Major components of our trade with the EU
    include soybeans ($2.3 billion), forest products ($1.2 billion), tree
    nuts ($842 million), tobacco ($653 million) and coarse grains ($375
    million). Consumer-oriented products show particular promise and (as a
    group) have grown from $1.8 billion to $2.5 billion over the past 5
    years. In 1989, the introduction of both the EU's ban on meat from
    hormone-treated animals and its Third Country Meat Directive resulted
    in a drastic decline in U.S. beef exports to the EU. U.S. exports of
    beef and beef offal plummeted from over $100 million in 1985-87 to $18
    million in 1989. Since 1989, exports of beef have actually recovered
    ($40 million in 1995, compared with $15 million in 1985-87), but offal
    exports have not ($13 million in 1995, down from $90 million in 1985-
    87).
        Question. What steps are being taken to eliminate barriers with the
    EU?
        Answer. Many of our trade policy efforts with the EU in the past
    decade have focused on the meat and livestock area. Both before and
    after implementation of the EU's Third Country Meat Directive, United
    States Government (USG) officials engaged in negotiations aimed at
    preserving access for our meat products. In 1992, conclusion of the
    U.S.-EU Red Meat Agreement succeeded in eliminating many of the
    barriers that had been imposed on our beef industry, and U.S. beef
    exports recovered somewhat.
        Unfortunately, because of the hormone ban, U.S. offal trade has not
    recovered, and beef exports have not been able to grow as they
    otherwise would have. After years of fruitless attempts to resolve this
    issue bilaterally, and with the improved leverage of the Sanitary and
    Phytosanitary (SPS) Agreement and the dispute settlement procedures in
    the WTO, in 1996 the USG embarked upon a dispute settlement process
    within the WTO. The three-member panel of judges selected to review the
    case have concluded all their meetings, and a final report is expected
    in late May 1997. We are hopeful that the outcome will be in the U.S.'s
    favor and will result in elimination of the EU ban. In recent years,
    the EU has been harmonizing its directives on the whole range of
    animals and animal products (including fish products). We have been
    negotiating an equivalence agreement, in order to preserve U.S. trade
    in these products. We have succeeded in negotiating terms of trade for
    most product areas which will allow U.S. trade to continue. We are
    still trying to finalize details, particularly regarding poultry
    inspection.
        Question. What effect has the BSE problems with British beef had on
    U.S. exports?
        Answer. The only direct effect has been an increase in U.S. exports
    of beef to the United Kingdom, which jumped from 587 metric tons in
    1995 to 1,384 metric tons in 1996. Indirectly however, fears over BSE
    caused considerable anxiety among consumers in important markets for
    U.S. beef. This is particularly true in Japan, where the combination of
    the BSE scare along with unexplained outbreaks of E. coli dampened beef
    consumption and led to slower than expected growth in U.S. exports. We
    expect to see a recovery in Japan's beef consumption over the course of
    1997. Though no cases of BSE have ever been recorded in the United
    States, the controversy surrounding BSE has had an impact on imported
    beef in a number of other markets, particularly in Asia.
                          developing markets for rice
        Question. Of the $125 million in U.S. rice sales to Japan, how much
    is being consumed in that country rather than being used for other
    purposes such as meeting their own foreign food assistance needs?
        Answer. Of the approximately 200,000 tons of U.S. rice purchased by
    Japan during their 1996/97 import campaign, 13,000 tons purchased under
    the semi-private Simultaneous-Buy-Sell (SBS) system is known to have
    entered regular marketing channels. Of the remainder, the Government of
    Japan (GOJ) has announced its intention to use up to 30,000 tons in
    food aid shipments. It is believed that all, or almost all, of the
    remaining amount is currently in GOJ stockpiles.
        Question. What is the long-term outlook for rice exports to Japan?
        Answer. The long term outlook is excellent as long as the GOJ
    continues to fulfill market access commitments. The GOJ has repeatedly
    stressed its commitment to buying the highest quality rice available
    for its domestic consumers. In addition, the GOJ has stated its
    intention to monitor SBS purchases as an indicator of consumer
    preference for foreign rice. In both of the first two years of Japan's
    minimum access rice imports the United States has dominated SBS
    purchases.
        Question. What is the current state of the Japanese ``mind set''
    toward consumption of U.S. rice?
        Answer. Japanese consumers have had little exposure to foreign rice
    and U.S. rice exporters are actively engaged--under the auspices of the
    USA Rice Federation and with the help of USDA--in promoting U.S. rice
    in Japan. We have full confidence in the high-quality of U.S. rice and
    the eventual acceptance of U.S. rice by Japanese consumers as long as
    the GOJ continues to provide market access for foreign rice.
                          genetically altered products
        Question. You mentioned successes in Japan and the EU in
    introducing genetically altered products. Still, we hear reports about
    serious objections to those products overseas. What is the current
    outlook for overcoming these obstacles?
        Answer. Our biggest concern now is that consumers, especially in
    Europe, are not receiving the best information and are voicing strong
    resistance to biotech products. This is a major topic in our
    conversations with various EU government officials and with U.S. and EU
    industry. We are encouraging the private sector to do more in the way
    of consumer education. We are also working to ensure that any labeling
    requirements that are adopted in foreign markets are fair and
    reasonable and do not amount to disguised restrictions on trade.
                             new areas of fas focus
        Question. What do the shifts in your focus from Europe to the
    Pacific Rim and Latin America mean for various U.S. commodity producers
    and regions?
        Answer. The shift in focus from Europe to the Pacific Rim and Latin
    America is primarily due to changes in market demand and potential for
    export growth. FAS' goal is to maximize total U.S. agricultural exports
    with a focus on emerging markets and trade opportunities created by
    recent trade agreements, promotion of high value products, and export
    assistance for small-sized, new-to-export entities and cooperatives.
        While Europe continues to be an important market for U.S.
    agricultural products, it can no longer be viewed as a high growth
    market in comparison to the potential in the Pacific Rim and Latin
    America. This change in focus has led to a gradual decline in USDA
    export promotion funding for Europe. Although changes in the European
    Union's agricultural policy have had notable effects on demand for U.S.
    agricultural exports, Europe is still our most important market for
    soybeans, peanuts, rice, prunes, raisins, tree nuts, walnuts and
    almonds.
        FAS continues to take a proactive approach to position our products
    in growth markets to help ensure U.S. agriculture's continued export
    success and contribution to farm income and rural development. The
    growth in U.S. agricultural exports to Latin American and Pacific Rim
    markets is more than offsetting any declines in Europe. For example,
    twenty years ago the EU accounted for 31 percent of total U.S.
    agricultural exports while the Pacific Rim accounted for only 24
    percent. Today the EU accounts for only 16 percent, while the Pacific
    Rim accounts for approximately 43 percent. FAS will continue to work
    closely with the industry to capitalize on trade opportunities and
    provide support for those products and activities in those markets that
    hold the greatest export potential for the American farmer.
        Question. Does this reflect that there are going to be winners and
    losers among American farmers based on this change of emphasis?
        Answer. No. We do not believe our shift in focus will produce any
    losers among American farmers. In fact, that is the very thing we hope
    to prevent by refocusing our resources to higher return to mission
    markets like the Pacific Rim. However, educating an industry as broad
    as agriculture on the importance of these export markets and how to
    succeed in them is important to maximizing the numbers of winners.
    Therefore, one of our major initiatives over the past couple of years
    has been to boost our resource commitment to outreach activities. By
    partnering with commodity organizations, government agencies, Congress,
    and others, in sponsoring and participating in export seminars and
    trade events around the country, we can help our producers and
    processors stay current on the strategic shifts in agricultural markets
    and informed on how USDA programs, activities, and resources can help
    them compete in the global market as we move into the 21st century.
                             market access program
        Question. How have the recent legislative changes to the Market
    Access Program (formerly the Market Promotion Program) changed the
    programs function in practice?
        Answer. The Omnibus Budget Reconciliation Act of 1993 and the
    Federal Agriculture Improvement and Reform Act of 1996 have
    programmatically changed the MAP in the following manner:
      --within the brand program, FAS gives priority assistance to small-
            sized entities and agricultural cooperatives;
      --FAS limits assistance to promote a specific brand product in a
            single market to no more than 5 years;
      --an eligible trade organization that receives assistance for generic
            promotion must provide a minimum contribution level of 10
            percent. FAS has assigned the greatest weight to this factor in
            its allocation decisions to encourage a higher degree of cost
            sharing. As a result, the average level of contribution is 40
            percent;
      --each participant must certify that any Federal funds received
            supplement, but do not supplant, private or third party
            participant funds or other contributions to program activities;
      --FAS no longer enters into direct agreements with large companies
            under the Export Incentive Program (a component of the MAP).
        Question. What have been the results of those changes?
        Answer. The most notable results stemming from the above-mentioned
    legislated changes are as follows: This year, FAS has targeted 84
    percent of the brand promotion funds for small-sized entities and
    cooperatives, up from 76 percent in 1996. Funding for generic campaigns
    to assist small and new-to-export companies and cooperatives take
    advantage of real opportunities in international trade has also
    increased from 66 percent in 1996 to 72 percent in 1997. FAS has also
    responded to concerns raised by Congress and program critics by
    decreasing funding for large companies. Since 1996, only small entities
    and cooperatives have been eligible to receive promotional funds
    directly from FAS under the Export Incentive Program. FAS has also
    reduced funding available to MAP recipients to indirectly fund brand
    promotion by large companies by 75 percent since 1995. Beginning with
    the 1998 program, FAS will only provide assistance to small-sized
    entities and cooperatives within the brand program.
        Question. Would you please provide your most recent breakdown of
    all MAP allocations (both your most recent actual figures and your most
    recent projected figures for the subsequent year) by entity for both
    generic and branded promotions and note which of the participants do
    not meet the definition of a small business?
        Answer. In 1997, FAS made direct allocations to 64 nonprofit trade
    organizations and agricultural cooperatives. For purposes of
    determining size, the SBA size standards are most applicable to those
    U.S. commercial entities that receive indirect assistance through
    nonprofit trade associations and state regional trade groups. A list of
    the 1996 and 1997 budgets authorized for generic and brand promotions
    by organization follows.
        [The information follows:]

               Market Access Program allocations--fiscal year 1997

                                                                    1997 MAP
            Trade organization                                    allocation
    Alaska Seafood Marketing Institute......................      $2,965,056
    American Brandy Association--Export.....................          36,294
    American Forest & Paper Association.....................       6,280,192
    American Jojoba Association.............................         176,324
    American Seafood Institute/Rhode Island Seafood Council.         592,923
    American Sheep Industry Association.....................          95,141
    American Soybean Association............................       2,203,929
    Asparagus USA...........................................         162,938
    Blue Diamond Growers....................................       1,412,689
    California Agricultural Export Council..................         525,178
    California Cling Peach Growers Advisory Board...........         727,009
    California Kiwifruit Commission.........................          66,095
    California Pistachio Commission.........................         815,018
    California Prune Board..................................       2,538,590
    California Strawberry Commission........................         471,614
    California Table Grape Commission.......................       1,987,929
    California Tree Fruit Agreement.........................         704,566
    California Walnut Commission............................       2,566,006
    Cherry Marketing Institute..............................         154,361
    Chocolate Manufacturers Association.....................         721,310
    Cotton Council International............................       9,261,438
    Eastern U.S. Agricultural and Food Export Council.......         799,696
    Florida Department of Citrus............................       4,247,525
    Hop Growers of America..................................         103,000
    Kentucky Distillers Association.........................         499,401
    Mid-America International Agri-Trade Council............         190,833
    Mohair Council of America...............................          75,000
    National Association of State Departments of Agriculture         564,788
    National Dry Bean Council...............................         306,760
    National Grape Cooperative..............................         664,261
    National Honey Board....................................         132,953
    National Peanut Council.................................         837,544
    National Potato Research and Promotion Board............       1,290,688
    National Renderers Association..........................         301,885
    National Sunflower Association..........................         821,958
    New York Wine and Grape Foundation......................         165,673
    North American Blueberry Council........................          92,952
    North American Export Grain Association.................          94,225
    Northwest Wine Promotion Coalition......................         119,287
    Ocean Spray International, Inc..........................         319,848
    Oregon Seed Council.....................................         180,540
    Oregon-Washington-California Pear Bureau................         974,151
    Pet Food Institute......................................         596,075
    Raisin Administrative Committee.........................       2,444,619
    Southern United States Trade Association................       3,097,777
    Sunkist Growers, Inc....................................       2,064,157
    Texas Produce Export Association........................          42,222
    The Catfish Institute...................................         304,905
    The Popcorn Institute...................................         500,000
    United Fresh Fruit and Vegetable Association............         177,093
    USA Dry Pea and Lentil Council..........................         550,918
    USA Fresh Sweet Cherry Promotion........................         840,401
    USA Poultry and Egg Export Council......................       2,290,770
    USA Rice Federation.....................................       2,911,598
    USA Tomato..............................................         481,772
    U.S. Apple Association..................................         438,707
    U.S. Dairy Export Council...............................       1,881,135
    U.S. Feed Grains Council................................       2,865,352
    U.S. Livestock Genetics Export, Inc.....................         739,981
    U.S. Meat Export Federation.............................       8,498,273
    U.S. Wheat Associates...................................       2,023,893
    Washington Apple Commission.............................       2,470,410
    Western United States Agricultural Trade Association....       4,481,370
    Wine Institute..........................................       3,051,004
                        --------------------------------------------------------
                        ____________________________________________________
          Total.............................................      90,000,000

    ------------------------------------------------------------------------
                                                       1996 ceilings
                 MAP participant             -------------------------------
                                                  Branded         Generic
    ------------------------------------------------------------------------
    Alaska Seafood Marketing Institute......        $800,000      $2,208,702
    Almond Board of California..............  ..............         531,800
    American Brandy Association--Export.....         208,146         138,565
    American Forest & Paper Association.....  ..............       7,490,689
    American Jojoba Association.............  ..............         165,500
    American Seafood Institute/Rhode Island
     Seafood Co.............................         259,202         244,798
    American Sheep Industry Association.....  ..............         343,403
    American Soybean Association............  ..............       1,972,747
    Asparagus USA...........................  ..............         254,575
    Blue Diamond Almond Growers.............       1,429,561  ..............
    California Agricultural Export Council..  ..............         498,985
    California Cling Peach Growers Advisory
     Board..................................  ..............         740,000
    California Kiwifruit Commission.........  ..............         200,363
    California Pistachio Commission.........         207,778         657,878
    California Prune Board..................         963,900       1,557,100
    California Strawberry Commission........  ..............         508,144
    California Table Grape Commission.......  ..............       2,058,406
    California Tomato Commission/Florida
     Tomato Comm............................  ..............         433,441
    California Tree Fruit Agreement.........  ..............         601,477
    California Walnut Commission............  ..............       1,820,278
    Cherry Marketing Institute..............  ..............         155,000
    Chocolate Manufacturers Association.....       1,472,244         193,116
    Cotton Council International............  ..............       9,373,200
    Eastern US Agricultural and Food Export
     Council................................       5,148,299       1,254,546
    Florida Department of Citrus............  ..............       4,280,355
    Ginseng Board of Wisconsin..............  ..............         120,475
    Hop Growers of America..................  ..............          94,676
    Kentucky Distillers' Association........         789,206         256,196
    Mid-America International Agri-Trade
     Council................................       7,397,656         880,822
    Mohair Council of America...............  ..............          75,000
    National Association of State Dept. of
     Agri...................................  ..............         547,513
    National Dry Bean Council...............  ..............         320,129
    National Honey Board....................          42,460          82,765
    National Peanut Council.................         202,894         699,300
    National Potato Promotion Board.........  ..............       1,365,000
    National Renderers Association..........  ..............         380,306
    National Sunflower Association..........  ..............         720,000
    New York Wine and Grape Foundation......          83,158         147,492
    North American Blueberry Council........  ..............         100,000
    North American Export Grain Association.  ..............         162,686
    Northwest Wine Promotion Coalitions.....          89,142         218,990
    Ocean Spray International, Inc..........         308,034  ..............
    Oregon Seed Council.....................  ..............         168,000
    Oregon-Washington California Pear Bureau  ..............         948,759
    Pet Food Institute......................  ..............       1,145,449
    Raisin Administrative Committee.........         231,513       2,190,759
    Southern United States Trade Association       5,126,496         803,504
    Sunkist Growers, Inc....................       2,418,571  ..............
    Texas Produce Export Association........  ..............         150,000
    The Catfish Institute...................  ..............         259,765
    The Popcorn Institute...................  ..............         399,437
    United Fresh Fruit and Vegetable
     Association............................  ..............         150,000
    USA Dry Pea and Lentil Council..........  ..............         443,434
    USA Fresh Sweet Cherry Promotion........               0         760,647
    USA Poultry and Egg Export Council......       1,679,225       1,980,025
    USA Rice Federation.....................  ..............       3,189,073
    U.S. Apple Association..................  ..............         413,235
    U.S. Dairy Export Council...............  ..............       1,642,437
    U.S. Feed Grains Council................  ..............       3,843,963
    U.S. Livestock Genetics.................         244,717         785,095
    U.S. Meat Export Federation.............         454,851       9,355,681
    U.S. Wheat Associates...................  ..............       2,171,578
    Washington Apple Commission.............  ..............       2,049,332
    Welch's Food............................         613,044  ..............
    Western United States Agricultural Trade
     Assoc..................................       6,409,844       1,091,405
    Wine Institute..........................       2,509,650       1,987,413
    ------------------------------------------------------------------------

    ------------------------------------------------------------------------
                                                       1997 ceilings
                 MAP participant             -------------------------------
                                                  Generic         Branded
    ------------------------------------------------------------------------
    Alaska Seafood Marketing Institute......      $2,569,203        $457,005
    American Brandy Association--Export.....         124,126         105,874
    American Forest and Paper Association...       7,568,704  ..............
    American Jojoba Association.............         200,000  ..............
    American Seafood Institute/Rhode Island
     Seafood Co.............................         172,854         500,000
    American Sheep Industry Association.....         170,000  ..............
    American Soybean Association............       2,550,929  ..............
    Asparagus USA...........................         258,103  ..............
    Blue Diamond Growers....................  ..............       1,412,691
    California Agricultural Export Council..         649,837  ..............
    California Cling Peach Growers Advisory
     Board..................................         798,931  ..............
    California Kiwifruit Commission.........         175,000  ..............
    California Pistachio Commission.........         721,853         257,250
    California Prune Board..................       1,553,590       1,010,000
    California Strawberry Commission........         536,843  ..............
    California Table Grape Commission.......       2,348,272  ..............
    California Tomato Commission/Florida
     Tomato Committee.......................         665,745  ..............
    California Tree Fruit Agreement.........         799,664  ..............
    California Walnut Commission............       2,593,772  ..............
    Cherry Marketing Institute..............         165,292  ..............
    Chocolate Manufacturers Association.....         207,876       1,840,004
    Cotton Council International............       9,756,938  ..............
    Eastern US Agricultural and Food Export
     Council................................       1,100,000       3,600,000
    Florida Department of Citrus............       4,499,440  ..............
    Ginseng Board of Wisconsin \1\..........  ..............  ..............
    Hop Growers of America..................         125,000  ..............
    Kentucky Distillers' Association........         446,159         582,847
    Mid-America International Agri-Trade
     Council................................       1,000,000       5,700,000
    Mohair Council of America...............          55,000          20,000
    National Association of State Dept. of
     Agri...................................         600,000  ..............
    National Dry Bean Council...............         728,469  ..............
    National Honey Board....................          44,582         100,000
    National Peanut Council.................       1,251,544  ..............
    National Potato Promotion Board.........       1,674,984  ..............
    National Renderers Association..........         354,500  ..............
    National Sunflower Association..........       1,007,958  ..............
    New Jersey Fish & Seafood Marketing \2\.  ..............  ..............
    New York Wine and Grape Foundation......           1,734         189,120
    North American Blueberry Council........          92,952  ..............
    North American Export Grain Association.         200,000  ..............
    Northwest Wine Promotion Coalitions.....         283,874  ..............
    Ocean Spray International, Inc..........  ..............         319,848
    Oregon Seed Council.....................         207,540  ..............
    Oregon-Washington California Pear Bureau       1,065,813  ..............
    Pet Food Institute......................       1,100,053  ..............
    Raisin Administrative Committee.........       2,108,393         336,226
    Southern United States Trade Association         900,000       4,800,000
    Sunkist Growers, Inc....................  ..............       2,593,546
    Texas Produce Export Association........         123,930  ..............
    The Catfish Institute...................         309,905  ..............
    The Popcorn Institute...................         522,078  ..............
    United Fresh Fruit and Vegetable
     Association............................         191,093  ..............
    USA Dry Pea and Lentil Council..........         585,918  ..............
    USA Fresh Sweet Cherry Promotion........         858,020  ..............
    USA Poultry and Egg Export Council......       2,671,174       1,388,426
    USA Rice Federation.....................       3,537,075  ..............
    U.S. Apple Association..................         505,548  ..............
    U.S. Dairy Export Council...............       1,934,781  ..............
    U.S. Feed Grains Council................       4,085,338  ..............
    U.S. Livestock Genetics.................         793,202         335,500
    U.S. Meat Export Federation.............      10,135,146         346,034
    U.S. Wheat Associates...................       2,334,389  ..............
    Washington Apple Commission.............       3,198,266  ..............
    Welch's Food............................  ..............         664,261
    Western United States Agricultural Trade
     Assoc..................................       1,300,000       6,200,000
    Wine Institute..........................       2,609,014       1,941,990
                                             -------------------------------
          Totals............................      89,130,404      34,700,622
                                                                 123,831,026
    ------------------------------------------------------------------------
    \1\ Applied, but not funded.
    \2\ Applied, but directed to work with the American Seafood Institute.

        Question. Also would you please note the extent and the manner in
    which any branded promotion funds were provided to companies indirectly
    through trade associations or any other means?
        Answer. Companies receive MAP assistance for brand promotions
    indirectly through trade associations. I will provide for the record a
    list of companies and the budgets for each that have been approved to
    date in 1996. The 1997 MAP allocation has just been completed. Funding
    available to large companies for brand promotions through trade
    associations was reduced by 35 percent in 1996, by 45 percent in 1997
    and will be eliminated altogether in 1998.
        [The information follows:]

                        MAP U.S. COMPANY BUDGETS FOR 1996
    ------------------------------------------------------------------------
                Company               Cooperative       Size       Budgeted
    ------------------------------------------------------------------------
    21st Century Genetics..........  .............  S...........     $15,500
    A&F International..............  .............  S...........       2,500
    ABS International..............  .............  S...........      44,084
    Accelerated Genetics...........  .............  S...........      10,000
    Advance Food Company...........  .............  L...........      30,000
    Advanced Nutritionals            .............  S...........     132,500
     Corporation.
    Ag-Link International, Inc.....  .............  S...........       6,000
    Agri BeefCo....................  .............  S...........      12,000
    Agri Trade International, Inc..  .............  S...........       7,500
    Agrisource, Inc................  .............  S...........      15,000
    Agway Inc......................  .............  S...........       9,666
    AJC International..............  .............  L...........      17,500
    Alle Processing Corporation....  .............  S...........      18,250
    Allied Foods, Inc..............  .............  S...........      75,000
    Allied Processors, Inc.........  .............  S...........      46,000
    Allied-Sysco...................  .............  S...........      80,000
    Alpine Lace....................  .............  S...........      50,000
    Alta Genetics..................  .............  S...........      17,033
    Amal Meat Corp.................  .............  S...........      37,500
    American Ag-Tec International..  .............  S...........      47,000
    American Connoisseur...........  .............  S...........       9,500
    American Eagle Beverages, Inc..  .............  S...........     150,000
    American Home Food Products....  .............  L...........      20,000
    American Popcorn Corp..........  .............  S...........     112,750
    American Protein Corporation...  .............  S...........      69,125
    American Soy Products..........  .............  S...........      23,800
    American Standard Products, Inc  .............  S...........      25,000
    American Tanning & Leather       .............  S...........      20,000
     Company.
    AMES International, Inc........  .............  S...........      40,000
    AMPC, Inc......................  .............  S...........      63,932
    Amy Foods, Inc.................  .............  S...........       5,000
    Anacon Foods Company...........  .............  S...........      21,500
    Andes Candies, Inc.............  .............  S...........      74,000
    Arciero Winery.................  .............  S...........       6,000
    Ariel Vineyards................  .............  S...........      28,000
    Arizona Pepper Products Co.....  .............  S...........      48,000
    ASB Group International........  .............  S...........     415,000
    Aspen International Export Inc.  .............  S...........      17,000
    Audubon Cellars................  .............  S...........       4,500
    Austin Nichols & Co., Inc......  .............  L...........      79,999
    Azmex Foods, Inc...............  .............  S...........      39,000
    A. Smith Bowman Distillery, Inc  .............  S...........      49,500
    Babe Farms.....................  .............  S...........      30,000
    Baldwin Vineyards..............  .............  S...........       5,000
    Barber Foods...................  .............  L...........      60,000
    Barnaby's Foods................  .............  S...........       5,000
    Bay Pac Beverages..............  .............  S...........      40,000
    Bay World......................  .............  S...........       8,500
    Beaverton Foods, Inc...........  .............  S...........      10,000
    Beechnut (Ralston Foods).......  .............  L...........      47,500
    Beehive Botanicals.............  .............  S...........      15,000
    Beer Nuts Inc..................  .............  S...........      30,000
    Ben and Jerry's................  .............  S...........      25,000
    Bernardi Italian Foods, Inc....  .............  S...........      26,500
    Bernardo Perez & Associates....  .............  S...........      40,000
    Berrywine Plantations, Inc.....  .............  S...........      20,000
    Best Brands Inc./American        .............  S...........      25,000
     Products, Inc.
    Better Baked Foods, Inc........  .............  S...........      10,000
    Biagio's Gourmet Foods, Inc....  .............  S...........      58,000
    Bil Mar Foods..................  .............  L...........       9,000
    BioSan Laboratories, Inc.......  .............  S...........     120,000
    Birdie Corp....................  .............  S...........      10,000
    Black Mountain Brewing Co......  .............  S...........      40,000
    Blue Bell Creameries, L.P......  .............  L...........      60,000
    Blue Diamond Growers...........  Y............  ............   1,479,561
    Blue Sky Natural Beverage Co...  .............  S...........      10,000
    BMTS International.............  .............  S...........      40,000
    Boboli International, Inc......  .............  S...........       5,000
    Bolinger Marketing Inc.........  .............  S...........       7,500
    Bovine Elite, Inc..............  .............  S...........       4,000
    Brach & Brock Confections......  .............  S...........     160,000
    Brice Foods, Inc...............  .............  S...........     100,000
    Brown & Haley..................  .............  S...........      58,000
    Bruce Foods Corporation........  .............  S...........     249,000
    BST International Corporation..  .............  S...........      20,000
    Bunge Foods....................  .............  L...........       6,000
    Bush Brothers & Company........  .............  L...........      49,500
    B&H General Supply & Marketing   .............  S...........      99,250
     Corp.
    B.M. Lawrence And Company......  .............  S...........      31,000
    Cakebread Cellars..............  .............  S...........       4,000
    Calico Cottage Candies, Inc....  .............  S...........      15,475
    California Kazakhstan Trading    .............  S...........      87,000
     Company.
    California Sun Dry Foods.......  .............  S...........      31,000
    Campbell Soup Company..........  .............  L...........     145,610
    Canadaigua Wine Company........  .............  L...........     132,779
    Capital Pet Foods..............  .............  S...........      76,000
    Cargill, Inc., Feed Division...  .............  L...........      14,500
    Carlton Bar A Ranches..........  .............  S...........       4,000
    Cascade Clear Water Co.........  .............  S...........      24,000
    Cascadian Farm.................  .............  L...........      20,000
    Cecchetti Sebastiani Cellar....  .............  S...........       8,000
    Cenzone Tech Inc...............  .............  S...........      33,000
    Cha Cha Foods..................  .............  S...........      50,000
    Charleston Tea Plantation, Inc.  .............  S...........      35,000
    Chef Paul Prudhomme's Magic      .............  S...........      40,000
     Seasoning Bl.
    ChemGen........................  .............  S...........      18,560
    Chenango Valley Pet Foods......  .............  S...........      49,900
    Cherrex Corporation............  .............  S...........     185,000
    Cherry Central.................  .............  S...........       7,873
    Chez de Prez Cheesecake, Inc...  .............  S...........      99,000
    Chihade International, Inc.....  .............  S...........     100,000
    Childers Food Products.........  .............  S...........      45,000
    Chukar Cherry Company..........  .............  S...........      20,000
    ClawIsland Foods, Inc..........  .............  S...........      24,200
    Cloud Nine, Inc................  .............  S...........      26,500
    Coast Ridge Cellars............  .............  S...........      57,500
    Coastal Health-Age Beverages...  .............  S...........      50,000
    Cody's Real Pet Products.......  .............  S...........      15,000
    Coffee Masters.................  .............  S...........      38,424
    Collin Street Bakery...........  .............  S...........      49,000
    Compass West...................  .............  S...........      20,000
    Conagra Frozen Foods...........  .............  L...........     136,000
    Concannon Vineyard.............  .............  S...........      26,300
    Continental Imports, Inc.......  .............  S...........      49,000
    Continental Mills, Inc.........  .............  L...........      15,000
    Cookie Investment Co., Inc.....  .............  S...........       9,000
    Cookietree Bakeries............  .............  S...........      97,000
    Cornucopia Pet Foods, Inc......  .............  S...........     100,000
    Country Fresh Farms              .............  S...........      10,000
     International.
    CPC International/Best Foods     .............  L...........     133,300
     Exports.
    Craft Beers International......  .............  S...........       5,000
    Creekside Vineyards............  .............  S...........       2,000
    Crichton Hall Vineyard.........  .............  S...........       2,500
    Crown Products, Inc............  .............  S...........     180,000
    Crystal Cream & Butter Company.  .............  S...........      20,000
    Crystal International            .............  S...........     210,000
     Corporation.
    Crystal Ocean Seafood, Inc.....  .............  S...........      23,000
    Cumberland Packing Corporation.  .............  S...........      37,750
    Custom Industries, L.P.........  .............  S...........      19,951
    Cuvaison Winery................  .............  S...........      20,000
    C.S. Steen.....................  .............  S...........       5,000
    C.H. Guenther & Sons, Inc. dba   .............  L...........      35,000
     Pioneer F.
    Da Vinci Gourmet, Ltd..........  .............  S...........      20,000
    Dae Julie, Inc.................  .............  S...........      28,000
    Dahlgren & Company, Inc........  .............  S...........      16,275
    De Beukelaer Corporation.......  .............  S...........      35,000
    Decas Cranberry Sales, Inc.....  .............  S...........      20,000
    Deep Sea Fish..................  .............  S...........      17,300
    Delicato Vineyards.............  .............  S...........     123,000
    DeLoach Vineyards, Inc.........  .............  S...........      14,000
    Desert Rose Foods, Inc.........  .............  S...........      40,000
    Devlin.........................  .............  S...........       1,500
    Diamond Pet Foods..............  .............  S...........      39,050
    Distributors International.....  .............  S...........      67,500
    Downey's International Inc.....  .............  S...........       5,000
    Dreyer's Grand Ice Cream.......  .............  S...........      60,000
    Dry Creek Vineyard.............  .............  S...........       1,500
    Dr. Konstantin Frank...........  .............  S...........       2,000
    Duck Walk Vineyards............  .............  S...........       3,000
    Durkee-Mower, Inc..............  .............  S...........      77,500
    DXR International, Inc.........  .............  S...........      33,000
    Earthrise Company..............  .............  S...........      48,000
    East Coast Seafood, Inc........  .............  S...........     108,750
    Eastern Food Exporters.........  .............  S...........       7,000
    EBS, Inc.......................  .............  S...........       5,000
    Edy's Grand Ice Cream..........  .............  L...........      23,833
    Eli's Chicago's Finest           .............  S...........      36,500
     Cheesecake.
    Empire Kosher Poultry, Inc.....  .............  L...........      10,000
    Entenmann's Inc................  .............  S...........      25,000
    Entertainment Foods, Inc.......  .............  S...........      39,000
    Equipment Team Hawaii..........  .............  S...........      31,000
    Excalibur Sires................  .............  S...........       4,000
    Excel..........................  .............  L...........      10,000
    Excel Trade Limited............  .............  S...........      37,000
    Export Trade Of America........  .............  S...........      55,000
    E. Boyd & Associates, Inc......  .............  S...........      25,000
    E. & J. Gallo..................  .............  L...........     915,000
    Fantastic Foods, Inc...........  .............  S...........      20,000
    Far Niente.....................  .............  S...........      27,000
    Farmland Industries, Inc.......  .............  L...........      20,000
    Fast Food Merchandisers........  .............  L...........      15,000
    Ferrara Pan Candy Company......  .............  S...........       2,000
    Fetzer Vineyards...............  .............  L...........      45,000
    Finnbar International LLC......  .............  S...........       1,150
    Firestone Vineyard.............  .............  S...........       3,000
    Florida European Export-Import   .............  S...........      13,000
     Co., Inc.
    Flower City Nurseries..........  .............  S...........      25,000
    Food Producers International...  .............  L...........      19,140
    Foppiano Vineyards.............  .............  S...........      28,000
    Foulds, Inc....................  .............  S...........      50,000
    Franciscan Vineyards, Inc......  .............  S...........       6,000
    Freemark Abbey Winery..........  .............  S...........       4,000
    French Gourmet Inc.............  .............  S...........     125,000
    Frontier Foods, International..  .............  L...........      20,000
    Frontier Trading...............  .............  L...........      48,000
    Fruits International, Inc......  .............  L...........      70,000
    Furman Foods Inc...............  .............  S...........      20,000
    Garden of Eatin' Inc...........  .............  S...........      29,000
    Garuda International, Inc......  .............  S...........       9,500
    General Mills, Inc.............  .............  L...........      32,700
    Genex Coop.....................  .............  S...........      11,500
    Gerber Agri, Inc...............  .............  L...........      27,500
    Gering and Son.................  .............  S...........      29,000
    Geyser Peak....................  .............  S...........      31,500
    Gibson Goodies Inc.............  .............  S...........       8,000
    Giumarra Vineyards.............  .............  L...........      15,000
    Global Beverage Company........  .............  S...........      50,000
    Global Export Marketing Company  .............  S...........     110,000
    Golden State Vintners..........  .............  S...........      90,000
    Golden Temple Bakery, Inc......  .............  S...........      38,000
    Golden Valley Microwave Foods..  .............  L...........      71,700
    Goldenberg Candy Co............  .............  S...........      58,000
    Good Kama Foods, Inc...........  .............  S...........       5,000
    Gossner Foods, Inc.............  .............  S...........      39,000
    Gourmet House..................  .............  L...........      40,988
    Graceland Fruit Cooperative,     Y............  ............      13,000
     Inc.
    Great Crescent International     .............  S...........     189,000
     Inc.
    Greater Pacific Foods..........  .............  S...........      24,000
    Grimmway Enterprises, Inc......  .............  L...........      30,000
    Groeb Farms, Inc...............  .............  S...........      16,125
    Guglielmo (Emilio) Winery......  .............  S...........      20,000
    Gulf Pacific Rice Co., Inc.....  .............  S...........      49,500
    Hale Indian River Groves.......  .............  L...........      25,000
    Hansa-Pacific Associates, Inc..  .............  S...........      25,000
    Hansen Beverage Company........  .............  S...........      85,000
    Hansmann's Mills, Inc..........  .............  S...........      29,000
    Harvest International Company..  .............  S...........      35,000
    Hawaiian Sun Products..........  .............  S...........      20,000
    Healthy Times..................  .............  S...........      27,000
    Heaven Hill Distilleries, Inc..  .............  S...........      59,801
    Heinz Pet Products.............  .............  L...........     211,110
    Henry Estate...................  .............  S...........       6,000
    Herman Goelitz, Inc............  .............  S...........     117,000
    Herr Foods Inc.................  .............  S...........      10,000
    Hershey Foods Corporation......  .............  L...........     224,610
    Heublein, Inc..................  .............  L...........      60,000
    Hills Pet Nutrition, Inc.......  .............  L...........      61,800
    Homeland Fruit Company.........  .............  S...........      20,000
    Honee Bear Canning.............  .............  S...........      50,000
    Honway.........................  .............  S...........       2,500
    Hormel Foods...................  .............  L...........      35,000
    Hsu's Ginseng Enterprises, Inc.  .............  S...........      90,000
    Hudson Foods, Inc..............  .............  L...........      24,375
    Hughson Nut Marketing, Inc.....  .............  S...........      18,000
    H.J. Heinz Company Ltd.........  .............  L...........      50,000
    H.K. Brewing Company, Ltd......  .............  S...........      25,000
    Idahoan Foods..................  .............  S...........     150,000
    Imagine Foods, Inc.,...........  .............  S...........     100,000
    Interfrost.....................  .............  S...........     150,000
    Inter-group Trade Services       .............  S...........     100,000
     Corp. (ITSC).
    International American           .............  S...........     470,000
     Supermarkets.
    International Food Concepts....  .............  S...........     150,000
    International Grocers, Inc.....  .............  S...........      40,000
    International Industries         .............  S...........     100,000
     Corporation.
    International Market Brands....  .............  S...........     229,000
    International Marketing          .............  S...........      50,000
     Systems, Ltd.
    International Multifoods         .............  L...........     180,700
     Corporation.
    International Pet Products, Inc  .............  S...........     108,000
    Island Coffee Company..........  .............  L...........      15,000
    Ital Florida Foods, Inc........  .............  S...........      12,000
    I.M.G. Enterprise Inc./Cherry    .............  S...........      45,000
     Lake Farm.
    J&J Snack Foods................  .............  S...........      18,000
    Jack and Jill Ice Cream Company  .............  S...........     150,000
    Jardine Foods..................  .............  S...........      20,000
    Jasper Wyman & Son.............  .............  S...........      47,000
    Jersey Asparagus Farms, Inc....  .............  S...........       8,500
    Jewel Date Company.............  .............  S...........      29,000
    Jim Beam Brands Co.............  .............  L...........     387,934
    J-K Products International.....  .............  S...........      15,000
    Johnsonville Foods.............  .............  L...........       9,750
    Johnstown Bean Company.........  .............  S...........       5,000
    Jones Dairy Farm...............  .............  L...........      64,000
    Joseph E. Seagram & Sons, Inc..  .............  L...........      43,093
    Joseph Gallo Farms.............  .............  S...........      10,000
    J.P. Sullivan & Company........  .............  S...........       6,000
    Kal Kan Foods, Inc.............  .............  S...........      30,000
    Kalsec Inc.....................  .............  S...........      11,640
    Karly..........................  .............  S...........       3,000
    Kashi Company..................  .............  S...........      11,000
    Kautz Ironstone Vineyards......  .............  S...........      40,000
    Kendall-Jackson Winery.........  .............  S...........      15,000
    Kenwood Vineyards..............  .............  S...........       8,000
    Kidd & Company, Inc............  .............  S...........     134,000
    King B Gourmet Foods...........  .............  S...........      15,000
    Knudsen & Sons, Inc............  .............  L...........      30,000
    Korbel Brands..................  .............  S...........      45,977
    Kozy Shack, Inc................  .............  S...........     192,500
    KSM Seafood Corporation........  .............  S...........      85,000
    Kwik Enterprises...............  .............  S...........      20,000
    La Tapatia Tortilleria, Inc....  .............  S...........      18,000
    Lady-J, Inc....................  .............  S...........      40,000
    Lafayette Foods................  .............  S...........      24,000
    Lamex Foods, Inc...............  .............  S...........      62,500
    Land O'Lakes Food Ingredients    .............  L...........      18,810
     Division.
    Laurel Glen Vineyard...........  .............  S...........       2,500
    Lawrence Foods, Inc............  .............  S...........      35,000
    Leprino Foods..................  .............  S...........       9,000
    Liberty Orchards Co., Inc......  .............  S...........      18,000
    Lincoln Snacks Company.........  .............  S...........     122,500
    Little Lady Foods, Inc.........  .............  S...........      77,500
    Long Island Seafood Export.....  .............  S...........       6,500
    LP International...............  .............  S...........      77,000
    Lucks Food Decorating Co.......  .............  S...........     100,000
    Lucky States Trading Company...  .............  S...........      15,000
    Lyons Magnus...................  .............  S...........      15,000
    M&R Company....................  .............  S...........      18,000
    Maker's Mark Distillery, Inc...  .............  L...........      34,477
    Mama Tish's Italian              .............  S...........      28,500
     Specialties, Inc.
    Manna Pro Milk Products Inc....  .............  L...........       9,550
    Maple Grove Farms of Vermont...  .............  S...........      25,000
    Maplehurst Genetics............  .............  S...........       4,000
    Market Makers, Inc.............  .............  S...........     150,000
    Matanzas Creek Winery..........  .............  S...........       3,000
    Matt Brewing Company...........  .............  S...........      50,000
    Maui Pineapple Company, Ltd....  .............  L...........      20,000
    Mauna Loa Macadamia Nut Corp...  .............  S...........     137,000
    Mazda Trading Co., Inc.........  .............  S...........      31,000
    McFarland's Foods, Inc.........  .............  S...........      20,000
    McIlhenny Company..............  .............  S...........     190,000
    Mederer Corporation............  .............  S...........     220,000
    Merrick Petfoods, Inc..........  .............  S...........      40,000
    Merrick's, Inc.................  .............  S...........      19,859
    Merryvale Vineyards............  .............  S...........      45,000
    Mi Mama's Tortilla Factory, Inc  .............  S...........       7,500
    Midamar Corporation............  .............  S...........      34,500
    Mid-America Dairymen, Inc......  .............  L...........      30,000
    Midwestern Pet Foods, Inc......  .............  S...........      76,250
    Milk Specialties Co............  .............  S...........      31,200
    Milward Enterprises, Inc.......  .............  S...........      30,000
    Mission Foods..................  .............  L...........      15,000
    Missouri Angus Association.....  Y............  ............       2,575
    Mister Cookie Face.............  .............  L...........      25,000
    Molly's Foods, Inc.............  .............  S...........      42,000
    Mooney Farms...................  .............  S...........      20,000
    Morrison Farms.................  .............  S...........      26,325
    Motts International./Div. of     .............  S...........      45,000
     Cadbury Bev.
    Mrs. Fields Inc................  .............  S...........      30,000
    Mrs. Leeper's, Inc.............  .............  S...........      20,000
    Murphy-Goode Estate Winery.....  .............  S...........       6,500
    M&M/Mars, A Division Of Mars,    .............  L...........     276,610
     Inc.
    Nabisco International Ltd......  .............  L...........      25,000
    NAF International..............  .............  L...........      91,000
    Nancy's Pies, Inc..............  .............  S...........      10,000
    Nancy's Specialty Foods........  .............  S...........      79,000
    National Raisin Co.............  .............  S...........      20,000
    Naturipe Berry Growers, Inc....  Y............  ............      37,000
    Nebraska Dairies...............  .............  S...........      50,000
    New Generations Dairy Cattle...  .............  S...........      11,974
    New Venture Development Corp...  .............  S...........      40,000
    Newman's Own Inc...............  .............  L...........      91,500
    Newton Vineyard................  .............  S...........       8,500
    Norbest........................  .............  L...........       5,000
    Norpac Foods...................  Y............  ............     118,000
    Norpro, Inc....................  .............  S...........      25,000
    Northeast Group................  .............  S...........      50,000
    Northwest Packing Company......  .............  S...........      35,000
    Nouveau International..........  .............  S...........      50,000
    NupacInternational, Inc........  .............  S...........      80,000
    Nutrilicious Foods.............  .............  S...........      40,000
    Ocean Spray Cranberries, Inc...  Y............  ............     338,534
    Oceanica Trade & Investment,     .............  S...........      17,000
     Inc.
    Oglesby Plant Laboratories, Inc  .............  S...........      13,250
    Old Salem Enterprises..........  .............  S...........       5,000
    Ontario International, Inc.....  .............  S...........     120,000
    Oregon Potato Company..........  .............  S...........      22,000
    Ore-Ida Foods..................  .............  L...........      30,895
    Organic Food Products..........  .............  S...........      92,500
    Organotech.....................  .............  S...........      40,000
    Orion Seafood International,     .............  S...........       3,000
     Inc.
    Otis McAllister, Inc...........  .............  S...........      40,000
    PA Producers Research & Devlop.  .............  S...........      19,500
    Pace Foods, Ltd................  .............  S...........      55,000
    Pacific Valley Foods...........  .............  S...........      13,000
    Pamela's Products..............  .............  S...........      10,000
    Paramount Farms................  Y............  ............      67,600
    Pepperidge Farm Incorporated...  .............  S...........      51,610
    Pet Center Inc.................  .............  S...........       5,500
    Pet Products Plus, Inc.........  .............  L...........      74,960
    Pete's Brewing Company.........  .............  S...........      40,000
    Petrofsky's International, Ltd.  .............  S...........      50,000
    Phoenix Marketing..............  .............  S...........      35,000
    Pierce Foods...................  .............  L...........      37,375
    Pindar Vineyards...............  .............  S...........       3,000
    Pines International............  .............  S...........     135,000
    Pioneer Snacks, Inc............  .............  S...........       5,000
    Plantation Sweets..............  .............  S...........      30,000
    Pogue Industries, Inc..........  .............  S...........      25,000
    Powerfood Inc..................  .............  S...........     150,000
    Precise Pet Products...........  .............  S...........      49,500
    President Foods Ltd/GWB Foods..  .............  S...........      15,000
    Presto Food Products, Inc......  .............  S...........      43,000
    Prickly Pear Ranch.............  .............  S...........       4,950
    Prime Tanning Co., Inc.........  .............  L...........      51,610
    Primex.........................  .............  S...........      57,678
    Prince of Peace Enterprises,     .............  S...........     101,000
     Inc.
    Pro Bar Products, Inc..........  .............  S...........       8,500
    Pro Diet Pet Products..........  .............  S...........      19,650
    Providence Bay Fish Company....  .............  S...........       2,500
    Purity Foods International.....  .............  S...........     200,000
    Quady Winery...................  .............  S...........       9,500
    Quality Products Intl., Inc....  .............  L...........      22,500
    Racke..........................  .............  L...........       7,500
    Ralston Purina International...  .............  L...........     213,310
    Ramsey Popcorn Company, Inc....  .............  S...........     200,000
    Raskas Foods, Inc..............  .............  S...........      17,500
    Red River Commodities, Inc.....  .............  L...........       9,900
    Reily Dairy and Food Company...  .............  S...........      15,000
    Reimann Food Classics, Inc.....  .............  S...........      15,000
    Rhino Foods, Inc...............  .............  S...........       7,500
    Richland Beverage Corporation..  .............  S...........      25,000
    Rim Export Consultants, LTD....  .............  S...........      18,200
    Rio Del Mar Foods, Inc.........  .............  S...........      40,000
    River of Life..................  .............  S...........       5,000
    Robert Mondavi Winery..........  .............  L...........      40,000
    Rocco, Inc.....................  .............  L...........      30,000
    Rocking JC Southwest Foods.....  .............  S...........      20,000
    Rockingham Poultry.............  .............  L...........      45,000
    Rocky Mountain Popcorn Co......  .............  S...........       7,000
    Roman Meal Company.............  .............  S...........     108,000
    Roney-Oatman...................  .............  S...........      49,850
    Round Hill Winery..............  .............  S...........      15,000
    Royal Cake Company.............  .............  S...........       5,000
    Royal Pacific Foods............  .............  S...........      20,000
    Royal Wine Company.............  .............  S...........     130,000
    Rubschlager Baking Corp........  .............  S...........       5,500
    Rutherford Benchmarks, Inc.....  .............  S...........       7,000
    Sabroso Company................  .............  S...........      22,000
    Safeway Inc....................  .............  L...........      11,000
    Sahagian & Associates, Inc.....  .............  S...........      10,000
    Santa Cruz Valley Pecan Company  .............  S...........      30,000
    Sargento, Inc..................  .............  L...........      47,200
    Schug Carneros Estate Winery...  .............  S...........      17,000
    Schwan's Food Asia Pte. Ltd....  .............  L...........      80,200
    Sea and Farmfresh Importing      .............  S...........      33,000
     Company.
    Sea Fresh USA..................  .............  S...........       4,800
    Sea Watch International, Ltd...  .............  L...........      35,239
    Seafood Exchange Seoul, Inc....  .............  S...........       6,000
    Seafood Export, Inc............  .............  S...........      30,325
    Seald-Sweet Growers............  Y............  ............      49,500
    Select Sires...................  .............  S...........      13,500
    Sequoia Grove Vineyards........  .............  S...........       5,000
    Servos International Trading     .............  S...........      25,000
     Co., Inc.
    Shafer Vineyards...............  .............  S...........       2,350
    Shallowford Farms..............  .............  S...........      15,000
    Shelf Stable Foods, Inc........  .............  S...........      80,000
    Shurfine International.........  .............  S...........      40,848
    Sierra Nut Company.............  .............  S...........       5,000
    Sigco Sun Products, Inc........  .............  S...........     117,500
    Simi Winery....................  .............  L...........      10,000
    Simonian Fruit Co..............  .............  S...........      21,000
    Simplot Meat Products, Inc.....  .............  L...........      20,000
    Simply Delicious, Inc..........  .............  S...........      25,000
    Sinner Bros & Bresnahan........  .............  S...........      15,000
    Sioux Honey Association........  Y............  ............      32,235
    Sire Power, Inc................  .............  S...........       9,500
    Sk Food International..........  .............  S...........      17,750
    SKIF Corporation...............  .............  S...........      65,000
    Smith Dairy Product Company....  .............  S...........      75,000
    Snapple Beverage Corporation...  .............  L...........      51,000
    Snyder's of Hanover, Inc.......  .............  S...........      50,000
    South Georgia Farms............  .............  S...........       7,329
    Southern Pride Catfish.........  .............  L...........      20,000
    Sovereign Trading Company......  .............  S...........      50,000
    Spectrum Naturals Inc..........  .............  S...........      20,000
    Stahlbush Island Farms.........  .............  S...........      10,000
    Stanley Orchards Sales, Inc....  .............  S...........      20,000
    State Fish Company, Inc........  .............  S...........      10,000
    Staton Hills...................  .............  S...........       3,000
    Ste. Chapelle..................  .............  S...........       3,000
    Stimson Lane Vineyards.........  .............  L...........      74,375
    Stinson Seafood Company........  .............  S...........      28,000
    Stockpot Soups.................  .............  S...........      12,000
    Stokes/Ellis Foods.............  .............  S...........      20,000
    Stonepoint.....................  .............  S...........      50,000
    Stonyfield Yogurt..............  .............  S...........      25,000
    Stroh Brewery Co...............  .............  S...........      51,610
    Sturdy Pet Products, Inc.......  .............  S...........      10,000
    Sun Maid.......................  Y............  ............     170,648
    Sun Pacific Enterprises........  .............  L...........      30,000
    Sunday House Foods, Inc........  .............  L...........       7,500
    Sungrow........................  .............  S...........      39,000
    Sunkist Growers................  Y............  ............   2,568,571
    Sunny Ridge Farm...............  .............  S...........      22,500
    Sunsweet.......................  Y............  ............     859,800
    Super Stores Industries........  .............  S...........      30,000
    Supervalu International........  .............  L...........      15,000
    Sutter Home Winery, Inc........  .............  S...........     117,500
    Sweet Street Desserts, Inc.....  .............  S...........      50,000
    Syfo Beverage Company of Flor..  .............  S...........      25,000
    SYSCO Food Services............  .............  L...........       5,000
    S.B. Global Trading Co.........  .............  S...........      80,000
    Take 5.........................  .............  S...........      25,000
    Teeccino Caffe, Inc............  .............  S...........      12,000
    Texas Best Authentic Food Pro..  .............  S...........      40,000
    The California Winery..........  .............  S...........      79,500
    The Figaro Company, Inc........  .............  S...........      10,000
    The Great Western Tortilla       .............  S...........      20,000
     Company.
    The Hain Food Group............  .............  S...........      50,000
    TheIams Company................  .............  L...........      68,900
    The Original Log Cabin Homes,    .............  S...........     175,000
     Ltd.
    The Seagrams Classic Wine        .............  L...........     125,000
     Company.
    Thompson's Pet Pasta Products..  .............  S...........     183,600
    Timber Crest Farms.............  .............  S...........      90,000
    TKI Foods, Inc.................  .............  S...........     200,000
    Tootsie Roll Industries, Inc...  .............  L...........      85,000
    Tostino Coffee Roasters........  .............  S...........      20,000
    Traditional Medicinals Inc.....  .............  S...........     106,000
    Transcon Trading Co., Inc......  .............  S...........     140,000
    Tree Top, Inc..................  Y............  ............     185,000
    Triangle Products..............  .............  S...........      45,000
    Tri-Valley Growers.............  .............  L...........     206,000
    TRT International..............  .............  S...........      50,000
    Trundle & Company..............  .............  S...........       7,945
    Tyson Foods....................  .............  L...........     690,000
    T&K Pet Products...............  .............  S...........      19,000
    T. Marzetti Company............  .............  L...........      15,000
    United Apple Sales, Inc........  .............  S...........      50,000
    United States Bilateral Trade    .............  S...........      25,000
     Co.
    U.S. Distilled Products Co.....  .............  L...........      22,101
    U.S. Foods & Pharmaceuticals,    .............  S...........     130,000
     Inc.
    U.S. Grain Company.............  .............  S...........      30,500
    U.S. Mills, Inc................  .............  S...........      14,500
    Valley Fig Growers.............  Y............  ............      45,000
    Valley View Packing Company....  .............  S...........      40,000
    Vanguard Trading Services, Inc.  .............  S...........     100,000
    Ventana Vineyards..............  .............  S...........       5,000
    Vermont Speciality Meats, Inc..  .............  S...........      50,000
    Vidalia Supreme................  .............  S...........      20,000
    Vie de France Corp.............  .............  L...........      30,000
    Vienna Sausage Manufacturing Co  .............  S...........     134,250
    Virga's Pizza Crust of VA, Inc.  .............  S...........      10,000
    Vision Ostrich International...  .............  S...........      49,500
    Vogel Popcorn..................  .............  L...........      15,861
    Wakefern Food Corporation......  .............  S...........      51,000
    Walton & Post, Inc.............  .............  S...........      25,000
    Washington Beef................  .............  L...........      22,000
    Welch Foods Inc., A Cooperative  Y............  ............     813,044
    Well-Pict, Inc.................  .............  S...........      22,000
    Wenix International Corp.......  .............  S...........      18,000
    Wente Bros.....................  .............  S...........     260,000
    Western Export Services, Inc...  .............  S...........      27,000
    Western Family Foods, Inc......  .............  S...........     143,000
    Wholesome & Hearty Foods, Inc..  .............  S...........      20,000
    Widman Popcorn Company.........  .............  S...........      26,375
    Wild Rice Exchange.............  .............  S...........     105,000
    Wilkins-Rogers, Inc............  .............  S...........       7,000
    Williamette Valley Vineyards...  .............  S...........       4,000
    Wilton Foods, Inc..............  .............  S...........      25,000
    Wine Alliance..................  .............  L...........      10,000
    Wine World Estates.............  .............  L...........      15,000
    Wines Of America, Ltd..........  .............  S...........      20,000
    Wisconsin Enterprise Inc.......  .............  S...........     185,000
    Wolny & Associates Co..........  .............  S...........      40,000
    Woltner Estates................  .............  S...........       4,500
    World Finer Foods, Inc.........  .............  S...........     200,000
    World Source Inc...............  .............  S...........      10,000
    World Variety Produce, Inc.....  .............  S...........       7,000
    Worldwide Marketing Corporation  .............  S...........      23,709
    Worldwide Sires, Inc...........  .............  S...........      44,083
    Y S Trading Company............  .............  S...........      20,000
    Yorkshire Dried Fruit & Nuts,    .............  S...........      40,000
     Inc.
    Yorkville Cellars..............  .............  S...........       5,000
    Yoshida Food Products..........  .............  S...........      85,000
    Young Pecan Company............  .............  S...........      30,000
    ------------------------------------------------------------------------

        Question. Please provide any documentation you have regarding
    actual market gains that are a direct result of this program.
        Answer. I will provide that information for the record.
        [The information follows:]

        [Clerk's note.--The information referred to does not appear in the
    hearing record but is available for review in the subcommittee's
    files.]

        Question. Please provide any documentation you have regarding to
    what extent non-coop companies which received MAP branded program
    dollars and are of a size which exceeds the small business definition
    made the decision to market products in a country only because they
    received the MAP assistance?
        Answer. We believe a substantial number of large companies have
    explored opportunities in new markets as a result of receiving MAP
    assistance, but we do not have documentation available to this effect
    because program participants are not required to submit this type of
    information to FAS. However, program participants are required to
    certify that any Federal funds received will supplement, but not
    supplant, any private or third party funds or other contributions to
    program activities. Program participants must also maintain supporting
    documentation which demonstrates why the participant is unlikely to
    carry out activities without Federal financial assistance and make this
    information available for audit.
                           section 11 reimbursements
        Question. Since USDA is under the cap for section 11 transfers, why
    are you asking for converting the Emerging Markets Technical Assistance
    to discretionary sending?
        Answer. The basis for proposing the change is that the nature of
    the activities carried out under the Emerging Markets Program do not
    relate directly to the primary mission of CCC, which is the
    stabilization of farm prices and incomes and assisting in the
    conservation of soil and water resources. Additionally. this proposal
    is consistent with past actions to discontinue the use of CCC funds for
    non-commodity price and income support activities, such as ASCS (now
    FSA) salaries and expenses and funding transferred to FAS to support
    the General Sales Manager's administrative expenses. Further, by making
    this change, funding for the Emerging Markets Program will no longer be
    subject to the section 11 transfer limitation and, thus, no longer have
    to compete for funding against other high priority activities.
        Question. Would you please explain in detail the need to move FAS
    activities from CCC reimbursables to discretionary spending?
        Answer. Provisions of the 1996 FAIR Act established a limitation on
    CCC funding made available each year to other agencies through
    reimbursable agreements. As a result, a number of priority activities
    are competing for limited CCC resources. Shifting the Emerging Markets
    Program and support of the CCC Computer Facility from mandatory to
    discretionary spending provides for a larger base from which to fund
    these activities. The 1998 budget does request an increase in funding
    for FAS which will help to offset a portion of the costs of the
    activities which will no longer be funded through CCC reimbursement.
        Question. Or, do you simply intend to convert these activities to
    mandatory funds subject to appropriations?
        Answer. No, the President's budget ultimately proposes a permanent
    shift of these activities from the mandatory to the discretionary
    account.
                                export education
        Question. As part of your effort to enhance export education with
    potential U.S. exporters on the home front, you mention activities in
    California, Colorado, Oregon, and Iowa. Are you also utilizing the work
    of the Global Marketing Support Service at the University of Arkansas?
        Answer. FAS recently contacted Dr. Preston Laferney of the
    University of Arkansas, and we are currently exploring avenues to
    utilize the Global Marketing Support Service. In addition, FAS is
    actively working with Arkansas state agricultural officials and the
    Southern U.S. Trade Association to alert Arkansas companies to overseas
    trade opportunities and USDA export assistance programs. USDA will
    continue to enhance export education of potential Arkansas exporters by
    working with the University of Arkansas and trade related organizations
    to ensure small, medium and new-to-export Arkansas companies have the
    tools and information they need to capitalize on the growing export
    market.
                                 public law 480
        Question. Explain why the reduction in the Public Law 480 program
    level will have no effect on projected tonnage exported through those
    programs?
        Answer. The proposed $50 million total rescission in fiscal year
    1997 appropriations for Public Law 480 Title I will affect projected
    tonnages under that program. Commodity shipments will be reduced by
    approximately 200,000 metric tons as a result of the proposed
    rescission. However, allocations of Title I commodity assistance that
    have already been announced for fiscal year 1997 will not be affected
    by the proposed rescission because the reduction in program funding
    will be taken from a reserve of unallocated funds and from unobligated
    funds carried over from fiscal year 1996.
        For 1998, while the budget includes a reduction in the Public Law
    480 program level, we expect the overall tonnage level for the program
    to remain unchanged from our revised estimate for 1997 because of lower
    commodity price projections for next year.
        Question. There is a pending rescission request relating to Public
    Law 480 Title I due to carryover funds and a further reduction in
    fiscal year 1998. Are the carryover funds not likely to be needed in
    future years?
        Answer. The decision to propose the $50.0 million Title I
    rescission was based on the need to identify an offset for the
    supplemental requests included in the budget, including one for the
    Special Supplemental Nutrition Program for Women, Infants, and
    Children. The reduction in program funding will be taken from
    unallocated fiscal year 1997 funds totaling $24.6 million and
    unobligated funds carried over from fiscal year 1996 totaling $32.9
    million. Upon enactment of the rescission, just over $7 million will
    remain in the ocean freight differential account for fiscal year 1997.
    We believe this remaining reserve is needed to meet current programming
    plans because the rate of ocean freight differential payments has been
    increasing recently, leading to higher program costs.
        Question. Is there not a likelihood that these funds could be
    transferred to Title II?
        Answer. By law, these funds could be transferred to Title II.
    However, at this time we have no reason to believe that funding will be
    inadequate for the Title II program this year. Nevertheless, we are
    monitoring the situation in North Korea and Zaire very closely.
    Developments in those countries could increase the need for emergency
    food aid.
                              overseas operations
        Question. Would allowing for 2-year money for overseas operations
    provide ultimate savings?
        Answer. A key advantage of this proposal is that unobligated
    balances remaining at the end of a given fiscal year could be applied
    toward offsetting the following fiscal year's operating costs. This
    would be particularly true in the event that favorable foreign currency
    fluctuations associated with overseas office operations created an
    operating surplus. It is expected that savings in one year would offset
    losses in others, as a result of currency exchange rate fluctuations.
        Question. If so, how much?
        Answer. Predicting any savings in advance is not possible.
        Question. What other efficiencies would be realized by this move on
    a programmatic basis?
        Answer. This proposal eliminates the uncertainties associated with
    forecasting overseas wage and prices increases and exchange rate
    movements, and coupled with the proposed advance appropriation, would
    ensure that only those funds necessary to offset these costs were
    actually made available. Currently, accurately forecasting overseas
    wage and prices adjustments is impossible given the long lead time
    involved in the budget process. In some fiscal years, more funds were
    appropriated for these costs than were necessary, in other fiscal
    years, less.
                                 rice/eu issues
        Question. What steps are USDA taking to help bring consensus within
    the U.S. rice industry to resolve the TRQ issue with the EU?
        Answer. USDA continues to have an ongoing dialogue both with
    individual companies and with industry associations. At the same time,
    we are working with EU officials to ensure that, once we come up with a
    workable system, imports can commence immediately.
                           cumulative recovery system
        Question. What is the status of negotiations with the EU on the
    rice Cumulative Recover System issue?
        Answer. The Commission has drafted proposed regulations for both
    the 4CRS and the malting barley TRQ. These proposals, both of which are
    acceptable to U.S. industry, are scheduled to be voted on at the April
    17 Grains Management Committee.
                                     ______

                       Question Submitted by Senator Kohl
                         dairy export incentive program
        Question. Will the Dairy Export Incentive Program (DEIP) be
    utilized in 1997 to the maximum extent allowed under the Uruguay Round
    GATT Agreement? If not, why not, and how close will we come to full
    funding for DEIP in 1997?
        Answer. We feel that our current level of activity under DEIP is
    moving the available dairy products to the international market without
    causing undue disruption to our domestic markets. We do not project
    reaching either the quantity or expenditure ceilings allowed under our
    Uruguay Round commitments for the current year. The volume of activity
    under the DEIP is a reflection of domestic availability and
    international demand. With the exception of butterfat, current
    allocations have been available since July 1996. However, almost 60
    percent of our awards have occurred since January 1997. The tight
    markets in the U.S. last summer and less than aggressive international
    demand for the products that can be exported under the DEIP were
    primary reasons for this limited activity. I will provide a table
    showing the award totals and Uruguay Round ceilings.
        [The information follows:]

                                          DAIRY EXPORT INCENTIVE PROGRAM (DEIP)
                                                 [Dollars in thousands]
    ----------------------------------------------------------------------------------------------------------------
                                                                       Quantity (MT)--            Bonus value--
                                                                 ---------------------------------------------------
                                                                                   GATT                      GATT
                              Commodity                            Committed     maximum     Committed     maximum
                                                                   (from July   (from July   (from Oct    (from Oct
                                                                       1)           1)           1)           1)
    ----------------------------------------------------------------------------------------------------------------
    Nonfat dry milk.............................................       39,024      100,222      $30,119     $113,388
    Whole milk powder...........................................        1,540        9,971        1,510       11,503
    Cheese......................................................        1,384        3,669          839        4,999
    Butterfat \1\...............................................          853       38,611          803       41,934
    ----------------------------------------------------------------------------------------------------------------
    \1\ Includes butter, butteroil, anhydrous milkfat and ghee on a butter equivalent basis.
    Note: Commitments are as of April 11, 1997. Quantity commitments are based on a July/June year and expenditure
      commitments are based on an October/September year.

                                     ______

                             Risk Management Agency
                     Questions Submitted by Senator Cochran
                             salaries and expenses
        Question. In a climate where other agencies in USDA are decreasing
    administrative and operating expenses, your projected available funds
    and staff years for 1998 for the Risk Management Agency and the Federal
    Crop Insurance Corporation actually increase. Why do you estimate an
    increased need in funds available and staff years for 1998?
        Answer. The requirements of the Federal Crop Insurance Reform Act--
    the Act--and the Federal Agriculture Improvement and Reform Act of
    1996--the 1996 Act--drastically increased the workload required of the
    Risk Management Agency--RMA--to support FCIC's existing programs, crop
    expansion, continuing changes to overall program requirements, and the
    increased emphasis on new crop program development. For example, the
    implementation of catastrophic risk protection coverage increased the
    number of policies sold from 800,000 in 1994 to 1.6 million in 1996. In
    addition, the 1996 Act provided for the establishment of a Risk
    Management Education program to provide education on risk management
    strategies, including futures and options trading and insurance
    protection programs, and to educate producers of the financial risks
    inherent in the production and marketing of agricultural commodities.
    The 1996 Act also transferred to RMA responsibility for the Options
    Pilot Program.
        Due to increasing expansion of program coverage resulting from the
    1996 Act, the need for greater compliance has grown. Greater reliance
    on private insurance company delivery based on the Standard Reinsurance
    Agreement has generated increased Compliance workload in the form of
    additional Hotline complaints, support investigations, support of
    regulatory functions of the current insurance program, and upgraded
    program operations. In addition, the increased reliance of farmers on
    crop insurance as a result of the 1996 Act has led to much greater
    demand to expand crop insurance to new crops and new products. Our
    resources are stretched thin at our current rate of expansion, and we
    will not be able to accelerate this expansion to the rate demanded
    without additional resources.
        Question. How has the agency conformed to the provision in the 1994
    Crop Insurance Reform Act which states, ``the Board shall alter program
    procedures and administrative requirements in order to reduce the
    administrative and operating costs of approved insurance providers and
    agents in an amount that corresponds to any reduction in the
    reimbursement rate required * * * during the 5-year period * * * ?''
    Has the reimbursement rate decreased, and if so, how much?
        Answer. Yes, FCIC has decreased the expense reimbursement rate as
    mandated in the Reform Act. For the 1997 reinsurance year, the rate was
    decreased from 31 percent to 29 percent. Under current law, the
    reimbursement rate will decrease at least to 28 percent in 1998 and
    decrease again in 1999 to 27.5 percent. However, we recognize that the
    rate may be too high and are proposing that the statutory ceiling on
    delivery expenses be reduced from 28 percent to 24.5 percent.
        RMA also continues to seek ways to simplify the delivery of crop
    insurance to satisfy this mandate of the Reform Act--reducing
    administrative expenses. Suggestions were solicited from participating
    companies and all other interested parties via a Federal Register
    notice. Twenty-nine actions have been completed since passage of the
    Crop Insurance Reform Act--a few examples follow: actuarial documents
    have been restructured, which reduced the number of pages printed each
    year by one-third, or approximately two million; combined forms have
    been approved which allow the company to reduce the number of times
    that they must contact the farmer; type and practice codes have been
    standardized and simplified; and the basic crop insurance computer
    system called RAS/DAS, was analyzed to assure that it contained no
    unnecessary or redundant data requirements. Ten actions are still in
    progress and four more are currently being evaluated. Consultations
    with industry will continue on this important issue.
        Question. The Administration has proposed legislation which will
    only reduce the amount needed to fund the sales commissions paid to
    reinsured companies from $202 to $150 million. How does the
    Administration propose to fund the remaining $150 million?
        Answer. The delivery expense of reinsured companies has been paid
    from the mandatory side of the budget for 1995, 1996 and 1997. For
    1998, part of the delivery expenses are to be paid from the
    discretionary side of the budget as part of a statutory compromise
    reached in the Federal Crop Insurance Reform Act of 1994. We are
    proposing that this amount be $150 million and that it be provided for
    delivery expenses in general rather than designated specifically for
    sales commissions. The $150 million is included in the President's
    request for funding under the 1998 Appropriations Act.
        Question. What will happen under current law to the crop insurance
    program if the Committee is unable to provide full funding requested
    for the sales commissions paid to reinsured companies?
        Answer. As described above, RMA specifically proposed that the $150
    million be appropriated for expense reimbursement generally, so the
    companies could determine how to allocate the mandatory and
    discretionary funds they receive as they see fit. Since the Federal
    Crop Insurance Act of 1980, delivery of the crop insurance program has
    been through private companies.
        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. We strongly urge
    that $150 million be appropriated.
        Question. The Administration's fiscal year 1998 request proposes
    increases in: pay costs for the Office of the Administrator; pay costs
    and staff years for research and development activities; pay costs and
    staff years for the insurance services division; pay costs for program
    support; pay costs and staff years for risk compliance; and, $202
    million for sales commissions paid to reinsured companies.
        How does the Administration justify these requested increases for
    pay costs and staff years when the program is in jeopardy if the $202
    million requested for sales commissions paid to reinsured companies is
    not funded?
        Answer. In our proposal, RMA would be absorbing fifty percent of
    the combined anticipated pay raise in fiscal year 1998 and the
    annualization of the fiscal year 1997 pay raise as required by the
    Department. Therefore, the increase for pay costs for the Agency is
    only half of what would be needed to fund the pay costs of agency
    personnel currently on-board working in support of the crop insurance
    program. Due to the legislation of the past several years, the workload
    has increased to implement new programs which are of service to the
    producers, review existing programs and rates/coverages, assure
    compliance with the policies and from the private insurance companies,
    and provide risk management education to producers on forward
    contracting, futures and options trading, and other risk management
    tools. All of these programs need personnel to produce the desired
    results expected from Congress and the nation's producers.
        Question. The current crop insurance regulations state, ``if there
    are insufficient funds appropriated by the Congress to deliver the crop
    insurance program, the policy will automatically terminate without
    liability.'' Who makes the determination of ``insufficient funds''
    which will trigger this provision?
        Answer. Pending the degree to which funds are not fully available,
    several parties including companies and the Administration must make
    such a determination. If partial funding is available, the
    Administration must decide if the program can be delivered in a manner
    acceptable to farmers and with little confusion or program
    vulnerabilities. Companies must decide if they can deliver the product
    adequately and compliant with program standards for the funds
    reimbursed. Each must make their determination based on the amount of
    available funds and the timing of when such funds become available. If
    program funds are not at adequate levels, producers could find
    themselves without insurance after they have made many key management
    decisions.
        Question. Has a determination been made for fiscal year 1998? What
    is the level of ``insufficient funds'' which will trigger this
    provision?
        Answer. Such a decision has not been made for fiscal year 1998. The
    Administrations budget proposal is the only basis at this time upon
    which to make such a determination, and that proposal results in
    adequate funding, although some insurance providers may disagree. Until
    actual funding is made known, estimating levels to trigger the policy
    provision would only be conjecture.
        Question. In your prepared statement, you state that under the
    Administration's proposal regarding the administrative expenses paid to
    the reinsured companies that an additional $10 million in
    administrative reimbursements to reinsured companies would be required.
    Please explain why this increase is required and is it netted out of
    the $53 million which the budget indicates would be saved by the
    Administration's legislative proposal?
        Answer. Under the current Standard Reinsurance Agreement, FCIC has
    authorized a higher rate of compensation for expense reimbursement to
    private insurance companies for increased sales of CRC policies, which
    is estimated as a $10 million increase in administrative expense
    reimbursement. Since we anticipate a 5 percent increase in sales of
    revenue products and a shift from current yield-based coverage
    products, we expect that costs to administer the programs will
    increase.
        To offset the increase in these costs in the discretionary portion
    of RMA's budget, we are proposing the reduction of expense
    reimbursement rates paid to private insurance companies.
        Question. The Administration is proposing legislative changes to
    reduce the reimbursement rate for delivery expenses, which I understand
    would lower the discretionary requirement rate from $203 million to
    $150 million. It is also proposing to make a portion of the overall
    reimbursement rate, not just the sales commission portion,
    discretionary and subject to appropriations. In your prepared statement
    you state that in order to be cost neutral in providing revenue
    insurance nationwide, the reimbursement rate used to determine
    administrative expenses paid to reinsured companies will be reduced. Is
    this reduction in the reimbursement rate the same as required by
    current law over a 5-year period?
        Answer. No, under current law, the targeted reimbursement rate for
    1998 is 28 percent and for 1999 and beyond, 27.5 percent. The
    Department's proposal does not specify a particular amount to be paid
    for sales commissions but reduces the overall reimbursement rate used
    to determine administrative expenses paid to the private insurance
    companies. This proposal would lower the reimbursement rate from 28
    percent of premiums sold for multiple-peril crop insurance to 24.5
    percent in 1998 and 24.25 percent in 1999 and beyond. The proposal
    specifies that 10.5 percentage points of the proposed rate be
    considered discretionary spending. This proposal achieves a reduction
    in discretionary spending of $53 million from current law to $150
    million for 1998.
        Question. How is this proposal to reduce the reimbursement rate
    connected to the Administrative's proposal that will result in an
    estimated increase of $10 million for administrative reimbursements to
    reinsured companies?
        Answer. The estimated increase of $10 million for administrative
    reimbursements to reinsured companies results from the expected
    increase in business from nationwide expansion of revenue products. The
    proposal to reduce the administrative expense reimbursement rate will
    provide an estimated savings of $53 million in delivery expenses and is
    not related to the expansion of revenue products.
                    expansion of crop revenue insurance plan
        Question. In January 1997 the Federal Crop Insurance Corporation
    Board of Directors approved an expansion of crop revenue coverage on
    corn and soybeans while adding new programs on spring wheat, grain
    sorghum, and cotton. (Senator Lugar has been very vocal about the
    anticipated high costs of expanding this program.) Does USDA have the
    authority under the Crop Insurance Act to expand the pilot program?
        Answer. The Department does have authority to expand CRC on a
    nationwide basis because it was sponsored by a private insurance
    company under Section 508(h) of the Act. 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.
        Question. What is the estimated cost to extend this pilot program
    nationwide?
        Answer. Most of the additional cost is expected due to greater
    participation induced by products that better meet producers' needs
    than does the standard yield-based coverage. To date, subsidies have
    been limited to the amount that would be paid if the producer had
    purchased the Actual Production History--APH--coverage plan. This cost
    generally is less than the APH plan for IP and RA. For CRC, the cost of
    the producer premium subsidy is the same as the APH plan, and an
    average of 9 percent extra is paid for administrative and operating
    expenses on the portion of the CRC premium that exceeds the premium
    that would have been paid under the APH plan. In general, the
    reimbursement to reinsured companies is 6-12 percent greater for CRC
    policies than for policies sold under the APH plan.
        The cost thus depends upon several factors: the increase in total
    participation and the mix of products that producers purchase. Higher
    sales of CRC will increase costs; greater market penetration by
    products such as IP and RA will reduce costs.
        For the purpose of the budget, FCIC assumed an increase in total
    participation on the order of 5 percent. It further assumed that most
    of the increase would be in CRC. To offset the costs associated with
    these assumptions, FCIC proposed that the statutory loss ratio target
    be reduced and made other program modifications. A part of the cost is
    offset by changes in other mandatory programs. The proposal is budget
    neutral.
        Question. What portion of the $203 million fiscal year 1998 request
    for administrative costs is related to this expansion of the pilot
    program?
        Answer. None. The $203 million estimate in the fiscal year 1998
    President's Budget only reflects current law. Current law does not
    authorize a Federal nationwide revenue insurance program. The
    additional cost for CRC in 1998 under current law is estimated to be
    $10 million.
        Question. When does the Agency plan to expand this program and
    offer it to producers?
        Answer. There has been great demand for increased availability of
    the revenue insurance concept, and the Administration is seeking
    legislative authority to offer revenue insurance nationwide. Presently,
    the Federal Crop Insurance Act authorizes only a pilot program of
    revenue insurance under direct Federal sponsorship. The plan or plans
    that may be offered are not yet known. Presumably, CRC would be one
    such plan. However, it probably does not meet the needs of all
    producers. Thus, some alternative plans may be needed such as Income
    Protection--IP--or Revenue Assurance--RA.
        FCIC has recently received a submission from the private company
    that developed CRC to expand wheat to 25 additional states and to
    expand to all counties in states that have previously been approved for
    only certain counties. FCIC will continue to review and consider for
    approval, products or product expansions as they are received from the
    private industry. If approved, consideration will be given to the
    timing that will allow for the orderly implementation in a way that
    provides ample opportunity for sales to producers.
        Question. What has been the participation rate in this pilot
    program?
        Answer. The Federal Crop Insurance Corporation developed the Income
    Protection--IP--Plan of Insurance. For the 1996 crop year, IP was
    available for corn, cotton, and spring wheat in 30 counties. For 1996,
    about 998 IP policies were purchased, covering about 218,000 net acres
    with total premiums of about $3.4 million. For the 1997 crop year the
    IP pilot program was expanded and is available for corn, cotton, grain
    sorghum, soybeans, spring wheat, and winter wheat in 159 counties. Data
    for the 1997 crop year will not be available until late in the calender
    year.
        Under the authority of the Act, FCIC approved the CRC and Revenue
    Assurance plans developed by the private sector. For the 1996 crop
    year, CRC was available for corn and soybeans for all Iowa and Nebraska
    counties. For 1996, about 91,000 CRC policies were purchased, covering
    about 11.3 million net acres, with total premiums of about $141.0
    million. For the 1997 crop year, the availability of CRC for corn and
    soybeans includes all counties in the States of Colorado--corn only,
    Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri,
    Nebraska, Ohio, Oklahoma, South Dakota, and Texas. In addition, for the
    1997 crop year, CRC was made available for:

    Cotton
      Arizona--all counties
      Georgia--all counties
      Oklahoma--all counties
      Texas--selected counties

    Grain sorghum
      Colorado--all counties
      Nebraska--all counties
      Oklahoma--all counties
      Kansas--selected counties
      Missouri--selected counties
      South Dakota--selected counties

    Spring wheat
      Minnesota--all counties
      Montana--selected counties
      North Dakota--selected counties

    Winter wheat
      Kansas--all counties
      Michigan--all counties
      Nebraska--all counties
      South Dakota--all counties
      Texas--all counties
      Washington--selected counties

        FCIC approved the RA plan of insurance for corn and soybeans in all
    Iowa counties for the 1997 crop year. CRC and RA plans of insurance
    will only be available in counties if an existing multiple peril crop
    insurance program is also available for the crop.
        Question. As a result of weather, adverse growing conditions, etc.,
    what are the estimated losses as a result of farmers participating in
    this program?
        Answer. As of April 8, 1997, reinsured companies had reported
    losses of $47.3 million for Crop Revenue Coverage for corn and soybeans
    in Iowa and Nebraska. The overall program loss ratio was 0.34. Losses
    paid to producers of corn and soybeans in Iowa and Nebraska who
    purchased coverage other than catastrophic under the Actual Production
    History yield-based plan had been paid $26.8 million, for a loss ratio
    of 0.26. By this time, reporting of losses normally is over 95 percent
    completed.
        On that same date, losses of $55 thousand and $178 thousand had
    been reported for corn and wheat, respectively, under the Income
    Protection coverage plan. The respective loss ratios were 0.07 and
    0.13. No losses had been reported for cotton under this revenue
    insurance plan. Since Income Protection is sold only in specific
    counties and not entire states, a comparable loss ratio for the APH
    coverage plan is not readily available.
        Question. Some farmers have expressed concern that no ``safety
    net'' exists for those that can't afford crop insurance or that no crop
    insurance coverage exists for a specific crop. Is there some way to
    address this concern?
        Answer. Free catastrophic insurance coverage--50 percent yield
    coverage indemnified at 60 percent of the maximum price--is available
    wherever crop insurance is offered. Producers are responsible for a
    minor $50 processing fee for each crop. The fee is waived in instances
    when limited resource producers cannot afford to pay it. Other
    alternative programs, such as the Group Risk Plan, provide low cost
    coverage alternatives in many areas. Where crop insurance is not
    available for a crop, the Noninsured Assistance Program provides
    coverage equivalent to catastrophic insurance coverage at no charge
    when an area suffers a widespread loss.
                       crop insurance for specialty crops
        Question. In the past pilot programs have been directed and pursued
    for crop insurance alternatives, especially for ``specialty crops'' in
    which the standard coverage was not viable. Such policies have been
    suggested for peaches, pecans, citrus, nursery crops, etc. Which crops
    are currently participating in a pilot program and what is the status
    of each of them?
        Answer. Specialty crops that are currently participating in a pilot
    program and their status is as follows:
        Apple Scab Integrated Pest Management Pilot Project.--This pilot
    program was conducted during the 1996 crop year and is currently being
    evaluated to determine its success. This program provided insurance
    protection to apple growers participating in an apple scab Integrated
    Pest Management--IPM--demonstration project. The University of Vermont
    and the University of New Hampshire jointly conducted the project to
    demonstrate the effectiveness of IPM procedures for the control of
    apple scab.
        The pilot program provided protection for quality losses due to
    scab on apples that, had it not been for apple scab damage, would have
    been marketable as fresh market U.S. Fancy or Extra Fancy apples. The
    protection against apple scab quality losses required an endorsement to
    the existing policy since that policy does not protect against quality
    or production losses due to disease or insects that could have been
    controlled. Producers desiring this optional coverage were required to
    carry an available level of additional coverage Actual Production
    History (APH) insurance coverage on their apples along with the apple
    scab endorsement.
        Support for this IPM demonstration project is consistent with the
    shared goal of USDA and Congress to facilitate producers' movement to
    sustainable farming practices.
        Avocados.--An avocado pilot revenue program has been established
    for the 1998, 1999, and 2000 crop years for Ventura County, California.
    This program is being tested as an adaptation of the Income Protection
    program to a specialty crop for which revenue has not previously been
    insured. Plans are in place to initiate a pilot program to protect
    against almond revenue losses beginning the 1998 crop year. The almond
    insurance program has been in place more than fifteen years and
    provides protection only for production losses.
        Blueberries.--An Actual Production History (APH) based blueberry
    pilot program was established for the 1995 and 1996 crop years, and
    expanded for the 1997 and 1998 crop years. The pilot program is
    presently available in two counties in Maine, two counties in Michigan,
    eight counties in Mississippi, two counties in New Jersey, and one
    county in North Carolina.
        Canola/Rapeseed.--An Actual Production History (APH) based canola
    pilot program was established for the 1995 crop year and expanded for
    the 1997 and 1998 crop years, and is available in sixteen counties.
        The pilot program is available for spring-seeded canola in the
    following counties: Lewis, Idaho; Kittson, and Roseau, Minnesota;
    Glacier, Montana; Bottineau, Cavalier, Pierce, Ramsey, Rolette and
    Towner, North Dakota; Whitman, Washington.
        The pilot program is available for fall-seeded canola in the
    following counties: Baker, Calhoun, and Early, Georgia.
        The pilot program is available for spring-seeded and fall-seeded
    high oleic canola and fall-seeded high euricic Rapeseed in the
    following Pacific Northwest counties: Latah, Idaho; and Umatilla,
    Oregon.
        Florida Fruit Trees.--A Florida fruit tree pilot program was
    established for the 1996, 1997, and 1998 crop years to protect grove
    owners for replacement or rehabilitation of trees damaged by freeze,
    wind, or excess moisture. The insurable tree types include all citrus
    and the following tropical fruit trees: avocado, carambola, and mango.
    The pilot program is available in the following five Florida counties:
    Dade, Highlands, Martin, Palm Beach, and Polk. The insured crops vary
    by county.
        Millet.--A millet pilot program was established for the 1996, 1997,
    and 1998 crop years for the following five counties: Logan, Colorado;
    Cheyenne and Deuel Counties, Nebraska; Dickey, North Dakota; and
    Bennett, South Dakota. Production records, grower interest, and Risk
    Management Agency Regional Service Office recommendations were used to
    select the pilot counties. The millet pilot program is an Actual
    Production History plan of multiple peril crop insurance. A detailed
    description of these and other pilot programs is available through the
    Risk Management Agency's Research and Evaluation Division Internet home
    page at http://www.act.fcic.usda.gov/research. This web site also
    contains feasibility studies and/or executive summaries of feasibility
    studies conducted to determine the feasibility of developing risk
    management programs for specific crops, most of which are considered
    specialty crops.
        Question. Have any of these pilot programs been successful?
        Answer. The following descriptions of the outcome/status of the
    pilot programs.
        Apple Scab IPM Pilot Program.--Although the Apple Scab IPM Pilot
    Program evaluation is not completed, the program appears to have served
    its purpose for the small number of growers who participated. The pilot
    program evaluation will assess the relative success of the program and
    its applicability to other areas and crops.
        Avocado Pilot Program.--It is too early to determine the success of
    the avocado pilot program.
        Blueberry Pilot Program.--Although the blueberry pilot program
    evaluation is not completed, it appears that the program has been a
    success, and plans are in place to convert the program to permanent
    status beginning the 1999 crop year. About 300 polices reported premium
    mostly at the CAT (50/60) level. Canola/Rapeseed Pilot Program--
    Although the canola pilot program evaluation is not completed, it
    appears that the program has been a success, and plans are in place to
    convert the program to permanent status beginning the 1999 crop year.
    Over 2,000 policies reported premium, mostly at the additional coverage
    levels.
        Florida Fruit Tree Pilot Program.--This pilot program is just into
    the second year of its 3-year expected duration, and the pilot program
    evaluation is expected to be completed in April 1998. Approximately
    1,200 policies were purchased in the 1996 crop year, mostly at the CAT
    (50/60) level.
        Millet Pilot Program.--The millet pilot program is just beginning
    its second year of its 3-year expected duration, and the millet pilot
    program evaluation is expected to be completed in July 1998.
    Approximately 1,700 policies were purchased in the 1996 crop year,
    mostly at additional coverage levels.
        Question. The Federal Crop Insurance Reform Act of 1994 created the
    position of ``Specialty Crops Coordinator.'' This position was created
    to serve as a liaison between producers and the agency. Has this
    position been filled? If yes, then who has been selected to fill this
    position?
        Answer. The Specialty Crops Coordinator position was filled in
    March 1996 by William C. (Bill) Jones after the previous Specialty
    Crops Coordinator, Dr. Floyd F. Niernberger, retired in January 1996.
    Mr. Jones, a native from McLean County, Illinois, began his Federal
    civilian career with the Federal Crop Insurance Corporation in 1968,
    and has served in numerous positions within the agency. Although raised
    on a grain, livestock, and dairy farm in Central Illinois, Mr. Jones
    has owned and operated a small fruit and vegetable farm in the Kansas
    City area for 15 years, growing, wholesaling, and retailing a variety
    of specialty crops.
        Question. What actions have the agency taken to address the
    insurance needs of specialty crops?
        Answer. The agency has taken a number of actions to address the
    insurance needs of specialty crops. Major actions that have been taken
    in addition to developing the pilot programs for specialty crops
    identified above are as follows.
      --The agency published ``Data Collection Guidelines to Be Used in
            Formulating New Crop Insurance Policies'' in the Federal
            Register on April 14, 1995, to advise interested parties of
            FCIC's guidelines for data collection to assist the Corporation
            in researching the feasibility of formulating crop insurance
            policies for new crops.
      --On July 12, 1995, ``Notice of Specialty Crops Research Studies''
            was printed in the Federal Register, naming the specialty crops
            for which research reports were being prepared and soliciting
            proposals from interested parties of additional crops or
            comments on the crops named. Representatives of the agency had
            speaking engagements with grower groups and commodity
            associations to communicate the agency's new and specialty
            crops program expansion efforts.
      --The agency has developed a Summary of New Program Development Data
            Requirements to be provided to specialty crops growers and
            commodity associations to enable them to better understand the
            data needed to develop a new program, and to enable them to
            assist in the data-gathering process to facilitate expansion
            efforts.
      --The agency contracted research with the Economic Research Service
            (ERS) to determine the feasibility of insuring various new and
            specialty crops. These feasibility studies represent one
            component in the process of developing risk management products
            for specialty crops. To date, 49 such projects have been
            undertaken.
      --The agency has made available its New Program Development Handbook,
            Summary of New Program Development Data Requirements, and
            information regarding various feasibility studies and pilot
            programs through the agency's Research and Evaluation Division
            Internet web site at http://www.act. fcic.usda.gov/research.
      --In August 1996, the agency's Research and Evaluation Division
            conducted an intensive New Program Development Training session
            for representatives from the ten Risk Management Agency
            Regional Service Offices and Washington, D.C. The expected
            outcome of this training was greater involvement in project
            management at the field level and maximum utilization of
            resources throughout the agency in the development of new
            programs.
      --The agency is conducting a joint research project between the
            University of Maine, the Extension Service, and RMA's Research
            and Evaluation Division to investigate the feasibility of
            offering a crop insurance program designed to meet the needs of
            specialized producers of vegetables and other perishable crops
            who market through direct marketing channels.
      --The agency is expanding the coverage of existing specialty crops
            programs to new areas and new producers. As an example, the
            apple insurance program was expanded for the 1996 and 1997 crop
            years into 16 additional counties in six states. Additionally,
            written agreements are being accepted for producers of
            currently-insured crops in counties where the program is not
            available.
        Pilot programs are in various stages of development for the
    following specialty crops:
        Almond Revenue Pilot Program.--A pilot program offering almond
    revenue protection as an alternative to the current production
    protection program is being considered for implementation in
    California.
        Pecan Revenue Pilot Program.--A pilot program offering pecan
    growers protection against unavoidable loss of revenue is being
    considered for implementation beginning the 1998 crop year.
        Sweet Potato Pilot Program.--A pilot program offering growers
    protection against unavoidable loss of production is being considered
    for implementation beginning the 1998 crop year in a number of states
    and counties.
        Turfgrass Sod Pilot Program.--A pilot program offering growers
    protection against unavoidable losses to their sod inventory is being
    considered for implementation beginning the 1999 crop year. The
    turfgrass sod industry trade group will be presenting the proposed
    policy to its membership at their annual meeting in June.
        Wild Rice Pilot Program.--A pilot program offering growers
    protection against unavoidable loss of production is being considered
    for implementation beginning the 1999 crop year in Minnesota and
    California.
        Christmas Tree Pilot Program.--A pilot program offering growers
    protection against unavoidable losses is being considered for
    implementation beginning the 1999 crop year.
        Direct Market Perishable Crops Pilot Program.--A pilot program
    offering growers protection against unavoidable loss of revenue is
    being considered for implementation beginning the 1999 crop year.
        Aquaculture Pilot Program.--A pilot program offering growers
    protection against unavoidable losses is being considered for
    implementation beginning the 1999 crop year.
        Peach Income Protection (IP) Pilot Program.--A pilot program
    offering peach growers protection against unavoidable revenue losses is
    being considered for implementation beginning the 1999 crop year.
        Potato Income Protection (IP) Pilot Program.--A pilot program
    offering potato growers protection against unavoidable revenue losses
    is being considered for implementation beginning the 1999 crop year.
        Nursery Program.--The current nursery program is being considered
    for redesign to provide broader protection than is currently available.
        Significant pilot program development activity is taking place for
    the following specialty crops during 1997 and 1998: Cane Berries--
    Brambles; Melons; Snap Beans--Fresh Market; Squash; Artichokes;
    Cabbage; Chili Peppers; Citrus Fruit--Alternative to current programs;
    Cucumbers; and Sesame. This may result in such pilot programs being
    initiated in the 2000 crop year, depending upon the model used, data
    and resources available, and other factors.
        Question. Are any special initiatives being pursued and what are
    they?
        Answer. Without intending to single out any projects as more
    significant or of higher priority than the others, the direct market
    perishable crops program and aquaculture program would probably qualify
    as much as any others as ``special initiatives'' in that they probably
    have the greatest potential to be significantly different from any
    other programs available or being developed.
                                     ______

                     Questions Submitted by Senator Bumpers
                             crop revenue coverage
        Question. How much would it cost to expand Crop Revenue Coverage
    (CRC) nationwide in terms of indemnities, reimbursements to private
    companies, and administrative costs?
        Answer. Most of the additional cost expected is due to greater
    participation induced by products that better meet producers' needs
    than does the standard yield-based coverage. To date, subsidies have
    been limited to the amount that would be paid if the producer had
    purchased the Actual Production History--APH coverage plan. This cost
    generally is less than the APH plan for IP and RA. For CRC, the cost of
    the producer premium subsidy is the same as the APH plan, and an
    average of 9 percent extra is paid for administrative and operating
    expenses on the portion of the CRC premium that exceeds the premium
    that would have been paid under the APH plan. In general, the
    reimbursement to reinsured companies is 6-12 percent greater for CRC
    policies than for policies sold under the APH plan.
        The cost thus depends upon several factors: the increase in total
    participation and the mix of products that producers purchase. Higher
    sales of CRC will increase costs; greater market penetration by
    products such as IP and RA will reduce costs.
        For the purpose of the budget, FCIC assumed an increase in total
    participation on the order of 5 percent. It further assumed that most
    of the increase would be in CRC. To offset the costs associated with
    these assumptions, FCIC proposed that the statutory loss ratio target
    be reduced and made other program modifications. A part of the costs is
    offset by changes in other mandatory programs. The proposal is budget
    neutral.
        Question. How do those costs, in addition to the Non-insured
    Assistance Program (NAP) administered by FSA, compare with the average
    of ad hoc disaster programs provided over the past ten years?
        Answer. As stated above, the cost of expanding CRC depends upon
    several factors including the increase in total participation and the
    mix of products that producers purchase. It is impossible at such an
    early stage of the expansion to make a meaningful comparison between
    the cost of CRC expansion and the cost of other ad hoc disaster
    programs and NAP. We can however, provide you with the average cost of
    disaster payments for fiscal years 1987 through 1996, as provided by
    the Commodity Credit Corporation, which is $1,034,082,200. Furthermore,
    as of April 3, 1997, the cumulative NAP payments for 1996 were
    $35,709,127 and $26,851,144 for 1995.
        Question. Please explain how you plan to make full coverage for CRC
    revenue-neutral?
        Answer. The major additional expense arises from expectations of an
    increase in overall program participation. The mandatory costs
    associated with this increase are to be offset by a reduction in the
    legislated target loss ratio from 1.10 to 1.085 in 1998 and 1.075 to
    1.060 beginning in the year 1999. Savings from other mandatory programs
    also are to be credited. The discretionary costs associated with this
    increase are to be offset by a reduction in the rate of reimbursement
    for delivery expenses.
        Question. Since the NAP program is designed as a risk management
    tool, why has it not been consolidated with the other risk management
    programs of your agency?
        Answer. The Department of Agriculture Reorganization Act of 1994
    was amended on April 4, 1996, by the Federal Agriculture Improvement
    and Reform Act of 1996. The 1996 Act required the Secretary to
    establish an independent agency to supervise the Federal Crop Insurance
    Corporation activities. The Farm Service Agency (FSA) administers a
    variety of activities and in the 1996 Act Congress retained NAP
    functional activities under the administration of FSA. RMA and FSA do
    coordinate in the collection of yield and price data on NAP crops and
    that information is helpful when establishing new insurance programs on
    those previously noninsured crops.
                      reimbursements to private companies
        Question. On page 12 of Secretary Smith's statement, he mentions a
    reduction in the discretionary amount for delivery expenses from $203
    million to $150 million. In the next sentence, he states, ``Further,
    our proposal would make a portion of the overall reimbursement rate
    discretionary and subject to appropriations whereas current laws treat
    only the sales commissions portion of the reimbursement as
    discretionary.'' Is it not the case that the reimbursement for delivery
    expenses, the amount you recommend dropping to $150 million is the only
    discretionary item relating to company reimbursements. Would you please
    clarify the statement I have quoted which sounds as though there is a
    further discretionary item?
        Answer. In our proposal, we tried to be fair to the agents and to
    avoid having to tell the insurance companies how much they would be
    allowed to pay their agents. As you know, sales commissions have been
    paid out of the FCIC Fund, which is a mandatory spending account
    although still subject to appropriation. However, current law requires
    that they be treated as discretionary spending beginning in 1998.
        Our proposal recognizes that the delivery expenses paid, in total
    not just sales commissions, may have been too high. Consequently, we
    are proposing that the statutory ceiling on delivery expenses be
    reduced from 28 percent to 24.5 percent of the premium on multi-peril
    coverage, which applies to production risks. For revenue insurance,
    which has a higher premium because it applies to price as well as
    production risks, the rate will be somewhat less, but the amount will
    be at least as much as the amount paid on multi-peril coverage. We
    estimate that delivery expenses under our proposal would be $417
    million, compared to $460 million under current law, which is a savings
    of $43 million, net of about $10 million in additional cost for an
    increase in business.
        As mentioned earlier, while we wanted to reduce delivery expenses,
    we did not want agents to have to bear more than a fair share of the
    reduction. We wanted this to be a matter of negotiation between the
    agents and their companies, without our getting into the matter. So our
    proposal provides for eliminating the distinction in current law that
    subjects only the sales commission portion of delivery expenses to
    discretionary spending ceilings.
        Question. If you reduce the loss ratio used to establish the
    premium rates structure, what effect will that have on participation?
    At some point will farmers not feel the cost of the program exceeds the
    benefits leaving only the more ``loss-prone'' farmers in the programs?
        Answer. RMA is not aware of any studies that reliably estimate the
    price elasticity of demand for crop insurance. Hence, any assessments
    about the effect of a change in the statutory loss ratio target can
    only be conjectural. The proposed reduction in the loss ratio, from
    1.10 to 1.085 in 1998 and from 1.075 to 1.060 in 1999, infers a need to
    increase premium income by 1.4 percent in each year. This is a
    relatively modest amount that should not impact participation greatly.
    Annual changes in price elections cause a greater change in premium
    costs to producers.
        The crop insurance program of today offers many options to
    producers that enable them to better target their risk management
    strategies with the price they are willing to pay. There are new
    products and new coverage levels compared to even the recent 1995 crop
    year. There is increasing awareness of the benefits of complementing
    production risk management strategies with marketing risk management
    strategies such as puts, calls, forward selling, and others. The
    environment created by the new farm programs will require producers to
    actively consider these strategies if they are to be successful.
                                     ______

                    Question Submitted by Senator Hutchison
        Question. During the month of March 1997 some areas of Texas have
    received in excess of 12 inches of rain and today received another 1\1/
    2\ inches. The heavy rains have prevented some Texas farmers from
    planting crops. At present only about 30 percent of the cotton has been
    planted and most will have to be replanted. Most of the grain has been
    planted, however, most will have to be replanted due to flooding and
    weed infestation as a result of herbicides breakdown.
        Is it possible for USDA to extend the final plant date to April 15,
    1997 without imposing penalties in the Texas regions where rainfall has
    been recently excessive? During last year' drought we used creative
    approaches like this to help Texas farmers and ranchers.
        Answer. FCIC has received several inquiries that have recommended
    that insurance final planting dates be changed so that producers who
    plant after the final planting date will not receive reduced production
    guarantees. While such action may appear attractive, it can have
    negative effects on producers:
      --Qualification for a prevented planting production guarantee would
            be delayed. Producers who are prevented from planting by the
            final planting date may qualify for a prevented planting
            production payment. Extension of these dates would require a
            producer to be prevented from planting until this extended date
            to qualify. Many growers have indicated that it is not
            practical to plant after current final planting dates.
      --Producers may be compelled to plant until the extended date to
            qualify for insurance coverage. Planting may continue even in
            situations in which reduced yields and net returns would be
            expected. This could result in increased insurance losses and
            less acreage planted to short-season substitute crops.
      --Insurance policy requirements regarding the replanting of a damaged
            crop could be impacted. Current provisions require that a crop
            damaged prior to the final planting date be replanted if it is
            practical to do so. As indicated above, many growers feel that
            planting past the current final planting date is not practical.
      --The late planting period would be extended for most crops until 25
            days after the new final planting date. The late planting
            period would then extend too far into the growing season for
            most crops.
      --Premium rates may be impacted in subsequent crop years if
            additional losses result from the changes in the final planting
            date.
      --This change would override current policy provisions without
            regulatory action in the very type of year/conditions for which
            they were designed.
      --RMA received negative feedback after certain date changes were made
            for the 1995 crop year.
      --Insurance providers may seek financial damages--hold harmless--from
            RMA to compensate for losses that would not have been incurred
            if planting dates were not changed.
        It is for these reasons that RMA intends to maintain current final
    planting dates and provisions that are expressly designed to deal with
    situations where planting is delayed or prevented. RMA will continue to
    evaluate any possible steps that will increase producers' awareness and
    understanding of these coverages and that will enhance the service that
    policyholders currently receive, including any options that may
    expedite payment of indemnities to impacted producers.

                              Subcommittee Recess

        Senator Cochran. Thank you all for everything you have been
    doing. We congratulate you for your good efforts. Thank you
    very much.
        Our hearing is concluded. We will have another in a series
    of hearings next Tuesday, April 15, at 10 a.m., in this room,
    124, of the Dirksen Senate Office Building. At that time, we
    will consider the budget request for the Department's rural
    economic and community development activities.
        Until then, the subcommittee stands in recess.
        [Whereupon, at 12:05 p.m., Tuesday, April 8, the
    subcommittee was recessed, to reconvene at 10:20 a.m., Tuesday,
    April 15.]

    AGRICULTURE, RURAL DEVELOPMENT, AND RELATED AGENCIES APPROPRIATIONS FOR
                                FISCAL YEAR 1998

                                  ----------

                            TUESDAY, APRIL 15, 1997

                                           U.S. Senate,
               Subcommittee of the Committee on Appropriations,
                                                        Washington, DC.
        The subcommittee met at 10:20 a.m., in room SD-124, Dirksen
    Senate Office Building, Hon. Thad Cochran (chairman) presiding.
        Present: Senators Cochran, Burns, Bumpers, and Harkin.

                           DEPARTMENT OF AGRICULTURE

    STATEMENT OF JILL LONG THOMPSON, UNDER SECRETARY, RURAL
                DEVELOPMENT
    ACCOMPANIED BY DENNIS KAPLAN, DEPUTY DIRECTOR, OFFICE OF BUDGET AND
                PROGRAM ANALYSIS

                            Rural Utilities Service

    STATEMENT OF WALLY B. BEYER, ADMINISTRATOR

                             Rural Housing Service

    STATEMENT OF JAN E. SHADBURN, ADMINISTRATOR

                       Rural Business-Cooperative Service

    STATEMENT OF DAYTON J. WATKINS, ADMINISTRATOR

      Alternative Agricultural Research and Commercialization Corporation

    STATEMENT OF W. BRUCE CRAIN, EXECUTIVE DIRECTOR

                                Opening Remarks

        Senator Cochran. The subcommittee will please come to
    order.
        We will continue our hearings on the President's budget
    request for the Department of Agriculture and related agencies
    for the next fiscal year. We are very pleased this morning to
    have Under Secretary for Rural Development Jill Long Thompson
    to lead our panel to review this phase of the budget. With her,
    we understand, are Wally B. Beyer, Administrator, Rural
    Utilities Service; Jan E. Shadburn, Administrator, Rural
    Housing Service; Dayton J. Watkins, Administrator, Rural
    Business-Cooperative Service; Bruce Crain, Executive Director,
    Alternative Agricultural Research and Commercialization
    Corporation; and Dennis Kaplan, the Department's Office of
    Budget and Program Analysis representative.
        Thank you all for being here. If I have omitted someone, I
    am going to ask Secretary Thompson to point that out and
    introduce others who might be accompanying her this morning.
        We have your written testimony, which we appreciate very
    much. We will make that a part of the record in full, and ask
    you to make whatever summary comments or remarks you think
    would be appropriate. We will then have an opportunity to take
    questions from the subcommittee members.
        Before proceeding, though, I am going to ask my colleague,
    Senator Burns, from Montana, if he has any opening statements
    or comments he would like to make at this time. Senator Burns.
        Senator Burns. Thank you very much, Mr. Chairman.
        We have a very lively microphone. Does anybody ever use
    this thing? [Laughter.]
        We are not going to dwell too much on this. Anyway, Mr.
    Chairman, I have a statement. We have to get this week started
    off with a little levity or it is going to be a long week, I
    fear. So, thank you very much. I will ask if my full statement
    can be made a part of the record.
        I just want to comment this morning that times change and
    the way we serve our rural communities is changing, too. Mr.
    Beyer and RUS, we have to start thinking technology and how
    technologies serve our rural areas and of course the rural
    utilities programs, distance learning, and telemedicine. I have
    a great interest in them all because we are moving into a new
    era with the different ways that we deliver our services and
    how we plan for rural development, how the infrastructure
    should look. Broadband communications happens to be a vital
    part of that. With rural telephones and with the use of
    wireless, all of this becomes very, very important to rural
    Montana, just as electricity or anything else is a vital part
    of that infrastructure that attracts business and industry,
    aside from our traditional agricultural base to those
    communities, is vital.
        And so I congratulate you for holding these hearings. I am
    sorry that we do not have some more money to spend in some
    areas on infrastructure. I think that is the role of
    Government--to provide that policy and seed money to build
    infrastructure and then the rest of us can get out of the way
    and let those that have great imaginations and ideas, let those
    ideas flow where they serve the majority of the people who are
    in the business of providing not only food and fiber, but the
    ability to provide the other services that are found in our
    rural communities.
        And I thank you for this hearing today.

                              Prepared Statements

        Senator Cochran. Thank you, Senator. We have your written
    statement and it will be made part of the record along with
    statements from Senator Bumpers and Senator Byrd.
        [The statements follow:]
                      Prepared Statement of Senator Burns
        Thank you Mr. Chairman. I thank you for calling this hearing today.
    The importance of what is going on in rural America is extremely real
    to all of us, especially since the majority of this committee comes
    from rural states. We are touched daily by the questions that our
    friends and neighbors have about the future of their way of life in
    rural America. Montana is no different in this respect than is
    Mississippi or Arkansas.
        I have some concerns about what we are planning to do to assist our
    rural American neighbors. I would love to see the ability to spend more
    money to spend to assist these people in the development of industries
    related to their way of life. However, we must do the most with the
    amounts of money we have available to us.
        I have a great interest in the efforts of the Rural Utilities
    Service to help bring our rural schools and medical facilities into the
    Information Age. The RUS Distance Learning and Telemedicine Grant
    Program provided seed money to some of our most successful telemedicine
    networks in Montana, networks that are still expanding. Rural America
    continues to face barriers to full access to telecommunications, and
    one of the best ways to get networks up and running is through grant
    programs. The grants are relatively small and usually no more than 3
    years in duration, but they allow an initial capital investment so the
    networks can get started. Telecommunications is an important part of
    rural development and I believe we ought to stay focused on it as we
    craft this year's bill. This modest investment will bring rural areas
    dividends in the form of better education, better health care, and more
    jobs.
        I will keep my statement short today to hear from the Department of
    Agriculture. I thank the Chairman and look forward to hearing from the
    Under Secretary today.
                                     ______

                     Prepared Statement of Senator Bumpers
        Mr. Chairman, again, thank you for your courtesies and let me offer
    a welcome to today's panel. This hearing will focus on the agencies at
    USDA charged with the responsibilities for Rural America. My state,
    with the exception of a few urban areas, is a rural state. Obviously,
    these agencies are therefore very important to my state. I can not go
    into any community in any part of my state where the programs
    administered by the people in this room have not had some direct effect
    of the lives of the people in those communities.
        Growing up in Charleston, Arkansas, I still recall when
    electricity, running water, and telephone service first came to our
    home. I know that these are services most Americans take for granted.
    In truth, there are far more Americans than many would expect that
    still live day in and day out without these basic services. Without the
    USDA rural development programs, many hundreds of thousands of
    Americans every year would still be surviving, somehow, without running
    water, electricity, or telephones. If America is going to move into the
    21st Century as one nation, that means it is up to us to see that all
    Americans have access to, at least, the basic services of life. The
    United States of America is not a Third World Country and our people
    should not be expected to live in conditions as though it is.
        Of all the requests that I receive from constituents in my state,
    none are more compelling, nor might I add more unrelenting, than
    appeals from rural communities and water districts for funding from the
    Rural Utilities Service's Water and Wastewater programs. I have seen
    first hand what a difference these programs can mean for rural
    communities and I have long considered myself a champion for their
    cause. My support for these programs is not simply because they are
    what my constituents want, I honestly believe these programs are among
    the very best provided anywhere within the federal government.
    Secretary Thompson, and Mr. Beyer, my congratulations to you for your
    continuing good work.
        By underscoring my support for the Water and Wastewater programs, I
    don't mean to ignore the other important programs at USDA for Rural
    America. Adequate housing has been and continues to be a major problem
    for rural Americans. When one thinks of homelessness, the immediate
    image is usually one found in an urban setting. But homelessness is not
    a problem isolated to the inner city, it is found all across our
    countryside. Equally troubling is the large number of rural Americans
    who live in totally inadequate housing. USDA's housing programs are
    designed to make housing affordable, safe, and, in some cases, existent
    for many families. I continue my support for these programs, but I am a
    little troubled by an item in the budget request calling on this
    subcommittee to provide funding for certain section 8 housing
    assistance costs that have formerly been under the jurisdiction of the
    VA-HUD subcommittee. With our limited resources, I am concerned that
    this expansion, without a corresponding increase in our 602(b)
    allocation, will be problematic for existing USDA programs.
        To further the need for USDA programs, I would like to focus for a
    moment on the tragic natural disasters that continue to ravage many
    parts of our country. For the past several weeks, we have all witnessed
    the terrible losses in the upper plains states from a combination of
    massive floods and freezing temperatures. The result has the appearance
    of convulsive ice flows that have isolated homes and communities. There
    is certainly a role for USDA Rural Development programs to help these
    communities and families cope with this disaster.
        In addition, last month, deadly tornadoes touched down in several
    communities in Arkansas. Beyond the grievous loss of life and personal
    injury, many thousands of Arkansans lost their homes and places of
    employment. I had hoped that the emergency supplemental request pending
    before Congress would have included an amount necessary to remedy these
    programs through agencies such as the Rural Utilities Service, the
    Rural Housing Administration and the Rural Business and Cooperative
    Development Service, but I fear the amounts included, where in fact
    they are included, will fall far short unless there are additional
    amounts requested by the Administration.
        The challenges facing Rural America have always been great. From
    the days of early settlement, giving rise to the genesis of the
    American spirit, through the trauma of the Great Depression, to the
    political disparity resulting from declining populations, Rural America
    has been at the heart of American perseverance and on the cutting edge
    of national direction. Today, rapidly changing technologies in
    communication and information offer Rural America a place at the table
    of national and global dialogue and achievement. But that place at the
    table will not occur if we don't ensure Rural America the tools
    necessary to compete and be a full player in the information age that
    is upon us. The agencies here today can, and must, play a vital role in
    making sure that Rural America not only has the basic services
    necessary for decent living, but also the tools appropriate for the
    opportunities that lie ahead.
                                     ______

                       Prepared Statement of Senator Byrd
        Chairman Cochran, Senator Bumpers, members of the subcommittee, and
    Under Secretary Long Thompson, I am pleased to be here today to review
    the U.S. Department of Agriculture's (USDA) Rural Development (RD)
    programs. These programs address one of my long-standing priorities--
    community infrastructure that meets the basic needs of our citizens.
    Particularly, the Rural Utilities Service (RUS) programs provide small
    rural communities with grants and loans for water and waste disposal
    systems--infrastructure that I deem as a fundamental element of modern
    civilization.
        Incredibly, in these United States, nearly 8 million people do not
    have access to safe drinking water. Now, let me repeat that, 8 million
    people in the United States of America, the most prosperous and
    powerful nation on the face of the Earth, do not have access to a
    reliable source of clean drinking water. That, in my view, is a
    national disgrace. National safe drinking water needs are assessed at
    some $10 billion. In West Virginia, in 1995, 176,000 families were
    without an adequate supply of safe drinking water, and the estimated
    cost of needed water development projects in my state alone is $568
    million.
        The USDA's efforts to provide safe drinking water to American
    families are generally laudable, if underfunded. I have maintained for
    years that our budget ignores the most basic needs of the people, and
    that we must take action to restore common sense to our budget
    priorities. Last year, I offered an amendment that would close
    corporate loopholes and restore $65 billion to the federal budget for
    domestic projects, including funds for water and waste disposal
    projects. Upon its defeat, I offered another amendment to add $1.5
    billion for federal water and waste water projects. Regrettably, this
    amendment was defeated as well. Nevertheless, last year, under the
    capable leadership of Bobby Lewis, the West Virginia Rural Development
    State Director, the USDA made available $22.2 million to fund projects
    that will provide hundreds of West Virginians with access to a reliable
    source of clean drinking water for the first time. However, much work
    remains, and this hearing is a welcome opportunity to renew attention
    to the critical need for federal investment in basic infrastructure. I
    have several questions regarding the President's proposed budget in
    this regard.

                        Statement of Jill Long Thompson

        Senator Cochran. Madam Secretary, you may proceed.
        Mrs. Thompson. Thank you, Mr. Chairman and members of the
    committee. I am pleased to be here today to present for your
    consideration the 1998 budget request for the rural development
    mission area. And before I discuss the specifics of the budget
    request, I would like to thank the subcommittee and your staff
    for the assistance that you have provided to the mission area
    and to the Department over the past year.
        With your assistance and leadership, we were able to enact
    some of the reforms needed in the multifamily housing program,
    and then, also, again with your assistance, we were able to
    conduct a very successful voluntary separation program, which
    mitigated the need for a large reduction in force. The
    voluntary separation program has assisted us in meeting other
    commitments, such as the implementation of the centralized
    servicing system, and it has permitted us to maintain a staff
    that is going to be with us for years to come.
        This past year has been very rewarding, as the mission area
    has enjoyed a number of successes beyond delivering the program
    funds provided by this subcommittee. We began the
    implementation of the dedicated loan origination servicing
    system, which will save the taxpayers $250 million over the
    first 5 years, and $100 million annually thereafter. We have
    also completed the streamlining of a number of our major
    regulations, single-family housing, business and industry loan
    guarantees, and water and waste disposal loans. And we, of
    course, are working on others.
        Mr. Chairman, since the early days of this administration,
    it has been evident that one of the President's highest
    priorities is to continue and, where possible, strengthen the
    investment in rural America. While we have seen some
    improvements in rural areas over the past few years, real
    household incomes have actually declined, and poverty rates are
    still alarmingly high.
        As you know, the majority of rural poor families are
    working poor, and incomes are not sufficient to lift families
    above the poverty level in many cases. The poverty rate in
    rural America still stands at about 17 percent. And even more
    disturbing is the fact that 25 percent of rural children under
    the age of 18 live in families with incomes below the poverty
    level. And among African-American children, the level is about
    54 percent.
        Neither the programs of this mission area nor any other
    Government program can ensure the economic success of any
    individual, but we can help eliminate some of the obstacles.
    And empowering people and communities to build the capacity to
    control their destinies, while partnering with the private
    sector to build new economic opportunities is a charge that I
    am very committed to, and is the foundation of this budget
    request. This budget reflects the President's belief that jobs
    create opportunity and long-term community stability.
        This administration stands behind the principle that if
    sustainable economic development is to occur, rural communities
    themselves must develop the structures that enable them to
    respond to rapidly changing economic conditions and forces in
    order to become competitive and to remain competitive. The
    communities that are successful are those that take the
    initiative and have the determination to succeed.
        As you know, one of the requirements of the 1996 farm bill
    is that our State directors in rural development, working in
    concert with local communities and the States, prepare a plan
    for the expenditure of the funds appropriated through these
    programs. Each State office has submitted a draft of their
    plan, and we are now in the process of reviewing them. And
    based on my early review of them, I do expect that these plans
    will very much be like business plans that articulate where a
    particular State hopes to be 5 or 10 years from now, and sets
    forth very concrete steps, benchmarks, to get there.
        In fact, the benchmarking is one of the more useful tools
    that comes out of the empowerment zone enterprise community
    experience. One of our champion communities, an applicant that
    did not receive designation as an empowerment zone or an
    enterprise community, did not wait around for the Federal
    Government to act, and based on the plan they developed, they
    have now brought in $100 million in investments without
    Government assistance.
        I very much appreciate the willingness of this subcommittee
    to appropriate funds under the Rural Housing Assistance
    Program, the Rural Business Assistance Program, and the Rural
    Utilities Assistance Program for fiscal year 1997. However, I
    do remain convinced that the additional flexibility that we
    requested--the authority to transfer up to 10 percent
    nationally from one funding stream to another--is a tool that
    we need to improve the use of the programs as development
    tools. For that reason, we have again submitted the budget
    under the terms of the Rural Community Advancement Program, as
    enacted in the 1996 farm bill.
        The budget request for RCAP totals $2.5 billion in program
    level, and that translates to a $689 million level in budget
    authority. As a former Member of Congress, I fully understand
    and I share the committee's concerns regarding accountability
    for sums of money of this magnitude and the ability to track
    expenditures.
        And today I want to assure the committee that I would not
    approve any transfer until a system has been developed to track
    the amounts of funding transferred, nor will any transfer be
    approved unless the administrators of the respective agencies
    agree to it. We have developed such a tracking system and we
    can implement it quickly should we be given this authority.
        The budget request for the Rural Housing Service, including
    those programs under RCAP, totals $921 million in budget
    authority, which will support a loan and grant program level of
    $5.4 billion. Over 60 percent of the budget authority is for
    the Rental Assistance Program, which, as you know, is the
    rental subsidy that makes it possible for very low income
    families to live in the multifamily projects that the
    Department of Agriculture finances.
        The request also includes a transfer from HUD of $52
    million, for us to assume the responsibility for administering
    the HUD section 8 assistance in some of our housing projects.
        For the Rural Utilities Service, including what is
    requested under RCAP, the total is $734 million in budget
    authority, which will support $3 billion in loans and grants.
    And over 80 percent of the budget authority is to support the
    water and waste disposal loan and grant programs. The request
    for these two programs is essentially the same as the
    subcommittee provided last year. And this level will enable us
    to continue our commitment to the Water 2000 initiative, as
    well as meet some of the other increasing demands for these
    programs.
        Probably the most significant change from last year's
    budget involves the Distance Learning and Telemedicine Program.
    We are requesting $21 million in grant funds, compared to the
    $7.5 million the subcommittee made available in 1997. And the
    reason for an increase of this magnitude is quite simple. As
    Senator Burns very eloquently stated in his remarks, I believe
    that, in the long term, this program will generate a greater
    return to the American public and the Federal Government than
    any other program. And the program is a prime example of why we
    should view these programs as investments rather than simply
    expenditures.
        The program budget request for the Rural Business-
    Cooperative Service totals $70 million in budget authority, and
    that would support a loan and grant program level of $780
    million. As I have stated earlier, I firmly believe that the
    private sector is the key to sustainable economic development
    in rural areas.
        And while the private sector has worked very well in most
    areas, there are some rural communities in which the private
    sector does not participate as well as they or we would like
    them to. And as I have also said, I believe the Government's
    role in these areas should be to encourage the private sector
    in doing what it does best. Increasing the role of the private
    sector will enhance our ability to create and maintain jobs in
    rural America.
        The budget request includes $10 million for AARC. That is
    an increase of $3 million over fiscal year 1997. AARC is of
    critical importance in enhancing private investment in rural
    areas. As you know, AARC's investments have led to the creation
    of 5,000 new jobs, all in rural areas, and each one related to
    value-added agricultural products.
        With regard to salaries and expenses, I am very pleased
    with the progress that rural development has made in meeting
    our objectives in streamlining and reinvention. And I pledge to
    you that we will continue to do our share in changing how we
    conduct business. These changes are long overdue, and had they
    been made when needed, they probably would not be as costly as
    they are today.
        The improvements we are making, such as DLOS, can only be
    achieved if up-front investments are made. We have implemented
    improvements without significant negative consequences on
    employees, and we thank the subcommittee for helping us to
    accomplish that.
        For salaries and expenses, I have requested $516 million
    for fiscal year 1998, which is a reduction from 1997. But I
    believe it is exactly what we need to continue to administer
    the programs and to carry out our other responsibilities
    without having to impose further reductions in force.
        Mr. Chairman, before I close, I would like to say that,
    last year, you questioned our projections regarding the subsidy
    rate for the single-family housing loans. And at that time, I
    suggested, in jest, that you were being cynical. And at this
    point, looking back, I would like to say that I very much
    admire your ability to forecast economic trends; that you were
    more accurate than I was. And I am hopeful that, as we work
    toward fiscal year 1998, that what we are requesting will be a
    more accurate reflection of what the true interest rates are
    going to be and what the Treasury rates will be.
        You were more accurate than I was.
        Senator Cochran. Thank you.
        Mrs. Thompson. And I say that as someone who has taken a
    number of courses in economic forecasting and have studied
    econometric models and feel that I have a pretty good
    background. And I think that you were quite accurate last year.

                              Prepared Statements

        Senator Cochran. Well, thank you, Madam Secretary. And let
    me say that we have statements from others on the panel which
    we will also incorporate in our hearing record. But if any of
    the others have an opening statement, we would be happy to
    receive their comments at this time.
        Mrs. Thompson. We would be happy just to submit them for
    the record, so that we can proceed with your questions.
        [The statements follow:]
                    Prepared Statement of Jill Long Thompson
        Mr. Chairman and Members of the Committee, I am pleased to be here
    today and present for your consideration the 1998 Budget request for
    the Rural Development Mission Area. Before I discuss the specifics of
    the Budget request, I would like to thank the Subcommittee and your
    staff for the assistance provided to this mission area and to the
    Department during the past year. With your assistance and leadership we
    were able to enact some of the reforms needed in the multi-family
    housing program and, again with your assistance, we were able to
    conduct a very successful voluntary separation program which mitigated
    the need for a large Reduction-in-Force. The voluntary separation
    program has assisted us in meeting other commitments such as the
    implementation of the centralized servicing system, and has permitted
    us to maintain a staff that is going to be with us for years to come.
        Mr. Chairman, this past year has been very rewarding as the mission
    area has enjoyed a number of successes beyond delivering the program
    funds provided by this Subcommittee. We began the implementation of the
    Dedicated Loan Origination and Servicing System (DLOS) which will save
    the taxpayers $250 million over the first five years and $100 million
    annually, thereafter. Implementation is still in the early stages, but
    we see no reason that we cannot meet our projected completion date of
    October 1, 1997. DLOS is one of the largest government reinvention
    efforts undertaken, and the monetary savings is only one part of the
    success. We have proven that we can successfully manage large scale
    change, and we have proven that change does not necessarily lead to
    negative consequences for our employees.
        We have also completed the streamlining of a number of our major
    regulations: single-family housing, business and industry loan
    guarantees, and water and waste disposal loans, and we are working on
    others. Our objective has been not just to streamline, but also to
    produce a product that works better and costs less. These regulations
    are not only smaller in volume--they are much more understandable and
    customer friendly. Further, in order to make the business and industry
    loan guarantee program more attractive to lending institutions, the
    application forms will soon be available electronically, and they can
    be forwarded to our offices electronically. We are now examining other
    opportunities to use this application process.
                            focus of the 1998 budget
        Mr. Chairman, since the early days of this Administration it has
    been evident that one of the President's highest priorities is to
    continue, and where possible strengthen, the investment in rural
    America.
        While we have seen some improvement in rural areas over the past
    few years, real household incomes have actually declined and poverty
    rates are still alarmingly high. The majority of rural families are
    working poor. Incomes are not sufficient to lift families above the
    poverty level in many cases. The poverty rate in rural America still
    stands at about 17 percent. Even more disturbing, however, is the fact
    that 25 percent of rural children under the age of 18 live in families
    with incomes below the poverty level, and among African American
    children, the level is about 54 percent. As the President said in his
    State of the Union address, our economic future is with these children,
    and their Education and training will be the cornerstone of tomorrow's
    economy. However, many of these children may not have the opportunity
    to obtain the necessary education because they still lack basic
    amenities of life such as adequate shelter and running water in their
    homes. Investment in the elimination of these problems must continue,
    and we must view them as investments, rather than simply expenditures.
                          empowerment and partnerships
        Neither the programs of this mission area nor any other Government
    program can ensure the economic success of any individual, but we can
    help eliminate some of the obstacles. Empowering people and communities
    to build the capacity to control their destinies while partnering with
    the private sector to build new economic opportunities is a charge that
    I am very committed to and is the foundation of this budget request.
    This budget reflects the President's belief that jobs create
    opportunity and long-term community stability. We recognize that it is
    primarily the responsibility of the private sector to create the needed
    jobs. However, in many rural areas, the private sector alone cannot
    accomplish the task. These are the areas where we need to focus our
    efforts and help the residents and the private sector create
    opportunity.
        This Administration stands behind the principle that if sustainable
    economic development is to occur, rural communities themselves must
    develop the structures that enable them to respond to rapidly changing
    economic conditions and forces in order to become competitive and to
    remain competitive. The communities that are successful are those that
    take the initiative and have the determination to succeed.
        There has been some improvement in rural areas, but examining the
    data closely reveals that most of the improvement occurs in those
    counties adjacent to metropolitan areas. According to one report, over
    400 rural counties have fewer jobs today than in 1969. These counties
    are generally found in the northern plains, the agriculture heartland,
    the Mississippi Delta, the Cotton Belt, and natural resource dependent
    states. The growth that has occurred in rural areas tends to be
    concentrated in slow growth or declining industries--and in the more
    rural counties that have experienced growth, it tends to be in low-
    skill, low-wage jobs. This type of growth does not provide a base for
    self-sustaining economic development.
        For sustainable development to occur, rural communities must either
    attract more of the high skill industrial employment or increase the
    number of higher income residents and the only means of accomplishing
    this is to increase investment that improves the communities' ability
    to compete in an increasingly global economy. Depending on their
    individual circumstances, this investment ranges from basic
    infrastructure improvements and housing to business and industrial
    investment. And we in the Federal government who administer programs
    that assist rural areas must be willing to work with the communities,
    and the States, to ensure that the investments are tied to long-term
    strategic improvements. As you know, one of the requirements of the
    1996 Farm Bill is that our State Directors, working in concert with
    local communities and the States, prepare a plan for the expenditure of
    the funds appropriated through these programs. Each State Office has
    submitted a draft of their plan and we are now in the process of
    reviewing them. I expect these plans to be like business plans that
    articulate where a particular State hopes to be 5 or 10 years from now
    and sets forth very concrete steps (bench marks) to get there. Bench
    marking is one of the more useful tools to come out of the Empowerment
    Zones/Enterprise Communities (EZ/EC) experience. One of our ``Champion
    Communities'', an applicant that did not receive designation as an EZ/
    EC, did not wait around for the Federal government to act. Based on the
    plan they developed they have now brought in $100 million in
    investments without government assistance. This is the ability and
    determination that we hope to create in all of our customers.
                   rural community advancement program (rcap)
        I very much appreciate the willingness of this Subcommittee to
    appropriate funds under the Rural Housing Assistance Program, the Rural
    Business Assistance Program, and the Rural Utilities Assistance Program
    for fiscal year 1997. However, I remain convinced that the additional
    flexibility that we requested, the authority to transfer up to 10
    percent nationally from one funding stream to another, is a tool that
    we need to improve the use of the programs as development tools. For
    that reason we have again submitted the budget under the terms of the
    Rural Community Advancement Program (RCAP) as enacted in the 1996 Farm
    Bill.
        I strongly believe that the key to economic growth in rural areas
    is the private sector, particularly the investment community. In most
    rural areas the private sector works quite effectively and efficiently.
    However, in other areas it does not work as well and when investment
    capital flows out of rural areas the local capacity to foster economic
    development declines, as does the incentive to invest in these areas.
    Inevitably, the Congress and the Administration are faced with public
    policy choices regarding these problems. What we collectively have done
    over the past few decades is enact new programs to meet some of the
    needs. The programs we administer today are a result of that process
    and while they individually have been very successful in eliminating or
    mitigating specific problems, they have not been used collectively to
    address the economic structural problems that plague many of our rural
    areas. What the Administration proposed, and what the Congress enacted
    in the 1996 Farm Bill, was the philosophy of better using what
    resources we now have rather than creating new programs which stood
    little chance of being funded due to budget constraints. If the problem
    is investment capital, we should focus our efforts not on new programs,
    but rather on how we can encourage the private sector by expanding
    secondary markets, making existing programs easier to use, working with
    community bankers to increase their ability to package loans, sharing
    risk with other institutions, and creating more partnerships with the
    private sector. This philosophy should also apply to infrastructure
    investments. At every opportunity we are involving other lenders and
    other sources of funds in our projects to stretch our limited
    resources. We can and we will do more of this. But, what we need is the
    flexibility to bring the key players to the table and structure a
    financial package that is good for the community, is a sound investment
    for the local lender, and reduces the involvement of the Federal
    government. Neither the Federal government, local or state governments,
    nor the private sector can solve these problems alone. We have to work
    together. The Federal government has to be more flexible in its
    approach to solving these problems, and, in my opinion, the flexibility
    outlined in RCAP is the most important part of the legislation.
        The budget request for RCAP totals $2.5 billion in program level
    and $689 million in budget authority. As a former Member of Congress, I
    fully understand and share the Committee's concerns regarding
    accountability for sums of money of this magnitude and the ability to
    track expenditures. I assure the Committee that I would not approve any
    transfer until a system has been developed to track the amounts of
    funding transferred, nor will any transfer be approved unless the
    Administrators of the respective Agencies agree to it. We have
    developed such a tracking system and can implement it quickly, should
    we be given the authority requested.
                             rural housing service
        The budget request for the Rural Housing Service, including those
    programs under RCAP, totals $921 million in budget authority which will
    support a loan and grant program level of $5.4 billion. Over 60 percent
    of the budget authority is for the rental assistance program which, as
    you know, is the rental subsidy that makes it possible for very low-
    income families to live in the multi-family projects that USDA
    finances. The request also includes a transfer from HUD of $52 million
    for us to assume the responsibility for administering the HUD section 8
    assistance in some of our housing projects. The Administration has
    adjusted USDA and HUD budget ceilings to reflect this transfer of
    responsibility. The request also includes $4 billion for single-family
    housing loans, $1 billion of which is for direct loans. Loans, loan
    guarantees and grants for community facilities total $428 million with
    a subsidy cost of $27.6 million. As you know, the funds are used to
    finance a wide variety of community facilities ranging from hospitals
    and health clinics to sidewalks and drainage improvements, with over 50
    percent of the money being utilized for either health facilities or
    fire and rescue equipment.
        Mr. Chairman, during the past few decades this country has made
    great strides in reducing the number of Americans living in inadequate
    housing and much of the credit for this success lies with this
    Subcommittee. Unfortunately, there is still a large number of rural
    Americans living in inadequate housing and, despite the desire of each
    one of us to balance the budget, the simple fact is that housing poor
    families costs money. And as we deliberate this budget request we must
    keep in mind that this housing is more than shelter from the elements--
    it is more than providing short-term jobs in the housing industry and
    increasing the local tax base of the community. Being a homeowner
    increases the dignity of these families immeasurably--it provides an
    environment for the children to gain more from their education. I would
    strongly encourage each Member of the Subcommittee to visit one of our
    mutual and self-help housing sites, visit with the families that have
    built their own homes with a little help from the Federal government,
    and experience what being a homeowner means to these families. Programs
    such as the mutual and self-help program should be among the highest
    priorities of this government because it gives people the opportunity
    to lift themselves out of their existing conditions. I think a quote
    from a recent article in the Los Angeles Times puts the proper
    perspective not only on the self-help program, but all of our programs.
    The statement is made by a gentleman in Mississippi, who with his
    family, recently moved into a new home that he and neighbors
    constructed through the program. He ``imagines the children having a
    clean place to study and himself awakening after a good nights rest
    where you don't have to worry about catching rain in pots and pans''.
                            rural utilities service
        The request for the Rural Utilities Service programs, including
    those requested under RCAP, totals $734 million in budget authority
    which will support $3.0 billion in loans and grants. Over 80 percent of
    the budget authority is to support the water and waste disposal loan
    and grant programs. The request for these two programs is essentially
    the same as the subcommittee provided last year and this level will
    enable us to continue our commitment to the Water 2000 Initiative as
    well as meet some of the other increasing demand for these programs. We
    presently have a backlog of applications for water and waste disposal
    loans and grants totaling over $4 billion, and this represents but a
    fraction of the funding that will be required to meet water quality and
    drinking water standards in rural areas. We will be increasing our
    efforts to attract other funding for these projects in order to stretch
    our limited resources.
        The most significant change from last year's budget involves the
    distance learning and telemedicine program. We are requesting $21
    million in grant funds compared to the $7.5 million the Subcommittee
    made available for 1997. The reason for an increase of this magnitude
    is quite simple. I firmly believe this program will, in the long-term,
    generate a greater return to the American public and the Federal
    government than any other program, and the program is a prime example
    of why we should view these programs as investments rather than simply
    expenditures. This is part of the President's emphasis on education.
    This program will ensure that rural students have access to the same
    educational opportunities available in suburban and urban schools, and
    improves the prospect that more of the students will remain in rural
    areas because they will no longer have to migrate to urban areas for
    better jobs. This technology means that the information business is no
    longer dependent on being close to urban centers.
        Not only does the distance learning program provide the enhanced
    educational opportunities to rural students that will enable them to
    compete in the job market and the universities with urban students, but
    it provides those students from poverty stricken families the
    educational tools that may change their lives. They no longer have to
    face a future of very limited opportunity or perhaps be doomed to a
    future of public assistance. These are the faces that light up the most
    when provided access to this technology. They are the ones that realize
    this access can help them break out of the poverty cycle that affects
    too many rural areas in this country. Secretary Glickman and I had the
    fortune to visit the schools in the Mississippi Empowerment Zone and
    see first hand what this technology means to these students. And I
    might add that this effort is supported not only by the Federal
    government. The private sector has been working hand-in-hand with us.
    In this particular school system we were able to place a number of
    Federal surplus personal computers, many which we and others repaired
    and upgraded. A private firm from Indiana donated 40,000 feet of cable
    initially, and has agreed subsequently to donate an additional 3.5
    million feet, while Federal employees and employees of the local
    telephone company volunteered the labor to wire the schools so the
    students could have access to the information Superhighway.
        Mr. Chairman, none of the success we will see from the distance
    learning/telemedicine program would have been possible without the
    rural electric and telecommunications programs. The positive economic
    effects these two programs have had on rural America cannot be
    measured. I say this to reiterate the point that rural America cannot
    attract the businesses or industry it needs to strengthen local
    economies without making investments in infrastructure. Mr. Chairman,
    we are requesting $34 million in budget authority to support a total
    program level of $1.5 billion for electric and telecommunication loans.
                       rural business-cooperative service
        The program budget request for the Rural Business-Cooperative
    Service totals $70 million in budget authority--this will support a
    loan and grant program level of $780 million. As I have stated earlier,
    I firmly believe that the private sector is the key to sustainable
    economic development in rural areas, and while the private sector has
    worked very well in most areas, there are some rural areas in which the
    private sector does not participate as well as they or we would like
    for them to. And as I have also said, I believe the Government's role
    in these areas should be to encourage and assist the private sector in
    doing what it does best. Increasing the role of the private sector will
    enhance our ability to create and maintain jobs in rural America.
        We have taken several steps to make the business and industry loan
    guarantee program easier for private lenders to use and we have also
    included incentives for the lenders to participate in areas in which
    they are now not very active, such as the Empowerment Zones/Enterprise
    Communities. For example, we are willing to increase the level of
    guarantee from 80 percent to 90 percent and decrease the guarantee fee
    from two to one percent on loans made in the targeted areas. The
    application will soon be available electronically, and the lenders will
    be able to submit the applications electronically. All of these changes
    should increase the participation and efficiency in the program.
        Mr. Chairman, with the decline of the traditional farm programs
    which provided stability in the farm markets, I firmly believe that
    cooperative-owned farm businesses offer an opportunity to pool risk,
    increase marketing power, and provide the stability no longer available
    through the price support programs. We see cooperatives as part of the
    safety net for farmers. In addition, I think we will see more
    cooperative processing businesses to maximize the amount of money
    returning to the farmer and remaining in the rural communities. We will
    soon be submitting legislation to the authorizing committees to
    authorize the delivery of assistance to nonagricultural cooperatives.
    There is an increasing interest in rural areas to use the cooperative
    form of business to deliver other services such as health care, child
    care and housing. At present we are prohibited from providing such
    assistance unless the primary sponsor is an agricultural cooperative.
    This legislation, if enacted, will provide another important tool in
    our rural development efforts and I think we will see more use of our
    business programs by cooperative ventures. As I said earlier in this
    statement, it is important that local investment capital remain in the
    local community--this is the foundation that makes sustainable
    development possible. Once the investment capital starts to migrate to
    other areas a declining spiral in the economy begins and it is very
    difficult to reverse.
      alternative agricultural research and commercialization corporation
        Mr. Chairman, the budget request includes $10 million for AARC, an
    increase of $3 million. AARC is of critical importance in enhancing
    private investment in rural areas. AARC's investments have led to the
    creation of 5,000 new jobs, all in rural areas and each one related to
    value-added agricultural products. AARC equity investments are part of
    the safety net for farmers, providing that vital link between the
    development of new products based on agricultural commodities and
    successful commercialization that is now even more critical with the
    gradual phase out of commodity support payments.
                             salaries and expenses
        Mr. Chairman, I am very pleased with the progress that Rural
    Development has made in meeting our objectives in streamlining and
    reinventions and I pledge to you that we will continue to do our share
    in changing how we conduct business. These changes are long overdue and
    had they been made when needed, they probably would not be as costly as
    they are today. The improvements we are making, such as DLOS, can only
    be achieved only if up-front investments are made. We have implemented
    improvements without significant negative consequences on employees,
    and we thank the Subcommittee for helping us accomplish that. Mr.
    Chairman, for Salaries and Expenses I have requested $516 million. This
    is a reduction from 1997 and is exactly what we need to continue to
    administer the programs and carry out our other responsibilities
    without having to impose further Reductions-in-Force. The level
    appropriated for 1997 presented some management challenges, but through
    planning and moving some items planned for 1997 back into 1996 and
    delaying other plans and reducing other headquarters expenditures, we
    have been able to work within the level provided and maintain our
    commitment not to reduce administrative support of the State Offices.
        Seventy four percent of our request is composed of salary costs. We
    cannot continue to absorb costs without further reductions-in-force,
    and we cannot afford to reduce the staff further than we have planned
    without jeopardizing the delivery of programs. We will have reduced the
    staff by over 2,000 positions since 1993 and we have closed just under
    400 offices. At the same time, our costs have increased automatically
    through inflation and annual cost of living adjustments and further
    reductions in salaries and expenses will necessitate reductions-in-
    force and that will negate much of the progress we have made.
        Thank you very much for the opportunity to discuss the budget
    request for rural development. The Administrators and I will be happy
    to respond to any questions you may have.
                                     ______

                       Prepared Statement of Wally Beyer
        Mr. Chairman and Members of the Subcommittee, I am pleased to
    accompany Under Secretary Jill Long Thompson and present the 1998
    Budget and Program Proposals for the Rural Utilities Service. I want to
    thank the Subcommittee for the support you are providing to rural
    America. Investment in infrastructure continues to be an investment in
    our Nation's future productivity and equality of economic opportunity.
    Congress has always recognized that it is in our national interest for
    all citizens, and all regions, to have equal opportunity to build, to
    grow and to develop to our greatest potential. The latest example was
    the passage of the Telecommunications Act of 1996, when Congress and
    the President declared that it was in our national interest to ensure
    that reliable, affordable, telecommunications be available to rural
    citizens as well as major population centers.
        The character of this Nation is rooted in rural America. We began
    as an agrarian society and our rural experience still affects our
    lives. Geographically we are rural. Rural America comprises 80 percent
    of the Nation's landmass. With nationhood comes responsibility, and the
    investment we as a people and as a government have made in the
    infrastructure of rural America has benefited all Americans. This
    investment has increased economic productivity, improved health care
    and education and created a modern agriculture that is a part of the
    global economy. Living in the Great Plains most of my life, I know
    firsthand the benefits of our rural electric, telecommunications and
    water programs. The opportunity that the government has ``helped to
    ensure'' throughout the years will be just as important tomorrow as it
    was 60 years ago.
        The rural infrastructure programs are the foundation of rural
    education, health and economic development. Without a strong
    foundation, rural America will not be able to build on its strengths
    and aid the country as we move into this increasingly competitive
    global economy.
        RUS is the Federal government's point agency for rural
    infrastructure assistance. RUS infrastructure programs focus on
    targeting scarce Federal resources into high cost areas, poverty areas,
    low density and out-migration areas and servicing the unserved.
    Priority is given to leveraging scarce Federal dollars. The 1998 budget
    proposes $34 million in budget authority for the electric and
    telecommunications infrastructure loan programs. This $34 million
    budget authority will generate $1.5 billion in Federal loans with an
    additional leveraging of $4.33 billion private capital for a total
    anticipated 1998 capital investment of $5.8 billion in the rural
    electric and telecommunications infrastructure. This relatively small
    Federal dollar investment in rural infrastructure is a critical
    catalyst for the much needed private, state, and local capital used to
    maintain quality reliable infrastructure in rural America at reasonable
    cost. Each Federal loan dollar in the RUS telecommunications program
    leverages 4.5 private capital dollars. Each Federal loan dollar in the
    RUS electric program leverages 3.0 private capital dollars.
                       water and waste disposal programs
        It is hard to imagine, but in this modern era we still have rural
    areas with families that are drinking unsafe water and families without
    plumbing and wastewater facilities. These are pressing but solvable
    public health concerns. Towns and communities of less than 10,000
    people often lack the tax base and bonding authority to construct,
    update, or repair water and waste disposal infrastructure systems.
        Drinking water and waste disposal infrastructure is basic and vital
    to both health and economic development. The Water and Waste Disposal
    Program administered by RUS invests loans and grants to bring safe
    drinking water and sanitary, environmentally sound waste disposal
    facilities to rural Americans in greatest need. If economic growth is
    going to occur in an area, adequate water and waste disposal facilities
    are a necessity. The challenges presented by investing in safe and
    clean water for rural areas and small communities are sometimes
    daunting, but our achievements are among our most rewarding.
        The programs make sound investments in rural citizens and small
    communities, improving the lives and public health standards of rural
    Americans in all 50 states. Sanitary and environmentally sound water
    and waste disposal facilities are key to protecting against serious,
    often life threatening illnesses related to water contamination, such
    as crypto sporidium,\1\ giardia, gastroenteritis, cholera, typhoid, and
    salmonella.
    ---------------------------------------------------------------------------
        \1\ Crypto sporidium killed more than 100 people in Milwaukee,
    Wisconsin, in April 1993, and seriously sickened thousands more.
    ---------------------------------------------------------------------------
        The RUS loan and grant programs will provide safe, affordable
    drinking water to an estimated 782,000 rural households and an
    estimated 2.2 million people in 1998. This program consistently has far
    more requests for funds than funds available. At the end of 1996,
    states had on-hand loan and grant applications totaling $4.1 billion.
    State Rural Development Directors have for several years done an
    outstanding job of mixing grants, loans, state and non-USDA funds to
    leverage and finance the highest priority projects. Based on the
    Administration's belief and policy that low income and poverty areas
    represent the greatest need, water and waste disposal investments are
    targeted to those areas.
    Water 2000 initiative
        In the RUS' state-by-state assessment in 1995, we found that an
    estimated 2.5 million rural Americans, including some one million
    people who do not have water piped into their homes, have critical
    needs for safe, dependable drinking water. Approximately 5.6 million
    more were found to have additional serious needs under Safe Drinking
    Water Act standards. Water 2000 is an initiative to clearly assess
    those needs and to target the loan and grant investments to address
    them. State Rural Development offices have completed the Needs
    Assessment which shows at least $3.5 billion in critical rural safe
    drinking water investment needs, and another $6.5 billion in additional
    serious needs.
        A good example of the value of this initiative is a project just
    funded to allow the City of Campton, Kentucky, to expand its current
    public water system to rural homes that now rely on spring, creek and
    well water.
        Located in Wolf County in the Appalachian region of Kentucky, the
    local economy is limited to small farms, small timber operations, and
    small coal mines. The median household income in Wolfe County is
    approximately $11,000, less than half the state average of $22,232. The
    County has water sample records from the supplies of more than 100
    people living in the proposed service area and the majority of the
    tested samples are highly contaminated with fecal coliform and/or
    confluent growth and some have detected the presence of dangerous E.
    Coli bacteria. By expanding the service area of the community, an
    additional 370 users will have a safe, dependable source of good
    drinking water.
    Water 2000 special allocation
        In 1996, Congress provided us with $36 million (budget authority)
    in unspent funds from the special supplemental nutrition program for
    Women, Infants and Children (WIC), to be used for safe and clean water
    projects. In July 1996, we converted these funds into $59 million in
    Water and Wastewater loans and grants, which we supplemented with $11
    million in loans and grants from regular State allocations, and used to
    implement a total of $70 million 54 targeted safe drinking water
    projects in 35 states. These projects, once all completed, will result
    in improved drinking water quality, quantity and dependability for an
    estimated 145,122 people, including some 18,200 receiving public water
    in their homes for the first time.
        In 1995 and 1996, RUS invested a combined total of $547 million in
    loans and grants in projects that meet the guidelines of Water 2000,
    which place a priority on serving unserved or under served households.
    Water and waste disposal budget
        The budget requests a total of $1.2 billion Water and Waste loans
    and grants. The program mixes loans and grants, according to the needs
    of the community or system, in order to provide water and waste
    disposal at an affordable rate. Under the RCAP program, the budget
    request is for a 1998 program level for Water and Waste Disposal loans
    of $809 million with a budget authority of $72 million and Water and
    Waste Disposal Grants and $484 million in grants.
                               telecommunications
        Technological advances in the telecommunications industry will mean
    new tools to increase opportunities for rural America. The Information
    Superhighway will help rural America survive, prosper, and compete. It
    brings the entire world to the door of our rural citizens. Whether
    enabling regional communication or finding new markets throughout the
    world, access to the Information Superhighway is vital to the future of
    rural America.
        The RUS Telecommunications program provides a cost-effective means
    for assisting rural telecommunications providers in building the
    infrastructure for the Information Superhighway in rural America. The
    program provides capital, establishes telecommunications standards, and
    provides policy guidance for rural telecommunications in the National
    Information Infrastructure initiative. This service is needed more than
    ever with the passage of the Telecommunications Act of 1996
    (Telecommunications Act). Significant investment in rural
    infrastructure will be required to meet the promise of the
    Telecommunications Act and the maintenance, expansion, and improvement
    of the rural infrastructure.
        The RUS Telecommunications Program continues to provide leadership
    in this changing environment. Just as we engaged in the development of
    the Telecommunications Act, we have been deeply involved in working
    with the FCC, the Federal-State Joint Board and State Public Utilities
    Commissions to create an acceptable universal service structure. To
    share ideas about the importance of telecommunications in people's
    lives, RUS held six satellite accessible rural telecommunications
    forums around the country bringing together Federal and State policy
    makers with rural Americans to discuss issues and exchange ideas.
    Telecommunications Program Budget
        The 1998 Budget requests $300 million for treasury rate loans, $120
    million in guarantee of direct FFB financed loans, and $40 million for
    5 percent hardship loans. These program loans are financed with a total
    budget authority of $1.6 million. RUS has requested budget authority in
    a single amount for telecommunications programs. If the Administrator
    has the flexibility to move budget authority between the
    Telecommunications programs, it will better enable the Agency to meet
    the needs of borrowers and the citizens of rural America who are the
    end users of these vital services.
    Distance Learning and Telemedicine Program
        The Distance Learning and Telemedicine Loan and Grant Program has
    emerged as one of the most dynamic new programs in the rural
    development area. For the past four years grants have been made to
    rural organizations to buy end-user equipment to encourage, improve,
    and make affordable telecommunications access to educational and health
    care services. The demand for the distance learning and telemedicine
    grants has been high. For the four fiscal years from 1993 through 1996,
    RUS has received 896 applications seeking a total of $277 million. Due
    to budget constraints, only $35 million was available. This money
    funded 119 projects in 39 states and one territory, leveraged more than
    66 million in non-federal dollars. In 1997, under our new authority, we
    will make our first loans.
        Through 4 years of the grant program activity, approximately 704
    rural schools in 33 states, serving nearly 600,000 rural students, will
    be able to utilize the Information Superhighway to share limited
    teaching resources and to gain access to libraries, training centers,
    vocational schools, and other institutions located in metropolitan
    areas. For telemedicine, approximately 500 rural medical facilities in
    23 states and one territory, serving more than two million rural
    residents, will be able to provide improved health care through linkage
    with other rural hospitals and major urban medical centers for clinical
    interactive video consultation, distance training of rural health care
    providers, management and transport of patient information, and access
    to medical expertise or library resources. This amazing leveraging of
    resources is a testament to the creative nature of our rural citizens.
    Distance Learning and Telemedicine Loan Program
        The Federal Agriculture Improvement Act of 1996 (1996 Farm Bill)
    added a loan component to the RUS Distance Learning and Telemedicine
    Program. For its first year, 1997, the loan component has been funded
    at a program loan level of $150 million. This loan component will help
    to meet the extraordinary demand from rural schools, libraries,
    community centers and health care providers to purchase end-user
    equipment. The new loan component will also allow third parties to
    guarantee the repayment of, or to borrow funds on behalf of, rural
    schools, community centers, or libraries that either cannot incur long-
    term debt or need a little extra help.
        This increase in program level for end-user equipment will fit
    hand-in-glove with the discount in the Telecommunications Act of 1996
    for transmission costs for schools, libraries and rural health care
    providers. Community centers can also use the equipment for welfare to
    work programs.
        To bring it all together, we are in the process of revising the
    regulations to integrate the loan component into the program.
    Distance learning and telemedicine grant and loan budget
        The Budget requests $21 million for grants in 1998. This is triple
    the current grant program, a $13.5 million increase over the 1997
    appropriation. For the new loan program, the Budget requests a program
    level of $150 million.
    Rural Telephone Bank
        Congress created the Rural Telephone Bank (RTB) to address the
    increasing need for capital to develop rural telecommunications
    services. Over the life of the program, the RTB has lent more than $3.2
    billion to rural telecommunications borrowers to help build, maintain,
    and upgrade the rural telecommunications infrastructure.
        Pursuant to statute, the RTB began the process of privatization
    during fiscal year 1996, when the Board of Directors voted to retire
    $18 million of government held stock. Also during 1996, we completed a
    study on how accelerated privatization of the RTB would impact the
    RTB's ability to obtain capital in the private markets. The study
    concluded that the RTB could accelerate the maximum statutory
    privatization period and be in good shape to borrow money in the
    private markets by the end of 1998.
        The RTB is in a strong financial position with more than $1 billion
    in net worth. By the end of fiscal year 1998, the RTB will have
    sufficient internally generated funds to fully retire the government's
    remaining $574 million capitalization of the RTB. The Administration is
    working on legislation which would allow a fully private RTB to
    leverage its net worth in the private markets and free the RTB from the
    restrictive lending purposes of the RUS program--allowing more capital
    for investment in the new rural telecommunications market structure.
    Rural Telephone Bank budget
        The 1998 budget request is for $3.7 million in budget authority, to
    support a program level of $175 million in loans.
                                electric program
        The Electric Program represents one of the most effective public/
    private partnerships in the history of our Nation. The Electric Program
    seeks to ensure universal electric service at affordable rates. It
    serves as a cost-effective means for the leveraging of capital for the
    maintenance of a nationwide network of infrastructure. The investment
    is a continuing success story.
        Today, the Nation's electric industry is changing dramatically. It
    is moving from a monopoly-based to a competitive structure. Already, to
    a great extent, the wholesale power industry has been deregulated.
    Several states are already introducing competition at the retail level,
    and legislatures in another dozen states are actively considering like
    proposals. The 105th Congress will debate a national restructuring this
    year.
        As the debate on electric utility restructuring and deregulation
    develops, the RUS believes there are two goals that should be part of
    the development of any restructuring of the marketplace. The first goal
    is to ensure the continued availability of reliable, high quality
    electric service at a reasonable cost to rural consumers. The second
    goal is to protect the integrity of the government's loan portfolio.
        To accomplish these goals, the RUS believes that any restructuring
    of the electric utility industry should be guided by the principles of
    reliability, fairness and flexibility. The transition to a more
    competitive industry environment must maintain the reliability of the
    Nation's electric system. A more competitive electric sector with
    retail choice should be fair and equitable to all consumers--including
    rural citizens, to existing electric utilities, and to Federal
    taxpayers who support the RUS program. Finally, industry restructuring
    should be flexible and contain a thoughtful transition process that
    accommodates the diversity of the electric utility industry, state
    regulatory structures and policies, and a process of educating
    consumers about the changes.
        To help address the changing nature of the industry, the RUS is
    reforming itself. We have made the first reform of our mortgage and
    loan security documents in 25 years. Working with the Office of General
    Counsel (OGC), we have instituted an automated loan processing system,
    a computerization of our loan and security document preparation that in
    the telecommunications program has reduced the time involved from up to
    6 months to a turn around of 10 days. We have streamlined our
    regulations and processes to maximize borrower flexibility. The new
    regulations and procedures enhance a borrower's ability to attract
    private financing while at the same time making internal changes to
    compete more effectively. New merger regulations encourage borrowers to
    take advantage of the economies of scale. The RUS continues to review
    our programs and procedures to allow for a more efficient program that
    is customer friendly while protecting the taxpayer investment in a
    modern rural infrastructure.
        RUS' Rural Electric Program is the primary mechanism that helps to
    provide universal service to those areas that are the highest cost to
    serve. The program helps service approximately 25 million rural
    Americans living on 80 percent of the land mass, areas that investor-
    owned and municipally-owned utilities failed to serve. Rural electric
    cooperatives own 2.2 million miles of line, serving an average of 5.5
    customers per mile. This compares to an average of 35 customers per
    mile of line that other providers serve. Unlike the telecommunications
    industry, where over the years, many mechanisms have been created to
    offset the high cost to serve rural areas, in the electric industry,
    the RUS program is the only mechanism to address the high cost to
    serve. The ongoing cost to serve must be supported and aging and
    obsolete infrastructure must be replaced and improved.
        As the electric utility industry undergoes restructuring and
    deregulation, RUS electric borrowers will face greater competition and
    uncertainty. This is particularly true of generation and transmission
    borrowers who, in the late 1970's and early 1980's made large
    investments in nuclear generation at a time of high inflation and high
    interest rates.
        Since President Clinton appointed me as Administrator of RUS,
    working with the very able and competent RUS staff, I have made every
    effort to work through these problems. Where necessary, this has
    included working with the Department of Justice to resolve serious debt
    situations. There is no doubt that it would be easier to sit back and
    take no action. However, we have an obligation to manage the RUS loan
    portfolio, and to that end will continue to aggressively seek solutions
    that result in maximizing recovery of Federal loan funds.
    Electric program budget
        For 1998, the President's Budget requests $400 million loans for
    municipal rate electric loans, a $125 million for 5 percent hardship
    loans, $300 million for guarantee of direct FFB financed loans. The
    1998 budget request reflects no change from the loan level of $825
    million available in 1997. These program loans are financed with a
    total budget authority of $29 million. As in the telecommunications
    program, RUS is requesting budget authority in a single amount for
    maximum flexibility in using funds for programs with the most need.
                                   conclusion
        The Rural Utilities Service has had the opportunity to be at the
    vortex of change in two of the Nation's most important industries--
    electricity and telecommunications. Each of these industries generate
    revenue of approximately $200 billion a year and both are evolving from
    a regulated monopoly to a competitive environment. Each of these
    industries define who we are as a nation and how we move forward into a
    global economy.
        Rural America is challenged by distance, density and economies of
    scale. The facts focus the issue--rural America, 80 percent of the
    landmass and 20 percent of the population. Serving rural America simply
    costs more per person than serving urban and suburban America and
    therefore, the market creates an access, quality and affordability
    disparity between rural and urban and suburban areas. This disparity is
    the rationale for the concept of universal service.
        A concept which holds that all Americans are part of our nation and
    all Americans are entitled to the opportunity to make the most of their
    natural abilities and the opportunity to join with each other, as a
    nation, in our relationship with the rest of the world.
        It is this issue--universal service, coupled with universal
    opportunity, and ultimately what kind of country we are--which defines
    the issue of rural infrastructure.
        The Congress debated the universal service issue last year in the
    Telecommunications Act of 1996. In that debate we asked how does a new
    competitive environment affect universal service? Will serving rural
    residents still cost more than serving urban and suburban residents?
    How do we make service affordable for rural residents? How will it
    affect rural America? The answer was clear--universal service must be
    preserved and strengthened. Rural America must not be left behind.
    Rural areas should be supported by the system as a whole.
        The question of funding rural infrastructure through the Rural
    Utilities Service asks the same basic question--the question of
    universal service. And the answer is the same as in the
    Telecommunications Act of 1996. Universal service support is part of
    who we are as a nation. The access to capital, standards, affordability
    equalization, and lending leadership is needed more than ever. As we
    move from a monopoly to a competitive market place, and as that
    transition takes place, the need is much greater, not less, than ever.
                                     ______

                     Prepared Statement of Jan E. Shadburn
        Mr. Chairman and members of the Committee, thank you for this
    opportunity to testify today on the President's fiscal year 1998 budget
    proposal and the accomplishments and goals of the Rural Housing
    Service.
        The Rural Housing Service, succeeding the Farmers Home
    Administration, provides opportunities to rural families which help
    them improve their standard of living, move out of poverty and build
    for the future. We enable rural communities to enhance the quality of
    life of their residents and to strengthen their economic
    competitiveness. We accomplish this mission by providing rural people
    and communities with: access to credit--which, as you know, is often
    limited in rural areas; subsidized loans and rents; and technical
    assistance and support to complete their community development efforts.
        The Rural Housing Service operates several housing assistance
    programs that provide decent, safe and affordable rental and home
    ownership opportunities to a wide variety of Rural Americans. RHS also
    administers the community facilities direct and guaranteed loan and
    grant programs which provide funding for essential facilities such as
    health care centers, fire stations, municipal buildings and day care
    centers. These facilities allow rural communities to provide an
    improved quality of life for their citizens and remain competitive in
    attracting jobs and businesses. We deliver these programs and the
    necessary technical assistance through a network of state and local
    offices, many of which are or will be collocated with other USDA
    agencies in USDA Service Centers.
        Too many times we talk about the number of housing units, the
    square footage or the payment with the associated subsidy cost. We lose
    touch with the final product in the blur of our daily work--that
    product is a chance at the American dream for thousands of poor working
    families. That product is the result of the efforts of this Congress
    and USDA, which gave an opportunity to a family or a community. The
    investment has paid off thousands of times, both for the individuals
    and communities and for the federal government. The rewards continue to
    grow.
        While we have provided this assistance for many years, we now also
    focus on four goals: Reinventing government; developing a range of
    partnerships and leveraging opportunities; creating budget savings for
    the taxpayers; and expanding access to our programs across rural
    America.
        I would like to update you on our efforts on these four goals and
    our modifications to the Section 515 Rural Rental Housing Program, but
    first I would like to share with you the impact of housing and
    community facilities programs on the broader range of issues which
    concern this Congress. These issues include moving individuals from
    welfare to work, containing health care costs, providing an adequate
    start to children to improve their opportunities in life and improving
    the competitiveness and stability of the rural American economy.
        Although the Rural Housing Service finances the physical
    construction or rehabilitation of housing and community facilities, the
    impact on the community and the individual goes far beyond the tens of
    thousands of construction and related jobs, the millions of dollars
    generated each year in building and associated trades, the more than $1
    billion boost in state and local taxes and the actual physical shelter
    provided. Our assistance literally allows individuals, families and
    communities to turn their lives around and to start to become self
    sufficient. Let me just give you a few examples.
        Some of the worst housing in the country is experienced by
    farmworkers. The horrendous housing conditions that some of these
    workers endure cause so many other problems, particularly for the
    children. I would like to share with you how one family near Madera,
    California credits RHS' farm labor program with providing them the
    opportunity to have a decent life and a future.
        Three years ago, a young farmworker and his family were sharing a
    substandard, one-bedroom house with another family. The father worked
    very hard in the fields, but the high cost of child care prevented the
    mother from finding a job. It seemed that the children in this family
    had dim prospects of a better life than that of their parents--that is,
    until the family was able to move into the RHS-funded la Casa de la
    Vina farm labor housing complex, located adjacent to the grape fields
    which the father helps to cultivate. The eldest child attends a nearby
    elementary school and the middle child attends the Head Start program
    located in the la Vina development. These children have stability, a
    decent home, and good educational opportunities, all of which seemed
    out of reach just three years ago. And the mother now feels
    sufficiently secure about her children's safety and her housing that
    she has started to work in a local produce-packing plant. This is just
    one example of the thousands of hardworking, low-income American
    families whose housing conditions--and therefore quality of life--have
    dramatically improved through participation in the RHS Section 514/516
    Farm Labor Loan and Grant Program.
        I would also like to tell you about what a difference in people's
    lives our Mutual Self Help Housing Program has made. This program, in
    conjunction with our Section 502 Direct Loan Program, allows groups of
    six to ten families to build homes for themselves by contributing sweat
    equity. Each family works on every other family's house until every
    house is done. Only then may the families move into their new homes.
    The process lasts about a year, and it's easy to see how by the end,
    the families have built not only their homes but also a tight
    community. Billy and Debra Blackmon offer a compelling example of how
    these programs have brought prosperity and a sense of togetherness to
    the people in one rural Florida town. In 1986, Mr. Blackmon was working
    hard at his $6 an hour job, but he never seemed to get ahead. Today, he
    is a certified electrician with his own successful business, and he
    credits his participation in the Self Help Program with enabling him to
    achieve that goal. Mr. Blackmon is giving back some of the opportunity
    the government gave him: today he hires young men from the local area
    to work in his business. He teaches them electrical skills and he
    mentors them, encouraging them to complete their education and to
    participate in society. Some of his employees who were considering
    dropping out of school are now on the honor roll. Mrs. Blackmon is
    giving back as well: she started her own day care program, thereby
    raising the income of her family and providing quality, affordable day
    care to her neighbors, who in turn are now able to return to work. As
    you can see, in the process of moving themselves out of poverty, the
    Blackmons have become community leaders and role models. Just ten years
    ago, they were living in a one-bedroom structure that got soaked every
    time it rained. Now, they and their children live in a lovely home they
    built with their own hands. Thanks to the Self Help Housing Program,
    their kids have opportunities that were unimaginable a decade ago, and
    their community is turning around.
        As you are aware, the effort to move families off of welfare and
    into work requires the availability of affordable quality day care,
    which is often more limited in rural America. This can present a real
    barrier to a family who is trying to move out of poverty. RHS'
    community facilities programs can be used to finance both adult and
    child day care and RHS is working hard to ensure that communities can
    utilize this resource. I would like to share with you how RHS'
    financing of the ``Time for Tots'' child care facility in Harlan, Iowa,
    has impacted so many residents' lives and supports your efforts to move
    families from welfare to work.
        ``Time for Tots'', financed by a direct community facility loan,
    opened in 1993 with a license to care for 113 children. According to
    Nancy Gessmann, general manager of Communications Data Service, Time
    for Tots benefits her business because ``. . . workers are more
    dependable and absenteeism is reduced by as much as 50 percent.''
    Harlan resident Mary Marco stated that ``my entire life has blossomed
    as a result of Time for Tots.'' Ms. Marco, a single working mother of
    four, always struggled to provide her children with a safe and stable
    day care environment. But before Time for Tots, there was no affordable
    day care in Harlan, and Ms. Marco had no alternative but to move her
    children from sitter to sitter and relative to relative. And still she
    sometimes had to stay home from work to look after them. Of course, Ms.
    Marco's absenteeism prevented her from moving ahead in her job. She
    worried that she would have to go on welfare to make ends meet. But
    after Ms. Marco enrolled her three youngest daughters in Time for Tots,
    her income stabilized, and with a loan from our agency, she was able to
    move her family from a rented, two-bedroom apartment into her own
    three-bedroom home. Because of Time for Tots, Marco and her children
    have a better future. They and other Harlan families are able to stay
    off welfare, and Time for Tots' affordable, high quality child care has
    given many families the resources they need to move from welfare to
    work.
        Rural America has seen tremendous progress from these investments.
    As a result, many of these communities are more competitive and stable,
    additionally many more families are contributing to the local tax base.
    Child care facilities and self help housing communities are pulled
    together by grass roots efforts of the local people. Children are
    healthier, doing better in school, gaining self esteem by having the
    pride of showing a friend where they live. This is the real story.
    However, we must recognize the task still to be done. Rural areas
    continue to have high poverty rates and over 2.3 million substandard
    homes. Many communities lack the essential community facilities such as
    child care centers, fire stations and access to health care that not
    only impact the quality of life but also make it more difficult to
    attract and retain businesses. And we cannot expect a community or a
    family to become self sufficient if the economy is not thriving.
    However, we also cannot expect a family to be able to hold down a job
    and stay off of welfare if they do not have a decent and stable place
    to live. A permanent address and a decent place to live provide the
    stability that a worker needs to obtain and maintain a job and that a
    child needs to be successful at school.
        Over the last two years, we have outlined our reinvention and
    partnership efforts to this committee. I would like to review those
    efforts and lay out our plans for the future to help achieve our four
    goals: reinvention, partnerships and leveraging opportunities, budget
    savings and expanding access.
        Let me first discuss reinvention. As rural America changes, so does
    the Rural Housing Service. Our reinvention efforts in the Single Family
    502 Direct Loan Program, under the leadership of the Vice President's
    National Performance Review, are a great success and have set the
    standard for future efforts. We recognize that as we work together to
    balance the budget, we must use automation and modern technology to
    increase our efficiency, improve our customer service and cut costs.
        The reinvention of the Section 502 Single Family Direct Loan
    Program includes three components:
      --The reduction of regulations by over 90 percent from 290 pages to
            30 in the Code of Federal Regulations and the production of a
            user friendly handbook for our field staff and partners.
      --The reduction in the cost of the program by over 30 percent,
            reducing the subsidy rate by squeezing out excess costs. As you
            know, this change was accomplished in fiscal year 1996.
      --The implementation of the Dedicated Loan Origination and Servicing
            (DLOS) System, strongly supported by this committee. The DLOS
            initiative includes two components--the automation of our loan
            origination and servicing functions, and the establishment of
            the Centralized Servicing Center (CSC) in St. Louis to service
            an $18 billion portfolio of almost 600,000 borrowers. The DLOS
            Initiative will allow us to satisfy the Congressional mandate
            to escrow for taxes and insurance.
        The Agency purchased a commercial off-the-shelf software system
    directly from the private sector with modifications to meet unique
    program requirements. Our borrowers will experience the best of both
    worlds by receiving the finest servicing the private industry has to
    offer today while still participating in Congressionally mandated
    ``supervised credit'' services delivered locally by our field staff.
    These services, unique to the 502 program, offer lower payments based
    on income (payment assistance), moratoriums and work-out agreements
    which allow our borrowers to preserve their homes through economic or
    financial difficulties. The automation and centralization efficiencies,
    the reduction in staff and the improved servicing of the portfolio will
    result in a savings to the taxpayer of $250 million over five years
    (1996-2000) and $100 million a year thereafter.
        The Administration laid out a plan three years ago which stated
    that we would complete conversion to a centralized system by the end of
    fiscal year 1997. On October 25, 1996, Secretary Glickman traveled to
    St. Louis, Missouri, to kick off the Centralized Servicing Center, to
    announce that this goal has been achieved and to present Vice President
    Gore's Hammer Award to the staff who have worked on this initiative. We
    are proud of our staff and our efforts. This is truly a reinvention of
    our business. The conversion of the portfolio is proceeding in seven
    phases and will be completed on schedule by September 1997.
        This year, we continue to build on our reinvention efforts by
    focusing on our Multifamily Housing Program. We are streamlining
    regulations and increasing automation. We hope to create a dramatically
    reduced, common-sense, non-bureaucratic set of regulations that eases
    the burden on our borrowers and our staff. We are confident that the
    result will be better administration of our programs and protection of
    our aging portfolio.
        We are also working hard to maximize our use of technology. For
    example, we are now posting those community facilities direct loans
    that are eligible for refinancing with private sector credit on the
    Internet so that private financial institutions can discuss refinancing
    opportunities with these borrowers.
        I would also like to share with you our efforts to increase and
    build partnerships and leveraging opportunities which expand our
    limited resources, ensure that as many dollars as possible are directed
    into rural communities, and build private, nonprofit and other public
    sector participation in local rural development efforts, increasing
    their likelihood of success.
        The goal of the President's National Partnership for Home Ownership
    is to provide home ownership to an additional eight million Americans
    by the year 2000. In support of the President's Initiative, we have
    increased our efforts to cultivate partnerships throughout the states.
    Three of these new partnerships have been especially successful, and I
    will tell you about them now.
        First, we formed the Rural Home Loan Partnership in June of 1996.
    RHS joined the Rural Local Initiatives Support Corporation (Rural LISC)
    and the Federal Home Loan Bank System to create and deliver a new
    single family mortgage product to enable families below 80 percent of
    area median income to achieve home ownership. RHS provides a fixed-
    rate, subsidized mortgage to cover a portion of the cost of a house,
    while a local bank provides financing for the remaining portion.
    Private non-profit community development corporations (CDC's) identify
    and counsel eligible borrowers and aid in the development of affordable
    housing opportunities. This counseling is often critical to the long
    term success of the homeowner. This partnership brings a new player--
    The Federal Home Loan Banks--into leveraging with the 502 direct loan
    program. RHS' partnership with the community development corporations
    helps direct resources to very needy areas, leverages technical
    assistance and builds a long lasting partnership to accomplish other
    rural development initiatives. This product was demonstrated in nine
    states, and eight new partnerships are being formed this year. The
    states involved in this partnership include Alabama, California,
    Florida, Kentucky, Louisiana, Maine, Maryland, Michigan, Minnesota,
    Mississippi, Nebraska, New York, Ohio, Pennsylvania, Texas, Washington,
    and Wisconsin.
        Second, RHS is also partnering to ensure home ownership education
    is available in rural America. RHS is working with Fannie Mae, Freddie
    Mac, the Housing Assistance Council and Rural LISC to help build a
    rural network and support for home ownership education which typically
    involves a series of classes to instruct potential homeowners on
    credit, budgeting, savings, home maintenance and the basic ABC's of
    owning a home. Numerous indicators have shown that home ownership
    education reduces delinquencies and increases the long term success of
    the borrower. However, as with so many other support services and
    assistance, rural residents are often at a disadvantage in accessing
    these resources.
        In addition to these new initiatives, one of our most successful
    partnerships, the Mutual Self Help program, also supports the
    President's home ownership goals. The Self Help program provides grants
    to nonprofit organizations and municipalities to organize and provide
    technical assistance to groups of families who work cooperatively
    together to help build their own homes. The sweat equity built up by
    the borrowers means these families--and the federal government--can get
    more house for less debt. The families are able to achieve the American
    dream of home ownership and start out with significant equity and
    greater commitment to their neighborhoods. Activity and interest in
    this program has increased tremendously in the last few years. In
    turning around borrowers' lives, the Self Help program brings together
    not only the contributions of the borrowers but also those of federal,
    state, local, private, and nonprofit organizations, all of which are
    committed to the goal of making home ownership a reality for low-income
    Americans.
        RHS' loan guarantee programs have brought increased numbers of
    financial institutions into partnership with the Agency. Over 1,600
    partners now participate in the Section 502 guarantee loan program.
    This program serves low and moderate-income residents that fall under
    80 percent of the median income. Additionally, in fiscal year 1996, the
    agency implemented a demonstration of the Section 538 multifamily
    guarantee program. We plan to approve approximately $13 million in new
    loans for fiscal year 1997.
        In the Section 502 direct program, we have encouraged leveraging,
    which utilizes our direct loan funds in partnership with another
    lender's funds. We take the second lien on the property, with the
    private sector lender or housing finance agency in first position. The
    states have been creative in establishing a wide variety of partners
    across the country. In fiscal year 1996 we leveraged almost 15 percent
    of our low-income 502 funds to increase home ownership opportunities to
    almost 1,600 families who would not have been served without this
    effort.
        In the 515 multifamily housing program, we increasingly employ
    partnerships with state housing finance agencies, CDBG and HOME funds,
    the private sector and local community organizations. This has allowed
    RHS to reach larger numbers of low-income tenants with limited budget
    authority.
        In the community facilities programs, RHS has leveraged over 50
    percent of its funds, with state, local and private partners. RHS is
    developing a new partnership with HHS and Rural LISC (Local Initiatives
    Support Corporation) to expand the number of child care centers in
    rural America and demonstrate a variety of financing models.
        RHS' third goal is to ensure access to our programs by all eligible
    residents and communities across rural America. Under Secretary
    Glickman's leadership, the Rural Housing Service is continuing its
    outreach to underserved communities and populations and its efforts to
    comply with both the letter and spirit of the civil rights and fair
    housing laws. Let me give you a few examples of our activities in this
    arena.
        Native Americans are among the poorest housed groups in America and
    mortgage financing has not been widely available on Tribal lands. In
    1995, USDA and HUD jointly conducted a series of home ownership
    conferences to enhance opportunities for lending on Native American
    lands. One result of these conferences is a comprehensive guide for
    Rural Development staff called ``Lending on Native American Lands.'' In
    addition, RHS is working closely with Fannie Mae and several Tribal
    councils to better serve Native Americans' housing needs. Fannie Mae
    has agreed to a pilot program in which Fannie Mae will purchase RHS
    guaranteed loans made on tribal lands.
        RHS has also improved the quality of life on tribal lands by
    expanding the use of the Community Facilities programs by Native
    American communities. For example, using a combination $825,000 direct
    community facility loan and a $675,000 guaranteed community facility
    loan, the Navajo Nation and the Foundation for Hospital Improvements
    were able to improve the medical compound at Ganado by building a new
    surgical wing, replacing the obsolete natural gas service line, making
    necessary repairs, and building housing for medical personnel.
        RHS has worked hard to ensure that all of our borrowers and staff
    follow the Fair Housing Laws. We incorporated a significant Fair
    Housing training component at all national housing training meetings
    last year. We are finalizing a Memorandum of Understanding with HUD on
    how to manage Fair Housing complaints. We have also significantly
    improved our annual Congressional Report on Fair Housing and RHS
    Beneficiaries by using more meaningful indicators of our progress.
        RHS has been promoting outreach activities to historically
    underserved customers. This activity includes home ownership among
    women by participating in the Home Ownership Opportunities for Women
    (HOW) partnership, one of 58 national partners in the President's Home
    Ownership Initiative. HOW is undertaking an initiative to bring
    national home ownership rates for women to the same level as those for
    men.
        Doing more with Less: RHS has accomplished a great deal in
    reinventing government, in creating and expanding partnerships and in
    expanding access to our programs, and we have also made a significant
    commitment to help balance the budget. In fiscal year 1996, RHS cut the
    cost of the single family direct housing loan program by over 30
    percent. Our Centralized Servicing and DLOS Initiative is saving the
    taxpayers $250 million dollars over five years (1996-2000). RHS has
    proposed a legislative change to the Section 515 program. This change
    will reduce the subsidy rate by approximately 8 percent. Even though
    there is a significant demand across rural America, we have held our
    request for rental assistance constant, increasing it only to take on
    the added responsibility of converting some rural area Section 8 units
    to USDA rental units. Finally, RHS' Servicing Initiative has reaped
    tremendous savings for the government. Our single family housing
    delinquency has fallen by over 3 percent from fiscal year 1996 and is
    at the lowest rate in over twenty years.
        Finally, I would like to provide an update on our Section 515
    Direct Multi-family Rental Housing Program. The Section 515 rural
    rental housing loan program is a vital program that provides decent and
    affordable housing to families, disabled and elderly individuals whose
    annual income averages about $7,300 dollars. No other federal program
    reaches into remote rural areas to provide affordable, safe and decent
    rental housing. We have made great strides in strengthening our
    management and oversight responsibilities in our Section 515 program.
    We have made over 100 administrative changes to improve performance and
    reduce fraud, waste and abuse. Changes include the establishment of a
    loan classification system which will enable us to improve our
    management and monitoring of the portfolio and reduce costs by
    improving the focus of our servicing. In addition, we have continued
    over the last four years to strengthen our debarment activities against
    developers and management companies which have abused the program.
        These management improvements complement the reforms to the Section
    515 program initiated by the Committee and passed by Congress in the
    1997 Appropriations Act. The Department has worked diligently since the
    law was enacted to expedite the implementation of these reforms. RHS
    has worked extensively with stakeholders representing for-profit and
    non-profit developers as well as housing advocacy groups, state housing
    finance agencies and other interested parties to develop the
    regulation.
        We believe we have a regulation which is workable and meets the
    intent of the law. The regulation is now in final clearance, and the
    Department is planning to publish an Interim Final Rule in the Federal
    Register on March 31, 1997 to implement these legislative reforms. As a
    result of the Congress' and the Administration's efforts to improve the
    515 program, we have a healthier and safer portfolio today. The
    tenants' and government's interest are protected.
        Before we provide the specifics of the budget request, let me
    reiterate the importance of RHS' housing and community facilities
    programs in creating strong rural economies and enabling rural families
    and individuals to have a decent quality of life and a fair shot at the
    American dream.
        Now I would like to highlight the following points from the 1998
    Budget proposal.
        For section 502 direct single family housing loans in 1998, we are
    requesting a loan level of $1 billion. This is the same level as was
    authorized in the 1997 Appropriation Act. However, after the Act was
    signed into law interest rates were higher than projected so $83
    million in budget authority only supported $585 million in loans. The
    budget authority increase from $83 million to $128 million is necessary
    to maintain a $1 billion loan level for fiscal year 1998. For the
    Section 502 guaranteed loans, we are requesting a loan level of $3
    billion. This level is $300 million more the 1997 level but only costs
    $690,000 more in budget authority over fiscal year 1997.
        We have also proposed legislation to permit the use of Federal
    guarantees to help graduate current direct loan borrowers to private
    credit. The Rural Housing Service is aggressively encouraging our
    direct Section 502 borrowers to ``graduate'' to private sector credit,
    particularly in this low interest rate environment. However, many of
    the borrowers do not have sufficient equity to graduate and qualify for
    conventional credit. Further, they are statutorily prohibited from
    graduating to our guaranteed program. The President's 1998 Budget
    requests an authorization of a $100 million for graduating direct loan
    borrowers into the guaranteed program, at an appropriated subsidy cost
    of only $20,000. The Department will also submit a legislative proposal
    to remove the statutory prohibition.
        In the section 515 multi-family housing loans, a loan level of $150
    million is requested for 1998. The loan level request for housing
    repair loans (Section 504) is $30 million. For domestic farm labor
    housing loans we are requesting $15 million. These and the two smaller
    loan programs for housing site development are requested at about their
    current 1997 levels.
        The budget authority appropriation requested for the housing loan
    programs is $225 million, about $34 million higher than in the 1997
    appropriation.
        An increase of $16.8 million to $540.9 million is requested for
    rural rental assistance in 1998. In addition, RHS is requesting an
    increase of $52 million to assume HUD's expiring Section 8 contracts in
    RHS financed projects. These contracts, which service Section 515
    developments, can be more economically managed in the Section 521
    Rental Assistance program, creating savings for the taxpayer.
        The housing grant programs are being requested for 1998 under the
    Rural Housing Assistance Grants Program. Within this program, our
    requests include $10 million for farm labor grants, $24.9 million for
    housing repair grants, $26 million for mutual and self-help housing
    grants, and $10 for housing preservation grants. The supervisory and
    technical assistance grant program and the compensation for
    construction defects grant program will continue to operate in 1998
    with small amounts of carry-over funds which will be available.
        The community facility program request is included in the proposed
    Rural Community Advancement Program. Within that overall program, we
    project that $209 million will be available for direct community
    facility loans and that another $209 million will be available in the
    guaranteed loan program. About $9 million is proposed for community
    facility grants. The appropriation requested within RCAP to support the
    community facility programs is $28 million for 1998. This is $9 million
    more than is available for 1997.
        For administrative expenses, the Budget requests $413.6 million.
    This is a $13.3 million reduction from 1997 which reflects the
    centralization of single-family housing loan servicing.
                                     ______

                    Prepared Statement of Dayton J. Watkins
        Mr. Chairman and members of the Committee, I am pleased to present
    the Administration's fiscal year 1998 budget for the Rural Business-
    Cooperative Service (RBS).
        Rural Business-Cooperative Service is a component of the Rural
    Development Mission Area and has made significant contributions to
    enhance the lives of rural Americans. Like our counterparts, we share
    the belief that a strong rural America requires an investment in
    people, education, technology, health care, infrastructure, and social
    and community affairs. These investments will enable rural Americans to
    continue advancing in the economic mainstream of this great nation and
    help them build sustainable rural communities. RBS significant
    contribution to this effort has been in our ability to make our
    resources available to rural Americans. These resources build
    partnerships within these communities which leverage public, private,
    and non profit resources to stimulate economic growth. New jobs paying
    higher wages will be created and they will maintain the current ones.
    It means positioning rural residents to be able to meet the needs of
    their individual families for basic necessities. This can be
    accomplished by allowing rural residents to have income to pay for
    educational expenses of their children, family's housing needs, and to
    enhance their personal pride and self-esteem. It also means being able
    to meet the credit and financing needs of rural business owners who are
    unable to find them from other sources. It means helping the new
    entrepreneurs implement their dream of owning and operating their own
    businesses. Besides helping agricultural producers analyze alternative
    business forms, like cooperatives, which may offer them greater
    economic opportunities than currently offered by the marketplace in
    this highly competitive environment. Each of these efforts will touch
    rural America. Our responsibility is to provide efficient access to our
    programs so that rural Americans can maximize the benefits that will
    result.
        At Rural Business-Cooperative Services, we strive to enhance the
    quality of life for all rural Americans by assisting rural business
    owners and new entrepreneurs to develop businesses that are sustainable
    and provide a product or service which consumers demand. We assist
    these businesses in providing employment for local residents, owners
    and their families. We help them identify new opportunities and markets
    for their goods and services. These commitments help improve the
    performance of rural businesses consistent with efforts to reduce the
    size of the Federal government and balance the Federal budget. Even in
    this environment we must still provide efficient services to rural
    residents. One of our objectives is to use this opportunity to be
    creative in developing new concepts and approaches to serve our
    customers. To ensure that rural Americans continue to have access to
    our programs and services, we are developing new and exciting
    initiatives. These initiatives will focus more resources on
    individuals, businesses, and communities that have not traditionally
    participated in our programs. By doing this, we can be instrumental in
    increasing the contribution made to the overall growth of rural America
    by putting under utilized resources to better use. This is consistent
    with the overall goals and objectives of the Rural Development mission
    area.
        To meet our goals, objectives, and the growing demand for our
    services and resources, our strategy is to increase strategic alliances
    through creative partnerships with other Federal Departments, other
    agencies of USDA, corporate America, educational institutions,
    nonprofit organizations and others. Together, we can leverage resources
    to maximize their availability to rural America. Through strategic
    alliances, we can serve more people and communities because more
    organizations are available to serve them. Let me highlight an example
    of a completed strategic alliance and others currently in the
    developmental stages.
      --Signed a Memorandum of Understanding (MOU) with the United States
            Army to assist with the Armament Retooling and Manufacturing
            Support (ARMS) Initiative. This initiative will use the
            ammunition manufacturing facilities on closed military bases as
            a catalyst for community economic development and business
            opportunities. Our role is to utilize our staff expertise in
            underwriting business loan guarantee transactions for
            businesses locating on these bases. We are also:
      --Working with the Department of Treasury and the newly created North
            American Development Bank (NAD Bank) to develop an MOU to carry
            out the Community Adjustment and Investment (CAI) program under
            the North American Free Trade Agreement (NAFTA). RBS will be
            instrumental in simplifying some programmatic and
            administrative services needed to process applications for
            Business and Industry Guaranteed Loans, loan recovery, and
            provide other services to the CAI program.
      --Developing expanded opportunities for women business owners to gain
            access to our programs so they can increase their business
            activities. Discussions are underway to expand opportunities
            for rural businesses owned by women to expand into
            international markets. This initiative will result in a
            strategic alliance with the Department of Commerce, Trade
            Development, International Trade Administration. This will open
            up opportunities for women business owners who will expand
            their business activities in rural communities and employ more
            rural residents.
      --Developing a partnership with USDA's Cooperative State Research,
            Education and Extension Service and the Department of
            Commerce's National Institute of Standards and Technology to
            collaborate on developing new technology for manufacturing in
            rural communities. This will begin to revive the manufacturing
            sector which has been so valuable to rural communities in the
            past.
      --Developing a partnership with the U.S. Small Business
            Administration (SBA) to include information regarding our
            business and economic development programs in their Business
            Information Centers (BIC) computer data bases. Our initial
            effort will focus on some 21 centers on Native American
            reservations.
      --Increasing our assistance to small farmers to help position them to
            compete in the competitive global agricultural environment. Our
            attention must focus on resources to organize small farmers
            into cooperatives and enhance their economic competitiveness
            advantages domestically and internationally. Unless they
            organize them into some form which provides economic
            opportunities, they will continue to struggle to remain
            competitive. We consider this assistance to be part of the
            producers' safety net necessary particularly, due to the
            elimination of the traditional commodity programs. We are
            witnessing examples of how farmers are turning to cooperatives
            to respond more to a market oriented agriculture. For example,
            after the wool and mohair program was discontinued, sheep and
            goat producers throughout Texas and the Southwest began to
            organize new cooperatives to market meat and fibers.
        These are a few of the strategic relationships we are encouraging
    throughout the rural business arena which will have a direct and
    positive impact on the growth of rural communities.
        RBS is also very conscious of its customer service image and the
    types of services we provide to rural Americans. We continue to rethink
    and evaluate our programs and the way they are delivered to serve our
    customers more efficiently. Our goals are to reduce the cost to operate
    these programs for the taxpayers, while improving our service delivery.
    Through the enactment of sweeping changes in the Business and Industry
    (B&I) Loan Guaranteed program, we have demonstrated that this can be
    accomplished.
        The recently published business and industry guaranteed loan
    regulations are shorter, clearer, and more logically organized. The
    material in the new regulations is about one-half that of the previous
    regulations. Program changes shift some responsibility for loan
    documentation and analysis from the Government to the lenders. This
    makes the program more responsive to the needs of lenders and
    businesses, and creates easy and fast processing of applications.
        In recognition of this tremendous effort, RBS received Vice
    President Gore's Hammer Award for our automated application procedure
    for B&I lenders. Ten states participated in the user validation
    demonstration program for testing this new product. The new system
    alleviated some concerns expressed by our customers regarding requests
    for repetitive information, and cumbersome and complicated regulations,
    forms and agreements. This automated application software is schedule
    for release soon and nationwide implementation. In addition, we have
    developed a B&I video with a new program brochures and information kit
    to use in outreach activities within the states to make the public more
    aware of the program.
        In expanding visibility of our programs, RBS held a series of
    Business Financing Forums with financial institutions around the
    country. Participants included members of the American Bankers
    Association, Independent Banker's Association, Farmer MAC, the National
    Association of Guaranteed Lenders, the National Association of
    Investment Companies, and other trade associations. This effort
    increased our relationship with the lending community and has
    substantially increased program usage throughout the financial
    community. Additional efforts are planned for this fiscal year because
    of the heightened interests in our resources and capabilities.
        Now I'd like to briefly address our program funding request.
                          business and industry loans
        The business and industry loan program guarantees all types of
    businesses including those engaged in agricultural production when it
    is a part of the integrated operation. These companies create and save
    jobs, upgrade the infrastructure, and improve the lives of rural
    residents.
        Fiscal year 1996 was a banner year for us in rural business and the
    best year we have had since the late 1970's. Last year, RBS provided
    $638 million in guaranteed B&I loans and was able to provide financial
    guarantees to 560 loans to businesses which maintained their existing
    employees and often created many new ones.
        An example of the types of business and communities benefiting from
    the B&I program is the Southern Industrial Mechanical Maintenance
    Company (``SIMMCO''). This company was founded in 1977 and is in
    Brownsville (pop. 10,019), Tennessee. The company is a leading employer
    in the Brownsville community. The 1990's have caused the need for the
    automation of the manufacturing process and update of the physical
    plant site and equipment. The company performs shut down mechanical
    maintenance service for other companies on a contract basis and
    manufactures liquid propane gas tanks. These are the two core
    operations of SIMMCO.
        In order to implement the expansion of the company, United American
    Bank of Memphis is providing a loan for $3.1 million with a business &
    industry loan guarantee. Funds will be used for expansion of an
    existing business. The business will construct and equip a building on
    real estate the business owns in Brownsville, Tennessee. The expansion
    will help preserve 85 jobs and provide approximately 143 new jobs. Most
    of the new job opportunities are expected to come from census tracts
    within the Haywood/Fayette Enterprise Community. This loan will also
    allow the business to be more feasible in it's L.P. Gas Tank Operation.
    The employment rate in the Enterprise Community is 8.3 percent, the
    wage rates run as high as $18.00 per hour for such jobs as welding.
                       direct business and industry loans
        Many rural areas lack a competitive capital market, which leads to
    inadequate sources of financial assistance, especially for new
    businesses. Recent statistics show extensive areas of the country
    where, despite outreach efforts, the need for financial assistance for
    business development is not being met. This is especially true in areas
    with long term persistent poverty, such as the Mississippi Delta; areas
    experiencing fundamental structural changes in their economic base,
    such as the Pacific Northwest; and areas of long term population
    decline, most notably the Central Plains States.
        The President's 1998 Budget includes $50 million for B&I direct
    loans and to fill gaps that cannot be met through B&I Guaranteed Loans.
                          intermediary relending loans
        The intermediary relending program (IRP) invests Federal funds to
    leverage local funds in support of rural businesses and jobs. Loans go
    to nonprofit intermediaries who in turn relend them to rural businesses
    to improve business, industry, community facilities, jobs, and economic
    diversity of rural areas. The program makes investment capital
    available to entrepreneurs who cannot otherwise obtain financing from
    conventional sources.
        Data shows that for every $1.00 lent to an ultimate recipient, an
    additional $3.75 of leveraged funding is provided. In fiscal year 1996,
    $37.6 million funded 47 loans which resulted in more than $141.3
    million of other funds being leveraged. For every $100,000 of program
    loan funds, 20-25 jobs are created or saved. It is projected that once
    the 47 loans made in fiscal year 1996 have been reloaned (an average of
    3.4 times during the life of the loan), these funds will create or save
    an estimated 25,000--32,000 jobs over the life of the loan.
        An example of how this program is used is as follows: After a
    devastating fire, the Route 1 Fashions Retail clothing store in Fort
    Kent, Maine contacted the Northern Maine Development Council (NMDC) for
    counseling and assistance. The NMDC quickly responded, collaborating
    with a local bank and the Town of Fort Kent. The Town packaged a loan
    for part of the needed funds from the State of Maine Development Fund.
    The NMDC packaged a restructured loan with their bank and an NMDC/IRP
    loan. In a short time, the store was back in business and the hole left
    by the fire on Fort Kent's Main Street was filled with a new building.
    The business could maintain full time jobs that would have otherwise
    been lost. The business provides an important addition to the community
    and the cooperation shown through this project is a true northern Maine
    asset.
                        rural business enterprise grants
        The rural business enterprise grants (RBEG) program finances and
    facilitates the development of small and emerging private business
    enterprises. This program can be used to finance and facilitate
    development of small emerging businesses in the rural areas and
    incorporated towns and cities with a population of less than 50,000.
        Last year 332 grants for $45 million were made, approximately 3,531
    businesses were assisted resulting in the potential for 10,483 jobs
    being created and 6,961 jobs saved.
        Examples of how the program was utilized are as follows: A storm
    ravaged the Maine coast at the end of January 1996, and left two
    tugboats that service the port of Eastport inoperable. A rural business
    enterprise grant was given to Eastport Port Authority in the amount of
    $80,000 to rehabilitate a tugboat which was acquired through the
    Federal surplus property program. The Eastport Port Authority and the
    Port of Eastport are major employers in the region. The unemployment
    rate in Eastport is 13.5 percent, compared to 6.5 percent for the
    State. Maintaining viable port operations is essential to the
    community. RBS funding saved 70 jobs and there is the potential of
    creating 62 other jobs.
        In June 1996, a $39,580 grant was made to the Emmonak Alaska Tribal
    Council. The grant was made to purchase and install a primary fish
    processing line to their processing facility. The new line will do the
    initial preparation process of salmon without disrupting the production
    process. The new line will add four new jobs to the current 20 seasonal
    summer jobs in this remote Alaskan Community. The RBEG was leveraged
    with $120,000 in funds from state and local sources.
        The Walhalla Rural Health Association received a $50,000 rural
    business enterprise grant. This grant was used to purchase medical
    equipment such as a portable x-ray machine, ultra sound machine and a
    coulter counter which assists in diagnosing serious blood diseases such
    as leukemia and anemia. The equipment will be leased to the Walhalla
    Clinic's management group (the ultimate recipient) for utilization in
    their clinic. The Walhalla community has raised and spent approximately
    $20,000 in getting the clinic approved for operation.
                  rural economic development loans and grants
        The rural economic development loan program promotes rural economic
    development and job creation projects. These zero-interest rate loans
    made to Rural Utilities Service electric and telephone borrowers are
    reloaned to provide start-up financing, project feasibility studies,
    and other expenses associated with creating business enterprises in
    rural communities. Under this program last year we provided funds to 65
    electric and telephone systems, which is anticipated to provide zero-
    interest loans or grants totaling $13,093,398 to more than 70
    businesses, and creating approximately 2,600 jobs.
        Baker Electric Cooperative, Inc. received a $400,000 grant to
    establish a revolving loan fund. The initial loan covered by the grant
    was to the Towner County Hospital Authority in Cando, North Dakota. The
    purpose of the loan was to aid in constructing and equipping a new
    outpatient clinic and service center to update the existing hospital
    facility. The project beneficiaries are the residents of Towner County
    and the surrounding counties who will receive health care from the new
    hospital and clinic facility. The employees of the hospital and clinic
    will also benefit due to the enhanced prospects of retaining the
    hospital and clinic.
                              cooperative services
        Cooperative Services (CS) devotes its efforts to promoting the
    understanding and use of the cooperative form of business as a viable
    option for rural residents. As government support programs are changed
    and encouragement is given to more a market driven policy, farm
    operators, ranchers and other rural residents are realizing that they
    need more effective forms of group action in the marketplace to
    represent their economic interests.
        Cooperative Services conducts studies, alone or in conjunction,
    with other federal or state institutions, to provide farmers with
    information on economic, financial, organizational, legal, and social
    aspects of cooperative activity. Technical advice assists farmer
    cooperatives in the development and operation of viable organizations
    to better serve the Nation's family farmers. Educational assistance
    provides farmers and other rural residents with a proper understanding,
    use and application of the cooperative tool.
        The Nation's agricultural sector is currently experiencing rapid
    structural changes often referred to as the ``industrialization of
    agriculture.'' United States businesses involved in agriculture are
    finding it increasingly necessary to have a coordinated or controlled
    supply of a narrowly defined raw product. As previously mentioned, we
    intend to devote more resources to assisting small farmers in forming
    cooperatives. Cooperatives are adapting their structure and activities
    to ensure that the cooperative businesses and their independent
    producer members remain competitive in this new industrialized system.
    The Cooperative Services, through cooperative research agreements and
    in-house staff, has an extensive research program that is helping the
    agricultural cooperative sector deal with these major structural
    changes. This has been especially valuable in the rapid structural
    changes of the pork industry. Various research publications have been
    developed and symposiums or other types of outreach meetings have been
    conducted or are being planned to get the findings of these studies out
    to the cooperatives, agricultural producers, and other resource
    providers.
        Meat goat producers, predominantly small farmers, from Mississippi
    and the southern part of the U.S. have experienced difficulties in
    gaining access to a profitable market for their livestock. These small
    producers depended on individual markets and operated in an environment
    with little information, as the industry is in an embryonic stage.
    Southern States Goat Cooperative was incorporated with our assistance
    in 1996 and held their first auction in June of 1996. The cooperative
    is now holding two auctions per month and membership has expanded to
    more than 300 producers. As the industry develops, the cooperative will
    explore the feasibility of a processing facility.
        As another example of cooperative development assistance, the
    economy of Smith Island, MD depends on the seafood business including
    watermen's harvested catch of crab. Historically, crab picking has been
    done in ``out-kitchens'' in each waterman's house. Although Smith
    Island crabmeat has always been a high quality product, the ``out-
    kitchens'' did not meet the Maryland Health regulations for seafood
    processing. The crab pickers are predominately women who were told they
    could no longer sell to the public unless the crabmeat was processed in
    an approved facility.
        In October 1996, the new and approved facility was dedicated.
    Cooperative Services helped develop a business plan and assisted the
    board and management of this new cooperative improve their operations,
    establish a bookkeeping system, review financial performance, and
    provided guidance for board decisions. The Smith Island Crabmeat
    Cooperative provides a valuable source of income for the island women
    and their families.
                      rural cooperative development grants
        The rural cooperative development grants (RCDG) program, formerly
    the rural technology and cooperative development grant program, has the
    primary purpose of improving the economic condition of rural areas
    through the development of new cooperatives and improvement of
    operations for existing cooperatives. The RCDG program provides grants
    to nonprofit corporations and institutions of higher education to
    establish and operate centers for cooperative development.
        The RCDG program is used to facilitate the creation or retention of
    jobs in rural areas through the development of new rural cooperatives,
    value-added processing, and rural businesses. Grants are competitive
    and awarded based on specific selection criteria.
            appropriate technology transfer for rural areas (attra)
        In fiscal year 1997 one-point-three million dollars of the RCDG
    funding (3 million) is being used for the Appropriate Technology
    Transfer for Rural Areas (ATTRA) program through a cooperative
    agreement. This program encourages agricultural producers to adopt
    sustainable agricultural practices which allow them to maintain or
    improve profits, produce high quality food, and reduce adverse impacts
    to the environment. ATTRA functions as a center for information and
    technical assistance, staffed with sustainable agricultural specialists
    and accessible nationally through a toll-free telephone number. The
    ATTRA program was transferred to USDA in fiscal year 1996 from the
    Department of Interior's National Fish and Wildlife Service. In fiscal
    year 1996 it responded to a record 18,246 request of which 11,810 were
    from farmers, and 6,436 from extension, agribusiness, university, state
    and federal agencies.
                   national sheep industry improvement center
        The National Sheep Industry Improvement Center will be used to help
    build the capacity of the U.S. sheep and goat industries, including
    infrastructure development, business development, resource development
    and market and environmental research.
        The Board of Directors, appointed in January 1997, will operate the
    National Sheep Industry Improvement Center. The Center is funded
    through a revolving fund account which allows up to 3 percent for
    administrative purposes. Initially the National Sheep Industry
    Improvement Center's revolving fund was $20 million. Although $30
    million is authorized during the next 10 years of the program, no
    additional appropriations are requested for fiscal year 1998.
                1890 land grant institutions outreach initiative
        The Rural Development 1890 Land Grant Initiative involves
    cooperative agreements with the 1890 Land Grant Universities and
    Community-based Organizations to develop income-producing projects for
    underdeveloped rural communities. This effort supports the President's
    desire to reach out to low-income, rural communities to improve their
    economic conditions. This initiative also supports the Executive Order
    to work with Historically Black Colleges and Universities. It has been
    funded at approximately $2 million annually for the past three years,
    and is included in the salaries and expense account for 1998.
        The intent of this project is direct jobs' creation in communities
    that are traditionally agriculturally-dependent or other natural
    resource-dependent. The land grant universities are among the best
    agriculture science and business educational programs in the nation.
    These agreements build on the strength of these institutions to ensure
    quality education related to small business development and to improve
    the quality of life in rural communities.
        A notable example involves Michael James and JWH Industries of
    Florence, South Carolina. In 1996, Mr. James and JWH Industries had a
    faltering worm business. Mr. James requested technical assistance from
    South Carolina State University through RBS's, Rural Development
    Initiative (RDI).
        Prior to his request to RDI, his business consisted of one lone
    employee and ten worm beds on a two-acre family-worked site in
    Florence, SC. After receiving technical assistance he now has ten acres
    in Manning, SC, five acres in Summerville, SC, a five-acre breeding
    facility in Trio, SC and another acre in North Carolina. Mr. James now
    employs 15 people and tends more than 360 worm beds at his various
    sites.
        Also, the Japanese have expressed interest in his process of
    treating soil with special worms called vermicomposting that he has
    developed. Mr. James has developed the knowledge of how the various
    worms can enrich the soil, resulting in organically rich compost.
                                 budget request
        I would like to highlight the following points from the 1998 Budget
    proposal. The primary business and industry programs are requested for
    1998 as part of the Rural Community Advancement Program (RCAP). Within
    that program, the Budget proposes $660 million for B&I loans of which
    $610 million would be for guaranteed loans and $50 million would be for
    direct loans. Rural business enterprise grants are also proposed as
    part of the RCAP program at a program level of about $40.375 million.
    The appropriation needed to support these programs in 1998 is $46.296
    million. This appropriation is needed to support the guaranteed loan
    and grants program, however, the direct business and industry loan
    program is not projected to require any subsidy cost.
        Intermediary Relending under the Rural Development Loan Fund is
    proposed at $35 million for 1998. This is a slight program level
    reduction from the 1997 level. The budget authority appropriation
    required to support this activity is $17 million.
        Rural Economic Development Loans are proposed at $25 million in
    1998. In addition, the request for the rural economic development grant
    program is $11.3 million. The Budget proposes that these loans and
    grants should be funded from the cushion of credit deposits in the
    Electrification and Telephone Revolving Fund, therefore no
    appropriation of new funds is needed. The Rural Cooperative Development
    Grant Program is proposed at the $3 million level for 1998, the same as
    the current 1997 level.
        For administrative expenses, the Budget requests $31 million. This
    is an increase of $4.6 million above 1997 which is primarily requested
    for activities in cooperative business assistance.
        Mr. Chairman the Rural Business-Cooperative Service is proud of its
    achievements. Through your continued support, we intend to be full
    partners in serving the needs and enhancing the quality of life for
    residents in rural America. I would be pleased to answer any questions'
    you or the other members may have.
                                     ______

                      Prepared Statement of W. Bruce Crain
        Mr. Chairman and members of the Subcommittee, I am pleased to
    testify today on the President's fiscal year 1998 budget proposal of
    the Alternative Agricultural Research and Commercialization (AARC)
    Corporation. It is a pleasure to provide you with an update of the
    Corporation's investment successes and its real and potential impact on
    rural communities.
        With the enactment of the 1996 Farm Bill, Congress set in motion
    transformational changes in agricultural policy in this country. The
    gradual phaseout of commodity support payments means farming must
    become more market-driven. To compete in the global marketplace,
    America must produce value-added products; we cannot prosper with raw
    commodities alone.
        In short, American agriculture must be innovative to remain strong
    in the 21st century. The AARC Corporation is a catalyst for innovation.
    It is a vital link between the development of high value-added
    agricultural products and their successful commercialization. It is the
    only agency in the Federal government making equity investments in new,
    rural business ventures.
        Commercializing new products can be an expensive and difficult
    process, especially in a rural locale. It can be difficult because
    rural areas often lack the financial and other entrepreneurial support
    systems concentrated in urban areas.
        The AARC Corporation makes what are known as ``seed capital'' and
    ``early-stage'' investments. It provides the capital resources that
    agricultural innovators cannot get from the private sector because of
    their high risk. Like private venture capital firms, the AARC
    Corporation conducts extensive due diligence on prospective investment
    opportunities. Private investors respect the AARC Corporation's
    expertise and track record. The 66 companies AARC has funded during its
    brief existence will tell you that when they obtain a ``USDA stamp of
    approval'' from AARC, it opens the doors to additional financial
    resources from the private sector, such as later-stage investments and
    debt financing, that are essential to success.
        The typical cycle of venture capital investments lasts
    approximately 8 years. We do not expect companies we fund to generate
    positive cash flow until their fifth or sixth year. The AARC
    Corporation, currently in its fifth year of operation, has invested
    $28.1 million in 66 projects in 32 states. To date, these investments
    have attracted $112 million in additional private financing to projects
    in rural communities such as Fontana, California; Ashburn, Georgia; and
    Wahpeton, North Dakota--places that do not show up on the radar screens
    of money center banks and most venture capitalists. AARC produces a
    substantial multiplier effect. Every dollar invested by AARC has
    leveraged into $5, money that puts people to work in permanent,
    manufacturing jobs in rural communities.
        Despite its short history and the time needed for investments to
    come to fruition, seven companies have already made partial repayments
    to the AARC Corporation. These partial repayments are testament to the
    due diligence and investment decisions of the AARC Board of Directors
    and their wide array of private sector expertise.
        Once an investment is made, the AARC Corporation assists these
    companies by marketing their products to the banking and venture
    capital communities and to potential buyers of such products, such as
    the Federal Government. The AARC staff and Board of Directors have
    worked diligently to educate members of the banking community through
    speeches, publications, and even satellite feeds to bank officers. In
    addition, AARC has visited with the venture capital communities in New
    York, Chicago, Los Angeles, and Houston. The responses from these
    potential sources of funds have been extremely positive. In fact,
    several of the AARC companies have already received follow-on
    investments from these contacts that have had a tremendous impact on
    the profit potential of these companies. For example, Ariboard
    Industries of Texas used the AARC investment to attract $2 million in
    equity from Raytheon Engineering. Gridcore International of California
    has received follow-on investments totaling $17 million from firms
    including Nihon Cement, the largest cement manufacturing company in
    Japan. Earthgro of Connecticut was successful in attracting $15 million
    in investments from Warberg-Pincus, an investment banking firm. These
    and other AARC-invested companies have confirmed that AARC's initial
    investment was key to attracting these and other additional investors
    into these small, mostly rural-based companies.
        AARC works closely with the Small Business Administration (SBA) to
    open additional doors for its value-added agriculture manufacturers to
    private financing. Through a new arrangement, AARC companies have
    access to SBA's new Angel Capital Electronic or ``ACE'' network, a
    certified investor network of individuals with net worth of at least $1
    million. This new alliance with SBA will further leverage AARC's
    investment funds by opening the door to an important source of
    potential investment dollars that previously has been difficult for
    AARC companies to access.
        Section 729 of the 1996 Farm Bill included a provision that allows
    Federal agencies to establish set-asides and preferences for products
    commercialized with the assistance of AARC. The AARC staff is working
    to educate Federal procurement officials about AARC-funded products,
    which are all environmentally friendly, and about the authority that
    allows them to establish procedures for the purchase of these products.
    Access to this huge Federal Government market can greatly enhance the
    financial success of AARC-funded companies and their ability to repay
    their investments, and the earnings on these investments to the AARC
    Corporation.
        Based on an analysis of the AARC portfolio prepared by the
    Agricultural Utilization Research Institute (AURI) and the Kansas
    Technology Enterprise Corporation (KTEC) in 1996, AARC investments have
    added on the average 13 times more value to the agricultural raw
    products and forestry materials. In addition, AARC investments have
    created 5,000 new jobs, mostly in rural areas of the country.
    Therefore, based on AARC's current leverage ratio, one job is created
    for every $5,000 invested by the AARC Corporation.
        To place a more human face on these numbers, I want to briefly
    describe one AARC funded company and the difference we are together
    making in its community.
        Indian Creek Mesquite of Brownwood, Texas, is manufacturing and
    selling a mesquite wood product that serves as an alternative to
    charcoal. The mesquite is paraffin-coated and packaged in a paraffin-
    coated bag which can be ignited without the use of lighter fluid or
    other added materials. Mesquite wood carries a negative value due to
    the cost associated with removing the trees from pasture land. This
    cost averages about $150 per acre.
        Because of the added value generated by Indian Creek Mesquite, the
    value of mesquite has gone from a negative $150 per acre to over $5,000
    per acre. In addition, Indian Creek Mesquite has created 14 new jobs in
    the Brownwood area that otherwise would not exist.
        With the necessary resources, the AARC Corporation can continue and
    even expand its role in creating value-added products and jobs that
    benefit rural America. With AARC serving in the capacity of
    facilitator, new private sector investment dollars will reach
    entrepreneurs that otherwise would not be available. The AARC
    Corporation requests $10 million to continue its mission. The AARC
    Corporation pledges to work diligently to invest its funds in projects
    that add the most value to commodities and rural communities, and work
    to locate and expand markets for these new bio-based industrial
    products. Based on the Corporation's track record during this short
    time, we feel confident in assuring the Subcommittee that these
    resources will be used wisely and effectively.

                               General Questions

        Senator Cochran. I apologize for our hearing getting
    underway a little late this morning. We had a series of votes
    over on the floor of the Senate. Those are out of the way now.
    I left before we had our final vote total, but I think we
    probably passed the Nuclear Waste Storage Act. We dealt with
    several amendments this morning to that bill.
        I have a number of questions on a variety of subjects, but
    I am not going to proceed. I am going to let my colleague from
    Montana proceed to ask whatever questions he has. I know he has
    other obligations in other committees in the Senate today.
        Senator Burns, if you have questions, please proceed.
        Senator Burns. Mr. Chairman, thank you very much. I have
    very few questions of this panel, which I think I explained in
    my opening statement.
        I am struck this morning that a member of the bureaucracy
    would walk forward and say I was wrong last year. [Laughter.]
        That is highly unusual in this town. And those of you who
    are visiting this committee for the first time, you are seeing
    history made. [Laughter.]
        And not even we admit that we are wrong. [Laughter.]
        Mrs. Thompson. Well, I never admitted I was wrong when I
    was a Member of the House. [Laughter.]
        Senator Burns. So this week has really started off.
        I, again, would just want to work with you on the budget.
    And I was asking the chairman, on the transfer of money--I
    chair Military Construction, and we do ours a little bit
    different over there, but I can appreciate how this transfer
    has kind of helped you with some versatility to do some things
    maybe that have to be done and where it gives you some choice
    to make some decisions. And I think you should have that
    ability to make those decisions.
        We have to trust our managers and our people to make those
    calls, and without a lot of fuss being made up here on this
    Hill. But I want to congratulate you for your increases in RUS.
    I am very much a promoter of that. I think as we deal with
    distances and this type of thing, this infrastructure becomes
    very, very important to us. And I appreciate the approach that
    this budget has taken this year.
        And I thank the chairman.
        Senator Cochran. Thank you very much, Senator.
        We are constrained this year in our budget process by
    provisions of the so-called FAIR Act, the farm bill that was
    passed last year. It authorizes the Rural Community Advancement
    Program. Funding for some of the rural development programs is
    to be consolidated under that program.

                     Budget Request and the 1996 Farm Bill

        My first question is whether or not the budget that is
    submitted for the review of the subcommittee reflects the
    authorities under the farm bill last year, insofar as the Rural
    Community Advancement Program is concerned. I know there are
    five different subaccounts. There is a ``Rural communities
    facilities'' account, ``Rural utilities'' account, ``Rural
    business and cooperative development'' account, the ``National
    office reserve'' account, and the ``Federally recognized Indian
    tribe'' account.
        You have the authority under this law, as I understand it,
    to transfer the money to the rural development State directors,
    then proceed to divide the moneys or allocate the moneys among
    the five accounts, within certain limitations, to meet State
    priorities. Does the submission that we have before us, Madam
    Secretary, take all of that into account? And are the specific
    requests for funding in accordance with the authorization of
    the FAIR Act?
        Mrs. Thompson. I believe that it is. I want to confirm my
    response, but I believe that everything is consistent.
        Senator Cochran. Maybe Mr. Kaplan can confirm that for us.
        Mr. Kaplan. Yes; it is consistent with FAIR Act.
        Senator Cochran. In that connection, let me ask whether we
    have complicated this or whether the legislative committee in
    the Congress, by adopting the FAIR Act, has complicated this,
    so that we have a hard time understanding where the priorities
    are. I am interested, for example, in rural water and sewer
    system accounts. We have a lot of unmet needs in our rural
    areas in my State and, I know, generally, throughout the
    country. One of the main areas of emphasis has been in trying
    to provide the quality of life opportunities for rural
    communities that we have in a lot of our urban areas and areas
    near the larger cities.
        What is the emphasis in this budget request, if you can
    tell us, with respect to those traditional programs of rural
    development?
        Mrs. Thompson. Well, the emphasis is certainly strong with
    regard to those programs that serve the three areas that are
    covered in the three agencies. The reason that we would like
    the additional flexibility that RCAP would provide is that many
    times--well, always--as you go from State to State, the needs
    are different. And at different points in time, those needs
    change.
        For example, there may be a community that has a need for a
    water system, but funds are insufficient to finance the project
    from the water and waste account, but there is funding
    available in other accounts and there is no immediate demand.
    The transfer of funds and the shifting of funds to best meet
    not only the long-term needs, but the short-term needs for each
    of the States would be most helpful to our State directors.

                            Rural Utilities Service

        Senator Cochran. One thing I noticed in reviewing the notes
    that I have is that the President's budget request proposes a
    decrease in the program level funding for direct water and
    waste disposal loans. I am curious as to why the administration
    made that decision. There are a number of increases, and you
    pointed them out, but this is a decrease. Are we at a point
    where we do not need funds in this program as we did in the
    past? Why would the administration submit a budget that calls
    for a decrease in this particular area?
        Mrs. Thompson. Well, I am going to defer to Administrator
    Beyer to answer in greater detail, but the biggest challenge is
    that there are many needs in many areas, and we are very
    committed to balancing the budget. And that means that tough
    decisions have to be made. Additional money could be spent in
    virtually every area and it would enhance the quality of life
    in rural communities across the country. But tough budget
    decisions have to be made.
        Senator Cochran. Yes.
        Mrs. Thompson. But let me turn it over to Wally Beyer.
        Senator Cochran. Mr. Beyer.
        Mr. Beyer. Thank you, Mr. Chairman.
        Senator Bumpers. Mr. Chairman, if I may interrupt. How much
    is the cut?
        Senator Cochran. It is very small, $739 million as compared
    with $734 million.
        Mr. Beyer. Yes; that is exactly what I was going to point
    out, Mr. Chairman. It is very small.
        Senator Cochran. I just wanted to verify that I had the
    right figures in front of me and that it was a decrease.
        Mr. Beyer. There is a decrease in the water and waste
    water, but it is very small.
        The other thing we are doing is a better job of leveraging
    the scarce Federal dollars. We are, in fact, doing that with
    States and with private dollars. So we are trying to do the
    best job we can in maximizing the budget authority that we
    have.
        Senator Cochran. There is also a small decrease in the
    Circuit Rider Program. This is a program where technical
    assistance is provided to small community water associations
    and the like.
        Mr. Beyer. Yes.
        Senator Cochran. What is the assessment of that program? Is
    it not providing benefits or is this another small decrease
    that simply reflects budget realities?
        Mr. Beyer. Mr. Chairman, the Circuit Rider Program is a
    very valuable program for rural America without question. It is
    simply a refinement. It is not an abandonment by any stretch of
    imagination. And here again it is a very, very small decrease.
        Senator Cochran. I notice on page 11 of your statement, you
    talk about the goals--as we approach the consideration of
    legislation here in Congress to deregulate the electric utility
    industry--you point out on page 11 that you think there are two
    important considerations that we need to keep in mind as goals
    that should be part of the development of any restructuring of
    this industry. The first is to ensure the continued
    availability of reliable, high-quality electric service at a
    reasonable cost to rural customers. And the second is to
    protect the integrity of the Government's loan portfolio.
        I just want to let you know that I share those goals and
    congratulate you on thinking about how the Rural Utilities
    Service that we have supported here in Congress for a long time
    ought to think in terms of the restructuring of the industry.
    Does the legislation being considered by Congress, in your
    view, meet or achieve those goals?
        Mr. Beyer. Mr. Chairman, the Rural Utilities Service is
    really at the vortex of revolutionary changes in the
    infrastructure in this country, as you know. There is so much
    legislation floating around right now and given the
    environment, the States' rights environment that we live in, we
    are approaching it with a general view of encouraging and
    trying to ensure the best we can that quality, reliable
    infrastructure at reasonable cost will be maintained in rural
    America.
        I mean if this thing is going to be open access, and cash
    is going to be king, then it is going to be even more difficult
    without some congressional help. And you couple that with the
    patchwork deregulation that is going on State by State, and it
    is a very nervous time for rural Americans in looking forward
    to ensure that quality infrastructure is available.
        I think Congress has spoken quite loudly--they did speak
    loudly in the telecommunications deregulation last year--in
    ensuring a rural safety net network. And, second, as we move
    through the process of molding a new rural electric
    infrastructure, we would certainly encourage Congress to be
    very sensitive to a universal service pool concept for the
    electric industry as well. We certainly have concerns about
    loan security issues.
        We have challenges all over the place in various States on
    our all-requirements contract, the basic documentations in loan
    security. We are working with that as quickly and as diligently
    as we can, in assisting borrowers to prepare themselves for
    this new, radically changed environment. So we know that your
    committee is very interested in this, and we would hope that
    you would take a very active role in watching this process
    unfold.
        Senator Cochran. Well, I think we ought to be vigilant and
    keep in mind, as you point out in your statement, that we do
    not want to adopt reform legislation and then wake up and find
    out that those who live in the small towns and the rural
    communities are going to see their rates skyrocket or they are
    going to lose service or something like that. That would be
    catastrophic. We have to be very careful.
        Senator Bumpers.
        Senator Bumpers. Thank you, Mr. Chairman.
        Mr. Beyer, just to pursue the question Senator Cochran just
    asked you, let me say, first of all, that the REA has never had
    a stronger champion in the Congress than I have been. Because
    you have heard me say many times what it did for the area I
    grew up in. In addition to that, it saved my father's business,
    because he was a smalltown merchant, and it gave him an
    opportunity to sell electrical appliances in rural areas. His
    business really began to boom after that. And REA operated out
    of the back of his hardware store for years.
        So I come to this deregulation thing with considerable
    qualms and concerns. But I got into it, No. 1, because I became
    ranking member of the Energy Committee, and Senator Johnston
    had originally started this, and we all agreed that it was
    going to happen. And only if I took charge of it would it
    happen in a sane, methodical way. [Laughter.]
        But let me just make this point and see if you agree with
    it. And I know that the co-ops are the biggest adversaries of
    this whole concept. And I understand that. They have all been
    in my office, and I am sure will be again and again. And they
    have nothing to fear insofar as my power to control this thing
    is determined, because I am going to make sure that the
    utilities are treated fairly, that they are not all sent into
    bankruptcy because of a crazy scheme.
        The second reason I got into it, other than being the
    ranking member, was that this thing is going to happen whether
    we do it here or not. Seven States have already adopted retail
    competition, restructuring the electrical industry in their
    States--seven. Four more have it under consideration. It is a
    very trendy thing. And as I have said in some of my speeches,
    the House is probably going to pass this. You have a mix in the
    House of liberals who think anything that benefits consumers is
    good and you have conservatives who think everything is fixed
    by competition. So you have those two forces at work in the
    House, which indicate that this thing is probably going to pass
    the House this year.
        But what I have tried to tell the co-ops and everybody else
    is if you allow 50 States to do this on a random, harum-scarum,
    ad hoc basis, you are going to wind up terribly sorry that we
    did not have a national guideline for this to happen. For
    example, Northeast Utilities is suing New Hampshire right now
    because New Hampshire is one of the seven States that has
    already gone to retail competition, and they have kind of a
    convoluted system of allowing people to recover their stranded
    cost. That is, if their generators--because of lost customers
    to competition--if their generators are no longer economical,
    they can go to the State public service commission and say, we
    want to recover, we want you to pay us for our own recovered
    cost of this generating plant.
        And they say that New Hampshire law shorted them the $434
    million. Now, I do not want to go into this whole electrical
    deregulation thing here. All I am saying is, if you were a
    utility operating in three States and you had three States--two
    with retail competition and one with none, and you find
    yourself in dire straits because of competition, you are not
    going to get any stranded cost from the State that has not gone
    retail. And on the two that have gone retail, they may have
    entirely different formula for determining stranded cost.
        Now, it is not just the co-ops, but the whole utility
    industry, in my opinion, that would be swamped--absolutely
    swamped if that happened. And it is beginning to happen, even
    though seven States are all we have that have gone to retail
    competition. So, as I say, I understand the concern. I am
    concerned about that person in Arkansas, who lives a mile down
    the lane, and REA has built a line at a considerable cost of
    thousands of dollars to put power down to that house. And I
    will not stand--at least I would not vote for it nor support or
    speak for any kind of a bill that did not take care of that
    customer.
        I want to make sure, if this is not good for everybody, it
    is not good for anybody, in my book. Hubert Humphrey used to
    say that America would never be a good place for anybody to
    live until it is a good place for all of us to live. And I
    champion that same phrase in connection with electricity.
        But while I know the co-ops are very much opposed to this
    concept, they are not likely to be exempt. And if they are not
    exempt, a national guideline, in my opinion, is going to be
    infinitely preferable to them trying to deal with--does REA
    operate in all 50 States?
        Mr. Beyer. Not today, Senator.
        Senator Bumpers. How many States does it operate in?
        Mr. Beyer. With your permission, I will have to get back to
    you on that. It is the bulk of them. California, for example,
    has four rural electrics. And some of the Northeast States. But
    that is about it. It is pretty broadly covered.
        Senator Bumpers. Do you quarrel with anything I just got
    through saying?
        Mr. Beyer. Senator, I do not quarrel with it at all. We are
    very, very concerned about stranded investment. We are very,
    very concerned about reliability into the future. If this thing
    is wide open and it is customer choice and you have the ability
    to switch consumers, the industrial and commercial customers
    are going to be gone first. Because that is where the cash is.
    And there is where the power marketers are going to go. That is
    where the folks with low-cost generation are going to go.
        And there is going to be a switch in consumers. And that is
    just going to be a bigger problem. We are very concerned about
    the national guidelines. I am speaking for myself now, but I
    personally think there needs to be some national guidelines for
    this patchwork direction that it is going in.
        Senator Bumpers. Well, you are speaking for yourself, I can
    tell you that.
        Mr. Beyer. I am speaking for myself, Mr. Chairman. I hope
    you do not mind that.
        And national guidelines would seem to me to be critical in
    the interest of reliability. We do not even understand what it
    is like to have systems that go on and off. Because when we
    turn the switch on in America, something happens. We do not
    even think about it. And if we start getting into this
    patchwork network, it threatens reliability.
        The other thing that we would encourage is some universal
    service concept in the electric system, not unlike the
    telecommunications. That is entirely doable. It would make a
    lot of sense to ensure that rural America has the ability to
    maintain quality, reliable, reasonable-cost electric service.
        Senator Bumpers. Mr. Beyer, how much money is in the budget
    this year for REA for rural electricity?
        Mr. Beyer. $29 million in budget authority. And if I may
    take this opportunity, Mr. Chairman, that $29 million will
    generate $825 million Federal dollars. In addition to that, it
    leverages 3 additional private dollars. So about $3.3 billion
    will be invested in electric infrastructure in fiscal year
    1998. That is a tremendous leveraging of the scarce Federal
    dollars.
        In fact, we are going to do a piece on the evolution of
    leveraging. In my understanding, that is the way government is
    supposed to work. You are supposed to get this thing going, and
    then you use government to leverage private capital. And that
    is exactly what this program has done.
        Probably the most value in the electric and
    telecommunications program today is the credit support
    leverages $3 in investment for 1 Federal dollar.
        Senator Bumpers. How about telephone, do you have money in
    there for rural telephone service?
        Mr. Beyer. Yes.
        Senator Bumpers. How much?
        Mr. Beyer. The telecommunications is $1.9 million, which
    will leverage--actually, the telecommunications program
    leverages about 4.3 private dollars for every Federal dollar.
    It is a little bit better leveraging in telecommunications.
        Senator Bumpers. Those are very small figures. And, of
    course, you know one of the things that we still hear around
    here from some sources is that REA has outlived its usefulness.
    They ought to be cut loose. There is nothing wrong with them
    being a cooperative, but they do not need Government subsidies.
    What is your response to that?
        Mr. Beyer. My response to that is the consideration of
    reliability, consideration of continuing need for capital to
    constantly improve and replace antiquated systems, to modernize
    the system. That is a never-ending process in the
    infrastructure. So there will be a continuing need for
    infrastructure investments in the years.
        Take, for example, the technology in telecommunications. My
    goodness, technology is just changing the landscape in
    telecommunications. And certainly you have to have a continuing
    availability of capital to keep that going.
        Mrs. Thompson. If I might also add in response that
    virtually all electric utilities are subsidized through the tax
    code. The other electric utilities are subsidized through the
    tax code. And in fact, per consumer, rural electric users are
    receiving a smaller subsidy. That is per consumer.
        In answer to your question about the number of States that
    have rural electric cooperatives, the number is 46. And let me
    also say that I know you would like an official administration
    position on some of the legislation that is being considered by
    the Congress, and if you would like that, we would certainly be
    glad to----
        Senator Bumpers. I would like that.
        Mrs. Thompson. We will provide that for you, then, on each
    of the pieces of legislation.
        Senator Bumpers. Yes; that would be very helpful. That is
    what I would like for us to have in our record, so we can
    consider all these options that we have before the Congress,
    with a view toward how they will affect those who live in rural
    communities and the small towns of America.
        Mrs. Thompson. We will provide for you the official
    administration position.
        Senator Bumpers. Thank you very much.
        [The information follows:]

        Legislative policy on electric utility restructuring
    includes several departments of the Federal government.
    Administration policy is being developed at this time. USDA
    feels that two factors are vitally important in any legislative
    action that impacts the electric utility industry.
        First, the taxpayers expect us to protect the integrity of
    the Government's loan portfolio and we take that responsibility
    very seriously. The second concern is that ensuring the
    continued availability of reliable, high quality service at a
    reasonable cost to consumers in all rural areas of the country
    is critically important.

                             Rural Housing Service

        Senator Bumpers. Mr. Chairman, just a couple of quick
    questions.
        Mr. Shadburn, I have language I intend to offer on the
    supplemental that would provide some help for the storm-ravaged
    part of my State. We had probably the second- or third-worst
    tornado season we have ever had. And I will share this language
    with you before we offer it. But I would like for the USDA to
    be on board with it, because I want some housing assistance for
    Arkadelphia in particular, but also especially for College
    Station, which is a very, very poor African-American community,
    which is a suburb of Little Rock.
        And, finally, on housing, Mr. Shadburn, your budget
    requests $52 million for HUD section 8 contracts. Why are we
    subsidizing HUD?
        Mr. Shadburn. Well, Senator, what we are asking for is the
    actual transfer of the budget authority from the HUD section 8
    contracts that are presently used in our section 515 projects
    into RHS 5-year rental assistance [RA] contracts. There are
    currently 46,000 HUD section 8 units in over 1,500 515
    projects. In an effort to save taxpayers money over the long
    run, the administration is proposing this transfer.
        For fiscal year 1998, the budget proposal requests
    $52,497,000 of rental assistance to replace 3,665 units of
    expiring section 8 in 515 projects. Over the next 8 years, the
    administration recommended that all 46,000 section 8 units be
    converted to RHS RA, provided Congress accommodates the
    adjustments to the 602(b) allocations for both Appropriation
    Committees of Jurisdiction.
        The budget cost for HUD to renew the 3,665 expiring section
    8 units for 1 year would be approximately $20 million for 1-
    year HUD contracts compared to approximately the $52 million
    for RHS 5-year rental assistance contracts. The net cost in the
    short term would be higher, but after 3 years there would be
    significant saving. At the conclusion of the full conversion in
    2005, an estimated $291 million would be saved.
        Senator Bumpers. I am not sure I understand that, but my
    time is about up. Let me just ask you this final question.
        Section 515 rental assistance, that program goes from $16.8
    to $540.9 million. Why such a staggering increase? Have we
    misread that?
        Mr. Shadburn. Yes, sir; I think that the $540 million
    figure is consistent with what we have been requesting over the
    last several years.
        Senator Bumpers. And this year, 1997, you only have $16.8
    million in the program?
        Mr. Shadburn. No, sir; we have a request in the budget
    for--are you talking about in fiscal year 1997 or 1998, sir?
        Senator Bumpers. 1997.
        Mr. Shadburn. OK, in fiscal year 1997, it is $518 million.
        Senator Bumpers. $518 million this year, and you are asking
    for $540 million next year. OK, then we just got a bad figure
    here.
        Thank you very much.
        Senator Cochran. Thank you, Senator.
        Senator Harkin. Thank you very much, Mr. Chairman.
        Mrs. Thompson. May I answer a question of Senator Bumpers
    before you ask a question?
        Senator Cochran. That is up to Senator Harkin.
        Senator Harkin. You can ask a question. I do not know if I
    will let him answer it, but you can ask him. [Laughter.]
        Mrs. Thompson. Well, I am not sure I heard Jan answer your
    question regarding your supplemental language. And maybe he did
    and it just slipped. But we have reviewed your supplemental
    language, and it is quite acceptable to us.
        Senator Bumpers. Good. Thank you very much, Mrs. Thompson.
        Senator Harkin. I was afraid you were going to ask him a
    question. He has been known to give answers that can go on for
    quite a while. And I did not want to get bogged down here in
    the middle of the afternoon. [Laughter.]

      Alternative Agricultural Research and Commercialization Corporation

        Well, guess what I want to ask about, Mrs. Thompson? I want
    to talk about AARC. I have been a strong supporter of that, as
    you know. In 1987, I introduced the legislation that we worked
    on for a couple or 3 years and, with some changes, it was
    finally adopted in the 1990 farm bill. That created AARC. It
    was a bipartisan effort. Then-Secretary Madigan was a strong
    supporter of it. He was then in the House of Representatives.
        It is a Government agency that is providing very hard-to-
    acquire venture capital for businesses. It is making real
    differences in a lot of companies. But the dollars available
    are much too limited. I just have a series of questions on the
    subject of AARC.
        Your statement makes reference to the fact that the key to
    improving economies in rural areas is the creation of business
    job opportunities. One of the successes you cite is how AARC is
    working with the private sector to create new opportunities.
    Can you provide a couple of examples of the products that have
    been commercialized? And, in particular, what that may mean for
    farmers? Can you or Mr. Crain? I do not know--whichever.
        Mrs. Thompson. Yes; I would be delighted to answer those
    questions, because we have had considerable success in AARC.
    And one example is the use of peanut hulls to be converted into
    a charcoal that is used in water purification, which then
    changes the value of the peanut hull to the producer from a
    cost of $7 per ton, I believe, to a positive $300 per ton. That
    is, to me, a significant value-added matter.
        We have had success, as you know, in the State of Iowa, as
    well as other States, with using wheat straw for wallboard. And
    it simply increases the demand sometimes for products that are
    actual waste. And so it has been a very successful program. It
    also means more jobs in rural communities. And so it is really
    a win-win program, where the farmer wins because the value of
    her or his commodity goes up, and the local community wins
    because jobs are created.
        Senator Harkin. There are a lot of other examples, I know.
    And if you would just provide those for the record, I would
    appreciate it.
        [The information follows:]

        Almost the entire portfolio of products could be utilized
    by the Federal government. For example, the U.S. Postal Service
    (USPS) is constructing ``green'' buildings around the country.
    One facility now being constructed near Dallas, Texas, will
    utilize compressed wheat straw walls produced by Agriboard
    Industries in nearby Electra, Texas. We believe other AARC-
    supported construction materials may also be used in that
    building.
        The USPS has also contracted with Gridcore Systems
    International (GSI) to produce trash cans for use in post
    offices. The source of the raw materials used to make the
    strong, lightweight honeycomb panels for the trash cans is
    undeliverable bulk mail. We support the way the USPS has
    endorsed environmentally friendly building products from the
    AARC Corporation. We are still talking with USPS about using
    other products in the AARC Corporation portfolio in their
    course of business.
        Gridcore has supplied samples and is also talking with
    Unicor, part of the Prison Industries Program, about making
    furniture.
        Discussions are currently underway with the Pentagon and
    several of the AARC building material suppliers to provide
    material to renovate and ``green'' the Pentagon. Use of AARC
    materials in this multi-year project could have a major
    positive impact on these companies.
        Phenix BioComposites produces Environ from soybean meal and
    waste newspaper. It is a replacement for hardwood and looks
    like granite. The Natural Resources Defense Council (NRDC) used
    Environ for the counter tops and work surfaces in its new
    headquarters built last year, in Washington, DC.
        PrimeBoard uses 100 percent wheat straw to produce Wheat
    Board, a particle board replacement. This product is being
    widely used for manufacturing cabinets, furniture, and
    millwork. NRDC's counter underlayment is from PrimeBoard and
    its cabinets are also made from Wheat Board.
        Seed-based Lubricants.--International Lubricants Inc. (ILI)
    produces a line of biodegradable seed-based lubricants--
    everything from transmission additives, to all purpose
    lubricants, to two-cycle oil to industrial lubricants. Although
    the seed-based lubricants are environmentally preferable, these
    petroleum replacements face stiff competition from the existing
    petroleum-based products. In spite of the competition, some
    sales to the U.S. Air Force have taken place. Vegetable oil
    based lubricants could also be used with weapons and in the
    engines of high-performance vehicles.
        The Leahy-Wolf Company uses canola oil as a lubricant for
    concrete forms. As the Federal government continues to build
    new buildings and renovate old ones, or pours cement in
    environmentally-sensitive areas (bridges over waterways for
    instance), this product may be specified.
        Other Fluids.--Windshield washer fluid produced by Aquinas
    Technologies that is made from ethanol would seem to be a
    natural for all vehicles.
        Absorbents.--There are several products in the AARC
    portfolio which will help clean up oil spills. Low value wool
    from Hobbs Bonded Fibers has been purchased for use at military
    bases in Texas to catch and hold petroleum drips from vehicles.
    Two other products show great promise in remediating
    hydrocarbons. One is Oil Gator, the Product Services Marketing
    Group, which is made from cotton seed lint. It has been used to
    remediate spilled petroleum. Kenaf core can also be used to
    absorb and remediate hydrocarbons. These products can be used
    to clean up spills from existing contaminated sites, not just
    new spills. As military properties are being cleaned up, these
    products are likely to be considered.
        Filter Material.--Scientific Ag Industries makes activated
    carbon made from peanut hulls. These products can be used in
    water and air filtration systems and can also be used to
    remediate soils. It's also cheaper and of better quality than
    imported materials.
        Soil Amendments.--Many military bases are located in places
    with poor soil conditions. Biorecycling Technologies, Inc. is
    currently working with the Marine Corps Ground Combat Center at
    Twenty Nine Palms, California, to improve soil conditions in
    the military housing area, the golf course, and recreation
    sites, using a variety of fertilizers and soil amendments
    derived from cow manure.
        Earthgro Incorporated makes a variety of potting mixes
    utilizing plant and animal wastes. These can be used with
    interior potted plants and exterior plantings as an ideal
    substitute for peat, a finite and imported material, and
    petroleum-based fertilizers.
        Cleaners.--The AARC Corporation has invested in a number of
    environmentally-friendly cleaning products. Interchem
    Environmental produces a line of solvents from soybeans
    including graffiti remover, paving equipment, tar remover, and
    cleaners for printing presses.
        Shadow Lake makes Citra-Solv, a multi-purpose cleaner made
    from a powerful citrus extract, along with a number of other
    natural products--castile soap from essential oils and Air
    Scense, an air freshener from essential oils, which absorbs
    odors.
        MM Manufacturing produces waterless hand cleaner from corn
    oil.
        Tree-Free Paper.--KP Products uses kenaf, an annual fiber
    plant, to produce tree-free, chlorine-free paper.
        Starch-based Plastics.--Several AARC-supported companies
    produce a variety of coatings and films from vegetable starch.
    For instance, StarchTech makes biodegradable packing peanuts,
    which replace similar petroleum-based products. The
    Environmental Protection Agency has been a major purchaser of
    these starch-based peanuts, which dissolve in water.
        Forestry Materials.--Indian Creek Mesquite coats mesquite
    wood chunks with vegetable based paraffin in a ``Light The
    Bag'' application. No starter fluid is necessary. We can report
    that sales of this product are brisk in USDA's employee-owned
    store located in the sub-basement of the South Building.
        Cat Litter.--BioPlus Incorporated products biodegradable,
    flushable cat litter from peanut hulls. SSM Environmental
    Technologies Inc. uses corn stover, a post harvest residue, as
    its base to also produce an environmentally friendly cat
    litter.

        Senator Harkin. How much money has AARC invested in
    companies since its inception? And what additional funding from
    private sources is going to these companies? I just want to
    know about the leveraging aspects.
        Mrs. Thompson. Yes; I have that number here. But Bruce
    Crain, the Executive Director, can probably answer that off the
    top of his head.
        Mr. Crain. Senator Harkin, to date, we have invested $28.1
    million and we have leveraged another $112 million of private
    dollars. It is about a 4-to-1 leveraging ratio. Now, after that
    first leveraging takes place, we have also been successful in
    achieving follow-on financing into these companies. We pulled
    the data on five companies in which we have invested $3.7
    million. And in those five companies, we had leveraged an
    additional $57 million of private equity.
        That shows us that putting a USDA stamp of approval on
    these companies is successful in attracting that all-important
    private debt and equity into these companies.
        Senator Harkin. Are some of them going public? What is the
    likelihood of some of them going public?
        Mr. Crain. I think the likelihood is very good that most of
    them will go public. When they come to us, we are pushing them
    in that direction. Because we want to cash out and exercise our
    put option or they can exercise their call option in the fifth
    through eighth years. We are probably about 18 months away from
    three IPO's, we think, at this stage. But, to date, we are
    having a lot of success in meeting with venture capitalists and
    investment bankers in New York and other States in areas that
    are coming in behind us with these dollars. And we are finding,
    like I said, that USDA stamp of approval is making a
    difference.
        Senator Harkin. What is the average length of time for
    companies acquiring venture capital funds to really kind of get
    up and get going and get in the private sector?
        Mr. Crain. Based on the data we have gathered from venture
    capital experts, it takes about 5 to 6 years for a company to
    experience a positive cash flow. AARC made its first
    investments in 1993. That means, next year, 1998, would be the
    first year we would really be expecting significant returns.
        We structure our deals where we are going to get four to
    five times our money back in the form of a risk premium for our
    investment. So we are confident that we can meet that schedule
    and it will produce significant returns.
        Senator Harkin. How much funding do you believe AARC could
    effectively spend in fiscal year 1998? This is the
    Appropriations Committee; how much money do you think you could
    effectively spend?
        Mrs. Thompson. Well, I actually think that it is almost
    unlimited. It depends on only the creativity and the initiative
    that is out there. And there is considerable creativity and
    there is considerable initiative in rural communities. So I
    think that it is almost open ended.
        Senator Harkin. How much did we have in the Appropriations
    Committee last year?
        Mrs. Thompson. I believe it was $7 million.
        Senator Bumpers. If anybody knows the answer to that
    question, it is him. [Laughter.]
        Senator Harkin. I am just making a record.
        Mrs. Thompson. Do you think he just wants me to have this
    in the record? [Laughter.]
        Senator Harkin. Stick around and you will hear it more.
    Because I think this is where it is. This is where we are going
    to have the value added and we are going to create jobs and
    provide more industry in rural areas.
        I guess what I am looking for is the budget request this
    year was how much?
        Mrs. Thompson. $10 million.
        Senator Harkin. Well, if it is doing all of these great
    things and we are moving ahead, why do we get a $10 million
    request? That is what I am trying to figure out. Everyone I
    have talked to indicates that they could use more money. It is
    a wise investment. People are going to pay it back. It is doing
    good research. And we have this sort of modest, timid kind of
    an approach. What did you say that they were asking for, $500
    million? What was that other thing you just said, for what?
        Senator Bumpers. That has been too long ago. [Laughter.]
        Senator Harkin. Yes; about one-half hour.
        Senator Bumpers. That was the 515 Rental Assistance
    Program.
        Senator Harkin. Oh, the 515 Rental Assistance Program. They
    cannot pay the rent unless they have jobs. This provides the
    kind of jobs they need so they can pay your rent, Senator
    Bumpers.
        Mrs. Thompson. Well, Senator, I have heard you speak on
    AARC a number of times, and you are very persuasive. I have
    been working with the White House on this issue and believe
    that we might be able to get support for up to $20 million for
    fiscal year 1998 on the part of the administration.
        Senator Harkin. I hope so.
        Mrs. Thompson. You are very persuasive.
        Senator Harkin. I still think that is very low. I think
    that we have just been muddling along here. And I have
    basically taken at face value some indications from this
    administration that they were going to boost their request for
    this. Then 1 year slips by, and they say, well, then we will do
    it next year. The next year slips by and I am through having it
    slip by any longer. Everything that I see indicates that there
    is a bright future for it.
        Let me ask one last question. I know the answer to it, but
    I want to get it on the record. Do other countries have a
    program like AARC?
        Mrs. Thompson. I am going to let Bruce Crain answer that
    specifically, but there are some interesting things that happen
    in other countries.
        Mr. Crain. Senator, Canada, right now, is establishing a
    value-added program. And I think the Canadian Government has
    appropriated $100 million for that program. A lot of that will
    be spent by individual provinces.
        Australia has a similar program. And we have just recently
    learned that the People's Republic of China has a program which
    is very similar, as does Germany which has a budget of $53
    million. And in a recent meeting that I participated in with
    some of my counterparts in those groups, they are looking at
    the AARC model as to how to develop a value-added-type program
    in their countries. Because they like the fact that we are able
    to leverage private dollars so successfully. And they are
    attuned to the fact that for every dollar of research, it takes
    $100 to commercialize that research.
        Senator Harkin. Well, I have followed it very closely and I
    have seen the companies that have been invested in. And
    everything looks like it is going to be a good program. And
    obviously not everyone is going to come up a winner. We know
    that. That is the nature of this business. But, overall, it
    seems to me, that you are putting the money out there, and
    these kind of businesses are going to add value to crops,
    provide jobs in rural areas, and I think that is the direction
    we have to go.
        I just hope that we can, Mr. Chairman, find the $20
    million. We were supposed to have done that last year and we
    did not. So I said, OK, we will wait another year. So I was
    greatly disappointed when I saw the budget request come in
    again at last year's level for something that is actually
    building jobs in rural America and leveraging what, 4 to 1,
    private money.
        Mrs. Thompson. Senator, I will do all I can to work with
    you on AARC.
        Senator Harkin. I appreciate that. Thank you very much.
        Thank you, Mr. Chairman.
        Senator Cochran. Thank you, Senator.

                             Rural Housing Service

        Mr. Shadburn, I know you were listening when Mr. Beyer
    talked about leveraging the funds available for rural utilities
    with private sector investment dollars. And I was curious to
    know whether your experience in the housing programs is that we
    are leveraging in the same kind of way with housing dollars as
    we are in utility dollars. What can you tell us about the
    programs under your jurisdiction, as far as attracting private
    investment is concerned?
        Mr. Shadburn. Well, Senator, we are very proud in the Rural
    Housing Service of the leveraging that we are doing. Obviously,
    we are focusing on attracting additional private investment--in
    the direct program, we are requiring a goal of at least 20
    percent of our direct housing money to be leveraged by each
    rural development State office. We also have the Real Home Loan
    Partnership that we initiated in fiscal year 1996 with Rural
    LISC, the Federal Home Loan Bank and community development
    corporations, where we now have 17 States that are working to
    leverage funding.
        We also are working with the State housing finance agencies
    and the private lenders. So we have focused in each of our
    programs, the direct single-family program, our guaranteed
    single-family and multifamily housing program, our guaranteed
    and direct community facilities program, and likewise in our
    515 program. So, in all of our programs, we are focusing on
    leveraging with partners to make our funds go further.
        Senator Cochran. We have also heard that if you have a
    program that has as its goal the ownership of the housing unit
    by those who are being identified as beneficiaries of the
    program, that you are more likely to have property that is well
    cared for and that pride in ownership and other things flow
    from that experience--more responsibility for family, getting a
    job, for doing the things that have moved this country forward
    economically. My question is, Is that something that is real or
    imagined? Are we seeing those kinds of results flow from our
    rural housing programs that encourage ownership or that move
    someone toward owning their own home?
        Mr. Shadburn. Yes; most definitely, sir. We are focused at
    the Rural Housing Service on just the things that you were
    talking about there. But, in addition, it certainly benefits
    the total family, especially the children, because of their
    ability to live in safe, sanitary, and decent housing. It
    allows them to do better educationally. It has been proven. And
    it builds and supports the family unit. And we are finding that
    as we focus on our servicing and portfolio management, that we
    are assisting in making successful homeowners.

                       Rural Business-Cooperative Service

        Senator Cochran. Mr. Watkins, the programs under your
    jurisdiction have been very helpful in many respects in my
    State, particularly those in enterprise zones that were
    identified where there is a lack of job opportunities,
    providing loan funds and even grants in some cases to
    businesses and to new initiatives to provide jobs. It has made
    a big difference in a lot of people's lives.
        What is your assessment of those programs in the rural
    enterprise communities? Have they been working or not?
        Mr. Watkins. Mr. Chairman, thank you very much for the
    question.
        Our experience to date is that as those communities develop
    their expertise and their capacity to understand how Federal
    programs can really be used to benefit their communities, as we
    market and promote the programs to the private sector,
    businessowners and entrepreneurs in those local communities,
    then, yes, these programs have been utilized and they make a
    significant difference in assisting businesses establish
    themselves and locate in the empowerment zones and enterprise
    communities.
        Senator Cochran. When some of these programs were just
    starting up, I had gotten the impression that there were more
    meetings being held than loans being made. Are you still having
    more meetings than loans being made?
        Mr. Watkins. Well, Mr. Chairman, that was probably a true
    assessment when the program first began, because the overriding
    philosophy of the program was that everyone in the local
    community was to be involved in the empowerment zones/
    enterprise community program. In order to be involved,
    residents who had never worked together were brought together
    for their communities economic development. They had to develop
    their capacity and expertise, to understand how this initiative
    would benefit them.
        We encouraged the continuation of meetings. Now, whether or
    not there are more meetings today than there are program
    assistance being made to those communities, from a personal
    perspective certainly meetings are continuing, but the
    resources are being made available and are being used in
    designated and nondesignated rural communities. We can provide
    you with the information to support this assessment.
        Mrs. Thompson. I have some numbers that I think you will
    find of interest.
        Senator Cochran. Yes, Madam Secretary.
        Mrs. Thompson. Since the time of the designation of the
    empowerment zones and the enterprise communities, through last
    December, there have been $324 million awarded from a variety
    of sources. And included in that is $85 million from the
    private sector, where we used Federal dollars to leverage
    private sector dollars.
        Since the inception of the program, we have had 18 new
    business revolving loan funds established, 3,000 residents have
    participated in job training. There have been six new job
    training centers established. And more than 7,700 residents are
    now being served by expanded child care or Head Start programs.
    So those are some of the things that we have been able to get
    accomplished.

                              Administrative Costs

        Senator Cochran. Let me ask you this one question about the
    budget request. I notice that in the area of administrative
    costs, last year's funding level was $31 million. This year
    there is a $4.6 million increase being proposed. Why is it
    necessary to increase the administrative costs over 10 percent
    in 1 year?
        Mrs. Thompson. I believe it is technical assistance that we
    will be providing to the communities, but I want to ensure that
    that is where that money is going. It is for technical
    assistance. And one of the things that I think we knew before
    but which has been confirmed as a result of the processes that
    we have been going through is that some of the poorest rural
    communities have the greatest challenge in terms of writing
    grant applications and strategic plans for their communities
    and updating strategic plans.
        And, as you know, it is very different--I know in my
    hometown, we do not have people working for the town of Larwell
    who have master's degrees in public administration, whose sole
    job it is to write grant applications in the private sector or
    the public sector. Instead, we have a lot of people who have
    day jobs and volunteer their time to serve the community as
    town board president and member of the town council.
        Well, in the poorest rural communities, they have not an
    even greater need than in my hometown for the technical
    assistance information that we can provide and guidance that we
    can provide to link them up with Federal programs that are
    available. And that is the reason for the increase.

      Alternative Agricultural Research and Commercialization Corporation

        Senator Cochran. With respect to the Alternative
    Agricultural Research and Commercialization Corporation--that
    is a fancy, big title--or AARC, I am impressed with the work
    that is being done. I appreciate very much your making this
    material available to the committee--or to Senator Harkin, who
    made us all read it. [Laughter.]
        But this is strong evidence, I think, of the importance of
    these investments in new technologies, new ideas, and new uses
    of products from the farms. I am hopeful that we can support
    your request for the additional funding. I know that amount
    sounds modest to you, but it is a small request for an
    increase. I hope we can do it, because I think it has been a
    worthwhile program, and we need to provide the funds to
    continue it and expand it if we can.
        I know, in our State, we have the facility down at the
    University of Southern Mississippi that this committee funded
    several years ago, the Polymer Science Center. It has
    undertaken research in many of these same areas, trying to use
    products in a new way--developing polymers specifically--but
    there are a lot of spinoff discoveries from that research, or
    as a result of that research.
        Have you been down there recently to check out what they
    are doing? Is that a complementary or a duplicative investment?
        Mr. Crain. Mr. Chairman, we work very closely with Dr.
    Thames at the University of Southern Mississippi. I have been
    down there a couple of times. And it complements what we do. We
    rely on research laboratories like that one, and the ARS
    laboratories and the Forest Products Laboratory to develop
    those technologies. Then we can assist the entrepreneurs who
    are attempting to commercialize these technologies. We are the
    next step in the process.
        As you know, down there, there is the revitalization of the
    tung oil industry. And we are excited about the possibility of
    getting involved in that, and assisting those people that are
    trying to develop biobased products from tung oil, that, as you
    know, was once very prominent in that area.
        Senator Cochran. There was once a great hope that the kenaf
    industry was going to be an alternative source for pulp and
    paper products. Are you familiar with any new developments in
    the kenaf area?
        Mr. Crain. Kenaf is something that we have invested heavily
    in--almost 10 percent of our portfolio is invested in kenaf,
    directly or indirectly. We feel like it is going to be the
    future. We have major paper companies now stating that they
    want to use up to 30 percent of their alternative fiber for the
    production of paper in the future. We are going to have to look
    at alternative fibers. And kenaf is a legal one, as opposed to
    some that are not, that we should pursue.
        I think that a few months ago there were eight paper
    company executives from Japan that came to Mississippi, and
    told the Mississippi Department of Agriculture they would take
    up to 1 million metric tons of kenaf pulp tomorrow if they
    could get it.
        Senator Cochran. Why can't they get it?
        Mr. Crain. Well, there is not enough in the ground. And
    there has not been an incentive yet for the farmer to plant it
    and for a paper mill to be developed or a pulping mill to be
    developed, say, in the empowerment zone, right near Charleston,
    MS.
        Hopefully, though, as we have more of these products become
    more commercially viable and the markets become penetrated, you
    are going to have more farmers in that region and in Texas and
    Arkansas and others looking at it. And when they do, you are
    going to see the big paper companies, whether they be domestic
    or foreign, come in and make investments to produce paper and
    other products from kenaf.

                      Rural Community Advancement Program

        Senator Cochran. I noticed the overall budget request for
    the Rural Community Advancement Program [RCAP] is $2.5 billion
    in program-level dollars. How does this compare with last
    year's appropriated amount for these activities?
        Mrs. Thompson. They are very similar. It is 10 percent. So
    it is very similar--well, it is 10 percent of budget
    authority--however that translates into the programs, whether
    they be grant or loan programs. But they are very similar.
        Senator Cochran. My last question involves the local
    administration of these programs. I know the Washington level
    can devise and plan, have strategies and budget numbers, but
    unless you have the program administered in an effective way
    and a sensitive way at the State level and the local community
    level, it may not produce the results that we all had intended.
    What is your assessment of the quality of administration in the
    offices at the local level and how they are providing the
    resources and assistance, technical and otherwise, to the
    family farms and to the people who actually are the
    beneficiaries of these programs and services?
        Mrs. Thompson. I think we have a very strong field delivery
    system, made up of career employees in the Department of
    Agriculture, who know very much about the needs in their own
    individual communities because they live, their kids go to
    school there and it is their community. And we have some very
    talented and very committed and, quite frankly, very, very
    knowledgeable people, whose heart and soul is in the community
    that they are serving.
        And I think when you look at all of the changes that we
    have made in the restructuring and reorganization in the
    Department of Agriculture and all of the changes that they have
    been a part of implementing in program delivery, I just think
    that they have performed something close to miracles over the
    last several years. And I, personally, as a political
    appointee, am very proud to be associated with the field
    structure and the career employees that we have across the
    country.
        And I, frankly, do not think there is any other way that we
    could administer these programs as cost effectively as we are
    administering them. I think the field structure is working very
    well.
        Senator Cochran. The reason I ask the question is we want
    to be sure that the dollars we appropriate go to support the
    workers out in the field too, and not just the people who are
    here in Washington managing the program. Because if we have too
    many managers and not enough workers, we do not get any work
    done. We just do not get the services provided or the technical
    assistance out to the local level.
        Mrs. Thompson. I could not agree with you more.
        Senator Cochran. I want to be sure that we have a proper
    balance in our budget as well. So we are going to be looking
    closely at that. If you have any comments that you want to
    submit for the record, such as comparing the cost of
    administration and the dollars spent on the field services
    delivery system now with what it was 5 years ago, before the
    reorganization really started, that would be interesting to
    look at.
        Mrs. Thompson. We can do that. As you know, we are
    requesting a lower level for salaries and expenses for fiscal
    year 1998 than for fiscal year 1997. Even with that, we are
    working hard to make sure that we are making the right kinds of
    investment in the resources that our field employees have
    available to them. And so there are some up-front costs in the
    reorganization and the restructuring that will be pretty much
    one-time costs. I am thinking in particular of the centralized
    servicing system for the single-family housing program.
        But, yes; we would be glad to provide some good statistics
    regarding the costs over the last several years.
        Senator Cochran. Thank you.
        [The information follows:]

        COMPARISON OF ADMINISTRATIVE COSTS TO PROGRAM AMOUNTS DELIVERED FISCAL YEAR 1995 THROUGH FISCAL YEAR 1998
    ----------------------------------------------------------------------------------------------------------------
                                                                                                      Administrative
                                                                     Salaries and                        cost per
                              Fiscal year                              expenses      Program amount   program dollar
                                                                                                         delivered
    ----------------------------------------------------------------------------------------------------------------
    1995..........................................................    $555,238,000    $6,463,145,000          $0.09
    1996..........................................................     533,198,000     6,933,966,000            .08
    1997..........................................................     519,959,000     8,205,524,000            .06
    1998..........................................................     514,951,000     9,126,234,000            .05
    ----------------------------------------------------------------------------------------------------------------

        The mission area has been able to lower the cost of program
    delivery by using a higher level of technology and through
    field restructuring. However, there are some initial start-up
    costs associated with the initiatives. Therefore, the budget
    request of $514,951,000 is required to continue the momentum on
    these savings.

                              Submitted Questions

        Senator Cochran. I may have some additional questions, and
    other Senators who are members of the committee may also. If we
    do submit additional questions, we hope you will be able to
    answer them in a timely fashion. We will put them in the record
    and carefully consider them as a part of our process.
        [The following questions were not asked at the hearing, but
    were submitted to the Department for response subsequent to the
    hearing:]
                     Questions Submitted by Senator Cochran
                               rural development
                  rural development loan fund program account
        Question. The Administration's request proposes to change the
    direct loans authorized under the Rural Electrification Act. The
    proposal suggests using earnings generated by the interest differential
    on the voluntary cushion of credit payments made by Rural Utilities
    Service borrowers to provide loan subsidies for rural economic
    development direct loans. Please explain how this proposed request
    would work using monies from the Rural Electrification and
    Telecommunication Liquidating Account? How many rural economic
    development direct loans will be available in fiscal year 1998 if this
    request is approved by the Committee?
        Answer. The earnings generated by the interest differential on the
    voluntary cushion of credit payments made by Rural Utilities Service
    borrowers would be used to finance the rural economic development loan
    and grant programs as authorized by the Rural Electrification Act.
    These earnings are currently being used to finance the rural economic
    development grant program. Some of the earnings would be transferred to
    the Rural Economic Development Loan Program Account from the Rural
    Electrification and Telecommunication Liquidating Account and used to
    provide the necessary loan subsidy for the loans. It is expected that
    the requested loan level of 25 million will provide for 79 loans.
                       rural business-cooperative service
                        rural economic development loans
        Question. The fiscal year 1998 budget request proposes $25 million,
    an increase of $12.7 million, for rural economic development loans. The
    carryover of unfunded applications from fiscal year 1996 and fiscal
    year 1997 will total $16 million by the end of fiscal year 1997. Will
    the proposed fiscal year 1998 budget request be sufficient to eliminate
    the backlog?
        Answer. The carryover of unfunded loan applications for fiscal year
    1996 was substantially eliminated in the first quarters of fiscal year
    1997, a total of 20 loan applications for $6.66 million had been funded
    under the Rural Economic Development Loan Program. As of April 1997, an
    additional 10 loan applications for $3.2 million are currently being
    processed by Rural Development State Offices. The fiscal year 1998
    budget request of $25 million is sufficient to cover any carryover of
    unfunded fiscal year 1997 loan applications and anticipated application
    activity. As you are aware, we are proposing to fund the loan program
    through earnings generated by the interest differential on the
    voluntary cushion of credit payments made by Rural Utilities Service
    borrowers. These earnings will be used to fund the $5.97 million in
    subsidy for the proposed $25 million supportable loan level proposed in
    the fiscal year 1998 budget request.
                          1890 land grant initiatives
        Question. The Rural Development 1890 Land Grant Initiative involves
    cooperative agreements with the 1890 Land Grant Universities and
    community-based organizations to develop income-producing projects for
    underdeveloped rural communities. What type of cooperative agreements
    are made with these universities and organizations?
        Answer. The Rural Business-Cooperative Service agency has authority
    to enter into cooperative agreements with 1890 Land Grant Colleges and
    Universities. These cooperative agreements are for technical assistance
    and business development services in the local under-served communities
    where they are located. They assist current business owners, local
    business groups and budding entrepreneurs to maintain, expand and grow
    new businesses.
        Question. Which 1890 Land Grant Universities are currently
    participating in this initiative?
        Answer. The following is the list of all 1890 and Historically
    Black Colleges and Universities which are under cooperative agreements
    with Rural Business-Cooperative Service for fiscal year 1997 funded
    from fiscal year 1996 budget authority:
        1890 Institutions:
             1. North Carolina A&T University, North Carolina
             2. South Carolina State University, South Carolina
             3. Southern University, Louisiana
             4. Prairie View A&M University, Texas
             5. University of Maryland Eastern Shore, Maryland
             6. Lincoln University, Nebraska
             7. Langston University, Oklahoma
             8. Kentucky State University, Kentucky
             9. Fort Valley State College, Georgia
            10. Florida A&M University, Florida
            11. Delaware State University, Delaware
            12. University of Arkansas Pine Bluff, Arkansas
            13. Acorn State University, Mississippi
            14. Tuskegee University, Alabama
        Question. What is the history of this initiative?
        Answer. The 1890 Land Grant Institution Initiative program was
    implemented as the result of USDA's commitment to work with these
    institutions as it does with the 1862 Land Grant Colleges and
    Universities to build capacity in the agricultural, mechanical, and
    technical arts areas. The Morrill Act of 1890 was enacted to provide
    federal assistance for Southern states for the education of African
    Americans. This initiative was initially implemented throughout the
    Department of Agriculture in fiscal year 1988. Rural Business
    Cooperative Service has participated in the program since fiscal year
    1994 when USDA implemented its 1994 Reorganization. Prior to that, the
    original 1890's program was started under the old Farmer Home
    Administration (FmHA).
                                  cooperatives
        Question. With the changing role in federal farm programs, the need
    for farmer cooperatives becomes increasingly important. In the fiscal
    year 1997 appropriations bill, the Subcommittee encouraged USDA efforts
    to support farmer cooperatives. Please outline the actions the agency
    has taken to strengthen existing cooperative development programs and
    what additional initiatives are planned to further encourage such
    cooperative self-help efforts?
        Answer. The Department recognizes the important role that
    cooperatives continue to play for farmers, especially as they adjust to
    changing farm programs. We are focusing our resources in areas and
    activities that will support cooperative development in areas most
    affected by changing commodity programs and needs as expressed by
    producer groups. Our actions to strengthen existing cooperative
    programs include the following. First, we are maintaining a staff at
    the National Office level to conduct research, technical assistance and
    development of educational programs about cooperatives. The new
    increase for research on cooperatives proposed in our budget identifies
    the critical need for bolstering this work and continuing the
    partnership with colleges and universities in fulfilling it. Second, we
    are continuing to build a network of cooperative development
    specialists in State Offices who can work on specific projects as they
    are requested. These specialists coordinate with our staff at the
    National Office level as needed. We are also working through three
    additional programs to augment cooperative development assistance. The
    Rural Cooperative Development Grant Program is seeking to build a
    network of public/private development assistance. Under the Fund for
    Rural America, we are attempting to encourage farmers through their
    cooperatives to capture a greater share of the value added to their
    agricultural commodities. The National Sheep Industry Improvement
    Center Program, just underway, is attempting to address infrastructure
    needs to help mitigate the loss of the wool and mohair programs through
    industry-directed research, promotion, and technical assistance. Each
    of these efforts is aimed at conducting a program of research and
    education. This will help farmers have a clearer understanding of their
    options and strategies for using cooperatives as an alternative to
    Federal farm programs
                             salaries and expenses
        Question. The President's fiscal year 1998 budget request proposes
    an increase of $2 million for Rural Business-Cooperative Service
    salaries and expenses to fund cooperative research agreements primarily
    with colleges and universities on issues facing agricultural and non-
    agricultural cooperatives. Why are these additional funds needed and
    how will they be awarded?
        Answer. Funds are needed to help rebuild the research base on
    agricultural cooperatives and to start building a research base on non-
    agricultural rural cooperatives. With diminishing resources for
    cooperative research the past few years, the base of information on
    which important decisions are made, by cooperatives themselves and by
    policy makers, has been eroded. In addition, we are seeking legislation
    which would expand the authority of Rural Business-Cooperative Service
    to provide the same type of advice and assistance to non-agricultural
    rural cooperatives as they are currently doing for agricultural
    cooperatives. Relevant research in this area is particularly lacking.
    If we are to provide timely and effective service to this new
    clientele, we need to start developing an information base through
    research when possible. Due to ceiling/staffing constraints, colleges
    and universities through cooperative research agreements will
    accomplish much of this research. This would be a competitive, matching
    program with funds allocated to those applicants with demonstrated
    ability to effectively carry out the needed research.
      alternative agricultural research and commercialization corporation
        Question. In your prepared statement, it mentions that 66 projects
    have been funded in 32 states with an investment from AARC of $28
    million. Seven companies have begun to partially repay AARC. In the
    prepared statement you say that AARC does not expect the funded
    companies to generate positive cash flow until their fifth or sixth
    year. Will any of the remaining 59 projects mature to their fifth or
    sixth year in fiscal year 1997 and 1998?
        Answer. The AARC Corporation's Board of Directors seeks to have a
    portfolio with companies at various levels of maturity. Thus, there
    should be a continuous flow of return into the Corporation's revolving
    fund, as opposed to periodic waves. The investments made in the
    earliest days of the Corporation--when it was called the Center--were
    primarily made in companies that were still in the Research and
    Development (R&D) phase of growth; the time of repayment was at least
    five to six years in the future. More recent investments have focused
    on companies that are in the pre-commercialization phase; the repayment
    horizon is shorter. As the portfolio grows and the mix of companies
    stabilizes, with an appropriate number running the gamut from those in
    the R&D phase to those in full production, there should be a constant
    number-probably two or three-per year reaching a positive financial
    position.
        Question. What level of payments do you expect to receive from
    companies in fiscal year 1997 and 1998?
        Answer. The current business plan, under which the Corporation is
    operating, anticipates relatively constant repayments of $100,000 in
    each of fiscal year 1996 and fiscal year 1997. The business plan
    projects an increase in repayments to $200,000 in fiscal year 1998.
    Major gain in repayments is not anticipated until fiscal year 1999. The
    business plan also takes into account an annual growth rate of
    approximately 4.3 percent in unrealized gains in value of AARC's stock
    holdings. Major equity options are eligible to be exercised beginning
    in fiscal years 1999 and 2000.
        Question. Section 729 of the 1996 Farm Bill includes a provision
    that allows Federal agencies to establish set-asides and preferences
    for products commercialized with the assistance of AARC. What sort of
    products will the Federal agencies be able to use?
        Answer. Almost the entire portfolio of products could be utilized
    by the Federal government. For example, the U.S. Postal Service (USPS)
    is constructing ``green'' buildings around the country. One facility
    now being constructed near Dallas, Texas, will utilize compressed wheat
    straw walls produced by Agriboard Industries in nearby Electra, Texas.
    We believe other AARC-supported construction materials may also be used
    in that building.
        The USPS has also contracted with Gridcore Systems International
    (GSI) to produce trash cans for use in post offices. The source of the
    raw materials used to make the strong, lightweight honeycomb panels for
    the trash cans is undeliverable bulk mail. We support the way the USPS
    has endorsed environmentally-friendly building products from the AARC
    Corporation. We are still talking with USPS about using other products
    in the AARC Corporation portfolio in their course of business.
        Gridcore has supplied samples and is also talking with Unicor, part
    of the Prison Industries Program, about making furniture.
        Discussions are currently underway with the Pentagon and several of
    the AARC building material suppliers to provide material to renovate
    and ``green'' the Pentagon. Use of AARC materials in this multi-year
    project could have a major positive impact on these companies.
        Phenix BioComposites produces Environ from soybean meal and waste
    newspaper. It is a replacement for hardwood and looks like granite. The
    Natural Resources Defense Council (NRDC) used Environ for the counter
    tops and work surfaces in its new headquarters built last year, in
    Washington, DC.
        PrimeBoard uses 100 percent wheat straw to produce Wheat Board, a
    particle board replacement. This product is being widely used for
    manufacturing cabinets, furniture, and millwork. NRDC's counter
    underlayment is from PrimeBoard and its cabinets are also made from
    Wheat Board.
        Seed-based Lubricants.--International Lubricants Inc. (ILI)
    produces a line of biodegradable seed-based lubricants--everything from
    transmission additives, to all purpose lubricants, to two-cycle oil to
    industrial lubricants. Although the seed-based lubricants are
    environmentally preferable, these petroleum replacements face stiff
    competition from the existing petroleum-based products. In spite of the
    competition, some sales to the U.S. Air Force have taken place.
    Vegetable oil based lubricants could also be used with weapons and in
    the engines of high-performance vehicles.
        The Leahy-Wolf Company uses canola oil as a lubricant for concrete
    forms. As the Federal government continues to build new buildings and
    renovate old ones, or pours cement in environmentally-sensitive areas
    (bridges over waterways for instance), this product may be specified.
        Other Fluids.--Windshield washer fluid produced by Aquinas
    Technologies that is made from ethanol would seem to be a natural for
    all vehicles.
        Absorbents.--There are several products in the AARC portfolio which
    will help clean up oil spills. Low value wool from Hobbs Bonded Fibers
    has been purchased for use at military bases in Texas to catch and hold
    petroleum drips from vehicles. Two other products show great promise in
    remediating hydrocarbons. One is Oil Gator, the Product Services
    Marketing Group, which is made from cotton seed lint. It has been used
    to remediate spilled petroleum. Kenaf core can also be used to absorb
    and remediate hydrocarbons. These products can be used to clean up
    spills from existing contaminated sites, not just new spills. As
    military properties are being cleaned up, these products are likely to
    be considered.
        Filter Material.--Scientific Ag Industries makes activated carbon
    made from peanut hulls. These products can be used in water and air
    filtration systems and can also be used to remediate soils. It's also
    cheaper and of better quality than imported materials.
        Soil Amendments.--Many military bases are located in places with
    poor soil conditions. Biorecycling Technologies, Inc. is currently
    working with the Marine Corps Ground Combat Center at Twenty Nine
    Palms, California, to improve soil conditions in the military housing
    area, the golf course, and recreation sites, using a variety of
    fertilizers and soil amendments derived from cow manure.
        Earthgro Incorporated makes a variety of potting mixes utilizing
    plant and animal wastes. These can be used with interior potted plants
    and exterior plantings as an ideal substitute for peat, a finite and
    imported material, and petroleum-based fertilizers.
        Cleaners.--The AARC Corporation has invested in a number of
    environmentally-friendly cleaning products. Interchem Environmental
    produces a line of solvents from soybeans including graffiti remover,
    paving equipment, tar remover, and cleaners for printing presses.
        Shadow Lake makes Citra-Solv, a multi-purpose cleaner made from a
    powerful citrus extract, along with a number of other natural
    products--castile soap from essential oils and Air Scense, an air
    freshener from essential oils, which absorbs odors.
        MM Manufacturing produces waterless hand cleaner from corn oil.
        Tree-Free Paper.--KP Products uses kenaf, an annual fiber plant, to
    produce tree-free, chlorine-free paper.
        Starch-based Plastics.--Several AARC-supported companies produce a
    variety of coatings and films from vegetable starch. For instance,
    StarchTech makes biodegradable packing peanuts, which replace similar
    petroleum-based products.
        Forestry Materials.--Indian Creek Mesquite coats mesquite wood
    chunks with vegetable based paraffin in a ``Light The Bag''
    application. No starter fluid is necessary. We can report that sales of
    this product are brisk in USDA's employee-owned store located in the
    sub-basement of the South Building.
        Cat Litter.--BioPlus Incorporated products biodegradable, flushable
    cat litter from peanut hulls. SSM Environmental Technologies Inc. uses
    corn stover, a post harvest residue, as its base to also produce an
    environmentally-friendly cat litter.
        Question. Have any agencies established procedures for the purchase
    of these products?
        Answer. No. USDA's Procurement Policy Division is currently working
    to amend the Agricultural Acquisition Regulations (AGAR) to reflect the
    new procurement preference. Resource managers and contracting officers
    within USDA will be trained on using the AARC preference. At the same
    time, USDA procurement officials are working to present a case to amend
    the Federal Acquisition Regulations (FAR) which govern purchases by the
    entire Federal government. Ten years after companies are funded by the
    AARC Corporation, their procurement preference ends. The preference
    ends even for those companies that repay AARC ahead of schedule. The
    first group of companies was funded in 1993, therefore, only six years
    are left on their procurement preference.
                             rural housing service
                          rural housing service loans
        Question. The fiscal year 1997 proposed subsidy rate proved to be
    too low for rural housing loans. Thus, the fiscal year 1997 budget
    authority proposal of $1 billion for the section 502 program was
    inaccurate and in turn the actual program level for fiscal year 1997
    was $585 million. Interest rates have just been raised by the Federal
    Reserve. If these rates are in effect at the beginning of fiscal year
    1998, how much lending authority will be available based on the fiscal
    year 1998 subsidy appropriation request of $128 million?
        Answer. If the April 14, 1997 Treasury discount rate of 7.19
    percent is used to compute a new subsidy rate for the section 502
    program, the result is a 16.51 percent subsidy rate. Based on the
    fiscal year 1998 budget authority of $128.1 million and a new subsidy
    rate of 16.51 percent, the program level would be $775.9 million.
    However, the forecasted rate of 6.16 percent is still the
    Administration's assumption, and we anticipate a sufficient loan level
    in the 502 programs.
        Question. Because of interest rate changes in the economy, the
    Secretary used monies from the Fund for Rural America to increase the
    fiscal year 1997 program level by $141 million for section 502 direct
    single family housing loans. With the additional money allocated from
    the Fund for Rural America, how many loans will be made in fiscal year
    1997?
        Answer. With the additional money received from the Fund for Rural
    America, approximately 11,000 Section 502 Direct Single Family Housing
    loans will be made in fiscal year 1997.
        Question. The budget indicates that the Administration has
    ``increased its commitment to the mutual self help technical assistance
    grant program.'' What does the agency mean by the statement ``increased
    its commitment?''
        Answer. In fiscal year 1996 there were 58 grants funded in a total
    of 26 States. The requests for technical assistance funding is ever
    increasing to help assist very low to low income families seeking
    affordable housing through the mutual self-help method. The requests
    for technical assistance in fiscal year 1997 far exceed our supply of
    funds, with 41 states requesting to fund over 113 grants. However,
    there were 26 other grant requests that totaled over $4.4 million that
    we could not expect to fund. There is a tremendous demand for rural
    Americans to obtain housing through the self-help method and this
    demand is evident by the requests of non-profit organizations seeking
    technical assistance funds.
        Question. How much money has been earmarked for technical
    assistance from the appropriated fiscal year 1997 program level plus
    the monies from the Fund for Rural America?
        Answer. There were $26 million provided specifically for this
    program in fiscal year 1997. We believe this level will enable us to
    meet program goals and none of the Funds for Rural America are planned
    for this purpose.
        Question. How much money is earmarked for technical assistance in
    the proposed fiscal year 1998 program level?
        Answer. In fiscal year 1998, we planned to maintain the $26 million
    program level under the rural housing assistance grant program.
        Question. How many unsubsidized guaranteed single-family housing
    loans will be available from the fiscal year 1998 proposed program
    level of $3 billion?
        Answer. The fiscal year 1998 proposed program level of $3 billion
    will provide approximately 42,360 guaranteed unsubsidized single-family
    loans.
        Question. What is the status of the interim final regulations for
    section 515 housing loans?
        Answer. The interim final rules have been submitted to the office
    of the Federal Register and we expect these regulations to be published
    on or about May 7, 1997.
        Question. The fiscal year 1998 budget requests $30 million for the
    program level and a subsidy level of $10 million for housing repair
    direct loans. This is a decrease from the fiscal year 1997 program
    level of $30.3 million and subsidy level of $6.9 million. The
    Administration states that it is ``essentially maintaining'' the fiscal
    year 1997 levels and the proposed fiscal year 1998 level will enable
    the Rural Housing Service to provide assistance to 5,620 families. How
    many families will be assisted with the fiscal year 1997 appropriated
    levels?
        Answer. Approximately 5,580 families will be assisted with fiscal
    year 1997 appropriated funds for Section 504 Housing Repair Loans. The
    subsidy level for fiscal year 1997 is $11.081 million, not $6.9
    million, provides a loan level of $30.251 million for fiscal year 1997.
    We have requested $10.3 million in budget authority for fiscal year
    1998 to have program authority of $30 million, which is approximately
    the same loan level.
        Question. How much of the proposed fiscal year 1998 budget request
    for direct farm labor housing loans and grants will be used for
    rehabilitation of existing USDA farm labor housing units?
        Answer. The Agency has identified a need for approximately $25
    million in rehabilitation for older farm labor housing facilities. A
    review of the labor housing portfolio revealed that most health and
    safety needs have been met and the predominant need is for replacement
    of obsolete units and upgrading older complexes. The Agency estimates
    that $5 to $8 million will be needed from fiscal year 1998 funds for
    this purpose, the balance coming from loans and grants in subsequent
    years, internally generated reserve funds, and leveraged funds as
    repairs and replacement units are phased in over time to avoid tenant
    displacement.
                           rental assistance program
        Question. The Administration's request for fiscal year 1998
    proposes $593 million for the rental assistance program, an increase of
    $69 million over the fiscal year 1997 level. The proposal states that
    during fiscal year 1998 the budget will provide $52.5 million of rental
    assistance to replace 3,665 units of expiring section 8 units in
    section 515 projects and that this is a funding shift from HUD to USDA.
    The explanatory notes also state that RHS will not be able to provide
    any additional ``servicing'' rental assistance at the proposed program
    level. (Servicing rental assistance helps very poor communities to rent
    to people who receive rental assistance.) Is the proposal to use USDA
    rental assistance to replace expiring section 8 units ``budget driven''
    or will it assist the Rural Housing Service to better satisfy the
    rental assistance renewal contracts for its customers? Does this
    proposal require authorizing language?
        Answer. While this proposal will save the Federal government money,
    it was initiated to provide a more secure source of tenant subsidy for
    borrowers and very-low income tenants dependent on project based deep
    tenant subsidy, and reduce administrative burden and cost for the
    borrower, HUD and USDA.
        USDA rental assistance (RA) is funded in five year increments,
    while HUD tenant subsidy is funded annually. The tenants, borrowers and
    RHS are all better served under a more reliable source of deep tenant
    subsidy. When the transition is made, borrowers will be subject to only
    one set of federal regulations. This will reduce operating burden and
    cost, and it will also allow more common sense approaches to project
    operations. In addition, replacing Section 8 rental assistance with RHS
    rental assistance will result in an overall cost savings for the
    government because the RHS rental assistance program uses a
    reimbursement structure based on project budgets to pay subsidy, which
    is different from the contract rent structure used by HUD, which
    includes automatic annual adjustments. For example, using RHS budget
    approval requirements will allow rents artificially inflated through
    automatic annual adjustments to be brought back down to reasonable
    levels.
        Additionally, we have been advised that no change in authorizing
    language is needed to implement this proposal.
        Question. How will the agency use the difference, $6.8 million,
    after the $52.5 million is used to replace the units of expiring
    section 8 in section 515 projects? Could this money be used for
    ``servicing'' rental assistance?
        Answer. Once the 52.2 million is accounted for, that leave 16.8
    million of the 69 million over the fiscal year 1997 level for RA. Any
    RA funds not needed to renew expiring USDA rental assistance or HUD
    Section 8 contracts could be used for servicing existing projects among
    other purposes such as new construction RA.
        Question. Please explain in detail the Administration's proposal
    for the RHS to provide rental assistance to replace the expiring HUD
    section 8 contracts. Why did USDA, HUD, and OMB decide that USDA could
    best meet the needs of these projects?
        Answer. After reviewing a number of options, USDA, HUD and OMB
    decided this approach offered the best combination of continued service
    to the public, reduction in subsidy cost, control of operating costs
    and reduction of administrative burden.
        As Section 8 contracts expire, borrowers will be provided with USDA
    rental assistance contracts. To obtain rental assistance, borrowers
    will sign an RHS interest credit agreement which requires them to
    operate on a limited profit basis.
                   reduced government costs/budget authority
        The government will save money by eliminating Housing Assistance
    Program (HAP) contract requirements that create higher rents through
    ``automatic'' annual rent adjustments. RHS project rents increase only
    when RHS approves each project's operating costs using a zero based
    approach.
        By 2005, all the Section 8 contracts in USDA projects would be
    converted to USDA RA contracts, provided that Congress accommodates the
    adjustments that need to be made in the 602(b) allocations for both the
    Agriculture, Rural Development, and Related Agencies and VA, HUD and
    Independent Agencies Subcommittees. For fiscal year 1998, the HUD
    allocation should be reduced by the amount it would cost to renew the
    expiring Section 8 contracts for one year, or $20 million, while the
    amount allocated for USDA 5-year RA contracts should increase by $52
    million. While the net budget authority required for this conversion is
    greater in the near term, because 5-year RA contracts are replacing 1-
    year Section 8 contracts, after three years there are significant
    savings in the budget authority needed to maintain these units with RA.
    Net savings from the conversion of all 46,000 units would be an
    estimated $291 million over eight years.
        RHS RA is less expensive. Cost savings are due to the differing
    agency approaches for determining the amount of the contracts; rental
    subsidy upon their renewal. RA contracts are increased based on a
    determination of project costs. The HAP contracts are by law and
    regulation automatically increased through the application of HUD's
    Annual Adjustment Factor, which in past years led to rents in excess of
    the market rents for the area. As an example, the estimated cost over
    five years for one unit of Section 8 assistance USDA rental housing
    would be $26,829. In contrast, the five-year cost of a USDA RA contract
    is estimated to be $14,324. Therefore, over five years, renewing the
    3,665 Section 8 units as RA would cost $52 million versus $98 million
    if renewed as Section 8 contracts, resulting in five-year savings of
    $46 million.
        Project operating costs will be reduced. Section 515 program
    borrowers with Section 8 units are currently subject to both HUD and
    USDA administrative requirements. Our analysis shows that management
    fees and expenses can be reduced by $2 per unit per month by
    eliminating HUD administrative involvement in these projects. By 2005,
    savings to project owners/operators would be approximately $1 million a
    year as a result of eliminating duplicative federal agency oversight.
    These cost savings would further reduce projects' rental assistance
    needs, because rental assistance is based on project operating costs.
        Summary of cost savings:
        There are two forms of savings, budget authority and outlays.
        The conversion from section 8 to Rental Assistance results in a
    savings to HUD's fiscal year 1998 Budget and an increased cost to
    Agriculture's. The cost is made up of two elements, 1) Interest Credit,
    which is an ``off-budget'' cost that is paid out of the Rural Housing
    Insurance Fund; 2) Rental Assistance, which is an ``on-budget'' cost
    that must be appropriated currently.
        Additionally, we are switching from one-year section 8 HAP
    contracts to five-year Rental Assistance contracts. This timing
    difference creates a cost up front that is recaptured over time.
        The net savings to the government, including both interest credit
    and Rental Assistance (off and on-budget), on average, over a 10 year
    period amounts to $25.4 million per year.
        The net savings to the government from a budget authority
    standpoint total $291 million from 1998 to 2005.
                         reduced administrative burden
        In addition to the significant cost savings, we see this proposal
    dramatically reducing the administrative burden on Section 8/515
    borrowers and Agencies. Currently, borrowers must follow both RHS and
    HUD requirements, submit reports to both Agencies, and find ways to
    resolve conflicting requirements. If this proposal is implemented,
    borrowers will be subject to only RHS regulations.
        The Federal government will also see its administrative burden
    reduced. HUD will no longer be required to regulate an entire category
    of Section 8 assistance, namely the Part 884 Section 8. RHS, HUD and
    borrowers will no longer be required to resolve frequent jurisdictional
    questions. No changes to RHS procedures should be needed to convert HUD
    Section 8 tenants to RHS RA. We anticipate that burden on tenants will
    not increase under this proposal. The only change tenants will see is
    that their certification will be completed on an RHS form.
        Question. If this budget proposal is not included and section 8
    contracts under rural rental assistance are not absorbed by RHS, will
    HUD then treat these contracts the same as all other section 8
    contracts coming due?
        Answer. We expect that HUD would treat these the same. RHS has an
    interest as the holder of the mortgage that these projects could fail
    if the contracts are not renewed or the contracts are replaced with
    vouchers or certificates. We would anticipate that any solution used by
    HUD will be more expensive in the long run than converting the subsidy
    to USDA rental assistance.
        RHS would be concerned if tenants were required to convert to
    tenant based vouchers or certificates. Rural housing markets do not
    offer as many choices as urban and suburban markets. In many rural
    communities, Section 515 housing may not only be the most affordable
    and best maintained rental housing, but the only rental housing. In
    addition, many rural Public Housing Authorities (PHA's) who administer
    HUD vouchers and certificates do not have the delivery system to
    provide an appropriate level of service for rural residents to secure
    and administer vouchers or certificates.
        If vouchers and certificates are not provided, existing tenants and
    projects will be forced into the non-subsidized housing market.
    Difficult non-subsidized market may force displaced tenants into sub-
    standard housing or homelessness. Borrowers will be placed in the
    impossible position of operating low income housing without being able
    to offer rents that eligible tenants can afford. Borrowers will simply
    not be able to operate their projects for the remaining thirty years of
    their fifty year loan.
        We suggest that the solution must be ``project based'' to allow
    projects and tenants to at least retain their current position in the
    housing market. We feel that USDA rental assistance offers the best
    option in project based assistance.
                  rural housing assistance grants (rha grants)
        Question. The Administration's proposes to fund all the rural
    housing grant programs in one account. It also proposes that all
    obligated and unobligated balances available from prior years for all
    housing grants be rolled into this account. Please list all obligated
    and unobligated balances available from prior years for each housing
    grant program.
        Answer. The requested appropriation language that would transfer
    both obligated and unobligated balances from prior years for all RHA
    grant programs from their current accounts to the RHA grant account
    would have no impact on grant making activity, it is only a change to
    simplify the accounting activities for carrying out these 6 RHS grant
    programs under one program account. This change would expedite the
    process of making funds available from recovered unobligated balances
    and would reduce the cost of and expedite the process of changing the
    computer systems. It would also reduce the administrative burden of
    reporting program account data to Treasury.

            Fiscal Year 1996 carryover for rural development programs

                                                            Budget authority
            Grant Programs                                  carryover amount
    Sec. 504 very low-income housing repair grants................  $132,806
    Sec. 504 very low-income housing repair grants, natural
        disaster..................................................   765,690
    Sec. 523 mutual and self-help housing grants..................     9,872
    Sec. 516 rural housing for domestic farm labor grants.........    64,125
    Sec. 509 compensation for construction defects grants......... 1,894,376
    Sec. 525/509 supervisory and technical assistance grants...... 1,731,394

        Question. This proposal combines programs that are allocated by
    formula, like home repair grants, with programs that are allocated
    based on demand, like self-help housing and farm worker housing grants.
    Section 516 farm labor housing grants are not needed in all 50 states,
    yet the proposed Rural Housing Assistance Grant (RHAG) program would
    allocate the funds appropriated to this account across all 50 states.
    Please explain in detail how the agency will allocate these funds for
    each grant program included in RHAG.
        Answer. RHS and the Administration anticipates providing
    flexibility on the state level between the 504 and Housing Preservation
    Grant Programs. This will allow state directors to meet the specific
    needs of rural communities. The Farm Labor grant activity is
    concentrated in certain agricultural states. This program works
    directly in conjunction with the Farm Labor Loan Program. The
    Administration anticipates that the funding will be administered from
    the National Office with flexibility provided to meet the need for
    these specific areas. Additionally, the Administration is moving
    forward to replace the current funding system of ``first come-first
    serve'' to a Notice of Funding Availability (NOFA) process. The Mutual
    Self Help Grant activity has expanded tremendously in the last few
    years across the rural America. The Administration anticipates to fund
    this program out of the National Office to ensure small communities
    and/or states with little or no activity have the opportunity to
    participate.
        Question. Why don't more states, like Georgia and Alabama, that
    have a need for farm labor housing currently participate in this grant
    program?
        Answer. The Agency has made specific strides through our technical
    assistance contractors to provide farm labor housing in underserved
    areas with demonstrated need. These efforts include working with local
    communities to develop sponsorships for farm labor housing.
    Additionally, the majority of Farm Labor grants are provided in
    conjunction with the Farm Labor loan program. The mixture of the loan
    and grant combination is limited to non-profits and governmental
    bodies. On-site farm labor projects where the farmer or owner provides
    farm labor housing through RHS is strictly limited to the loan program.
    Many states in the South have a history of on-site farm labor housing.
    We will continue to work with states such as Georgia and Alabama to
    ensure communities have the opportunity to provide needed farm labor
    housing.
                             rural housing service
        Question. What is the estimated number of Americans living in
    inadequate housing today?
        Answer. In the December 1996 publication titled, The State of the
    Nation's Rural Housing in 1996, the Housing Assistance Council
    indicated seven percent of all rural households (2.5 million) and 8
    percent of central city households (2.4 million) were in inadequate
    housing. This is compared to only 4 percent (1.2 million) of suburban
    households that were classified as inadequate.
        Question. The President's 1998 budget request proposes an
    authorization of a $100 million for graduating direct loan borrowers
    into the guaranteed program, at an appropriated subsidy cost of only
    $20,000. What is the status of this legislative proposal?
        Answer. The Department is in the final clearance process and we
    expect to transmit this legislative proposal to the appropriate
    Congressional Committees in the near future.
        Question. How many estimated direct Section 502 borrowers would
    benefit from this proposal?
        Answer. It is estimated that approximately 3,280 borrowers would
    benefit from this proposal based on refinancing an average loan balance
    of $30,500. These borrowers can be generally characterized as
    nonsubsidized, high interest rate (10 to 13 percent) borrowers or
    borrowers who receive minimal subsidies but still pay above current
    market rates.
                             salaries and expenses
        Question. The prepared testimony states that the Rural Housing
    Service will have a savings of $250 million because of the efficient
    changes brought about by automation and centralization. This savings
    will be a result of reduction in staff over five years. For the record,
    please provide the dollar and staff year savings by fiscal years (1996-
    2000).
        Answer. I would be happy to provide that information for the
    record. However, I should point out that not all of the savings comes
    from a reduction in FTE's. The majority of the savings comes from
    mandatory accounts associated with reduced amounts of real estate taxes
    the agency has to voucher annually and reduced losses on defaults and
    foreclosures. I will submit a table outlining the estimated net savings
    for the years fiscal year 1996 through fiscal year 2000 which total
    $249.2 million. This table reflects the original plan for the reduction
    of 220 FTE's on October 1 1996, followed by reductions of 300 on April
    1, 1997 and 80 on October 1, 1997. This plan was not carried out
    because of the implementation of the voluntary separation authorized by
    the Appropriations Act for 1997, however the results are the same in
    terms of FTE reductions for fiscal year 1997.
        [The information follows:]

                                                           900 FTE'S REDIRECTED, 220 REDUCED 10/1/96, 300 ON 4/1/97, 80 ON 10/1/97 (600 TOTAL)
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                Fiscal year--
                              Saving category                          -----------------------------------------------------------------------------------------------------------------------------
                                                                              1996              1997              1998              1999              2000              2001              2002
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    Escrow value......................................................  ................       $2,902,734       $12,480,827       $14,884,160       $13,218,669       $13,035,242       $13,405,993
    Savings on tax vouchering.........................................  ................        4,723,422        11,397,333        20,227,345        20,227,345        20,227,345        20,227,345
    Reduced default and foreclosure costs.............................       $3,281,040         9,037,448         5,550,271        28,786,762        45,890,338        63,424,864        68,886,097
                                                                       -----------------------------------------------------------------------------------------------------------------------------
          Total mandatory.............................................        3,281,040        16,663,605        29,428,432        63,898,266        79,336,352        96,687,450       102,519,435
                                                                       =============================================================================================================================
    PLAS nonpersonnel operating expense  avoided......................        4,208,899         4,351,166         7,358,717         7,505,891         7,656,009         7,809,129         7,965,311
    DLOS nonpersonnel installation/conversion/operating expense.......      (16,716,000)      (14,118,210)      (11,532,047)      (11,647,023)      (11,763,148)      (11,880,434)      (11,998,894)
    FTE reductions planned............................................  ................       24,510,000        34,200,000        34,200,000        34,200,000        34,200,000        34,200,000
    DLOS-related administrative expenses..............................       (3,279,854)       (2,474,010)        1,668,335         1,700,783         1,733,231         1,733,231         1,733,231
    Non-DLOS relocation and severance costs...........................  ................       (3,522,000)      (31,698,000)  ................  ................  ................  ................
                                                                       -----------------------------------------------------------------------------------------------------------------------------
          Total discretionary.........................................      (15,786,955)        8,746,947            (2,996)       31,759,651        31,826,092        31,861,926        31,899,649
                                                                       =============================================================================================================================
          Total.......................................................      (12,505,915)       25,410,552        29,425,436        95,657,918       111,162,444       128,549,376   ................
                                                                       =============================================================================================================================
    Total mandatory 97-2001...........................................      286,014,105   ................  ................  ................  ................  ................  ................
    Total discretionary 97-2001.......................................      104,191,620   ................  ................  ................  ................  ................  ................
                                                                       -----------------------------------------------------------------------------------------------------------------------------
          Total 97-2001...............................................      390,205,725   ................  ................  ................  ................  ................  ................
                                                                       =============================================================================================================================
    Total mandatory 97-2000...........................................      189,326,655   ................  ................  ................  ................  ................  ................
    Total discretionary 97-2000.......................................       72,329,694   ................  ................  ................  ................  ................  ................
                                                                       -----------------------------------------------------------------------------------------------------------------------------
          Total 97-2000...............................................      261,656,349   ................  ................  ................  ................  ................  ................
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

        Question. For the record, please provide the staff years and
    savings associated with each of the seven phases of implementation for
    the conversion of the Rural Housing Service loan portfolio.
        Answer. Regarding the second part of your question, I will submit
    for the record a table which shows the conversion to DLOS for each
    State in the seven conversion phases. The table reflects a planned
    total reduction in staffing of 888 FTE's which is a combination of the
    reductions attributable to DLOS and the reductions attributable to the
    revised streamlining targets established for Rural Development in the
    President's Budget. As you are aware the request for salaries and
    expenses reflects a reduction of $15.5 million, in discretionary
    savings, associated with the implementation of DLOS.
        [The information follows:]

                                                                   ESTIMATED/ACTUAL \1\ FISCAL YEAR 1997 STATE FTE EMPLOYMENT BY MONTH
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                                                     FY 1997 SYs
                                                           FY 1996                                                                                                             ---------------------
                                                           EOY FTE  Oct \1\  Nov \1\  Dec \1\  Jan \1\  Feb \1\  Mar \1\  Apr \1\    May      Jun      Jul      Aug      Sep                  Rev.
                                                             empl                                                                                                               Projected   ceiling
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    Alabama..............................................      181      179      175      166      164      161      161  \2\ 160      152      152      152      152      152      161.2      159.5
    Alaska...............................................       28       29       29       30       28       29       29       30       30       30       30       30   \2\ 30       29.3       30.0
    Arizona..............................................       85       82       82       79       77       77       75   \2\ 74       72       72       72       72       72       75.9       75.5
    Arkansas.............................................      199      198      197      182      177      176      177      173      173  \2\ 169      165      165      165      177.3      174.8
    California...........................................      171      168      166      161      158      156      155      154      153      153  \2\ 153      153      153      157.3      159.2
    Colorado.............................................       74       72       72       69       66       65       66       66       66       66   \2\ 65       64       64       67.1       68.2
    Delaware/Maryland....................................       74       75       72       68       66       67       68       68       68       68       68   \2\ 65       65       68.4       69.9
    Florida..............................................      141      137      137      131      129      128      128      125      124  \2\ 124      124      124      124      128.3      127.4
    Georgia..............................................      204      198      196      184      178      176      174  \2\ 170      170      170      170      170      170      177.7      175.8
    Hawaii...............................................       60       60       59       58       58       58       58       59       59       59   \2\ 59       59       60       58.6       58.8
    Idaho................................................       88       88       88       84       83       82       81       81       81       80   \2\ 80       80       80       82.5       86.8
    Illinois.............................................      158      156      156      149      148      149      148      146      146      145      145      145  \2\ 139      148.5      150.4
    Indiana..............................................      135      131      131      122      119      119      119      119      118      117      117  \2\ 117      118      121.0      121.2
    Iowa.................................................      162      161      161      154      148      146      145      142      142  \2\ 142      143      144      145      148.0      150.2
    Kansas...............................................       85       85       86       85       84       83       85       84       84       84   \2\ 80       80       80       83.5       85.5
    Kentucky.............................................      171      171      167      159      160      160      154      153      151      150      150  \2\ 145      145      156.4      152.1
    Louisiana............................................      149      148      147      142      140      138      137      134      134  \2\ 130      128      128      128      137.0      136.7
    Maine................................................      114      113      113      104      102      102      101       99       99       99       98   \2\ 98       98      102.5      104.7
    Massachusetts/Connecticut/Rhode Island...............       79       77       77       73       73       71       71       70       70       69       69   \2\ 69       69       71.8       73.0
    Michigan.............................................      178      175      171      161      156      147      151      150      150      150      150  \2\ 150      151      155.5      157.7
    Minnesota............................................      132      131      130      131      129      129      126      126      126      126  \2\ 125      125      125      127.6      130.6
    Mississippi..........................................      345      344      342      323      314      314      312      312      311      310  \2\ 284      257      258      311.2      291.8
    Missouri.............................................      193      191      187      177      174      171  \2\ 169      167      169      171      173      175      177      175.1      175.7
    Montana..............................................       66       64       62       58       57       56       55   \2\ 55       55       55       56       57       58       57.2       59.5
    Nebraska.............................................       93       92       90       87       85       85       84   \2\ 84       79       79       79       79       79       83.7       80.9
    Nevada...............................................       28       27       28       30       30       30       30   \2\ 30       30       30       30       30       30       29.4       30.0
    New Jersey...........................................       68       66       66       66       64       64       64       64       64       63       63   \2\ 58       58       63.9       65.0
    New Mexico...........................................       70       70       68       70       70       68       65       65       64       64   \2\ 62       62       62       66.2       66.1
    New York.............................................      157      154      152      142      139      138      135      134      134      134      134  \2\ 134      135      139.2      143.0
    North Carolina.......................................      296      298      294      273      267      265      262      261      253      247      245      244  \2\ 230      264.4      262.9
    North Dakota.........................................       72       71       73       72       72       72       72       69       69       69       69       69   \2\ 65       70.6       71.0
    Ohio.................................................      146      142      139      133      129      126      126      125      125      125      125  \2\ 125      127      129.0      135.5
    Oklahoma.............................................      134      133      133      118      117      116      113  \2\ 111      110      110      110      110      110      116.4      116.0
    Oregon...............................................       92       92       91       92       92       93       92   \2\ 87       87       87       87       87       87       89.6       92.4
    Pennsylvania.........................................      160      155      154      148      147      146      145      144      144      144      143      143  \2\ 132      146.7      141.9
    Puerto Rico..........................................      136      138      141      138      137      133      130      130      129      129      129      129  \2\ 108      132.9      136.2
    South Carolina.......................................      191      184      178      164      159      158      156      155      156      157      158      159  \2\ 159      162.3      175.0
    South Dakota.........................................       89       86       86       83       83       82       82       81       81       80       80       80   \2\ 79       82.1       81.2
    Tennessee............................................      209      212      209      196      192      192      190      190      185      182      181      180  \2\ 170      191.6      192.6
    Texas................................................      256      256      250      232      227      227      223      222      220  \2\ 218      216      217      217      228.0      221.8
    Utah.................................................       64       61       61       60       60       59       60   \2\ 58       53       53       53       54       54       57.6       57.1
    Vermont/New Hampshire/Virgin Islands.................       92       90       89       81       78       78       79       79       79       78       78       78   \2\ 77       80.6       81.1
    Virginia.............................................      181      178      176      153      145      143  \2\ 142      126      130      133      137      141      144      145.7     146.18
    Washington...........................................       91       87       84       83       82       81       79   \2\ 78       79       80       81       82       83       81.5       86.4
    West Virginia........................................      106      103      101      101      101      101      100      100       99       99       99       99   \2\ 95      100.2      105.2
    Wisconsin............................................      136      127      126      126      127      127      128  \2\ 128      124      124      124      124      124      125.7      132.0
    Wyoming..............................................       52       51       50       49       48       49       48   \2\ 48       47       47       47       47       47       48.3       49.6
                                                          ------------------------------------------------------------------------------------------------------------------------------------------
          State total....................................    6,194    6,108    6,046    5,746    5,639    5,590    5,550    5,483    5,440    5,424    5,384    5,352    5,298    5,614.6    5,644.0
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    \1\ Actual data.
    \2\ Month of conversion.

                            rural utilities service
                     electric and telecommunications loans
        Question. The fiscal year 1998 President's budget proposes an
    increase in direct electric loans. It states that the need for this
    increase is due to over two-thirds of Rural Utilities Service
    borrowers' electric distribution facilities having been in service for
    50 years or more. How many RUS borrowers' electric distribution
    facilities have been in service for 50 years or more and where are they
    located? How many loans can be made at the fiscal year 1998 request
    level?
        Answer. In the aggregate, the fiscal year 1998 requested electric
    loan levels are roughly equal to the fiscal year 1997 supportable
    levels. However, the fiscal year 1998 request would increase lending
    authority for direct hardship loans by $56 million from the fiscal year
    1997 supportable levels. The fiscal year 1998 request offsets the
    increase in hardship loan levels with a commensurate decrease in
    ``municipal'' rate lending from the fiscal year 1997 supportable
    levels.
        Current information indicates that about 90 percent of USDA RUS
    borrowers have some distribution plant that is in the 40 to 50+ year
    age range. About 65 percent (1.3 million miles) of distribution line
    contains components of this vintage. These facilities are spread across
    most of the Nation's rural areas. The attached table shows how much of
    this plant is located in each state. The table is ranked by the
    percentage of the national total of this vintage plant located in the
    state.
        The size of individual electric loans varies considerably depending
    on the amount particular borrowers request. At the funding level
    requested, the RUS would generally make loans to between 120 and 130
    rural electric distribution borrowers.
        [The information follows:]

                                                          MILES OF ENERGIZED LINE FOR ACTIVE BORROWERS
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                             Percent                          Percent
                                                                                  1945 num   of 1995               1955 num   of 1995               1995 num
                                                                     1945 miles    active   miles of  1955 miles    active   miles of  1995 miles    active
                                                                                 borrowers    line                borrowers    line                borrowers
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    AK.............................................................         116          2         2       1,172          6        21       5,551         13
    AL.............................................................      11,010         22        19      35,213         24        60      58,498         24
    AR.............................................................      10,372         17        16      38,208         19        59      64,663         19
    AZ.............................................................         635          3         4       4,263          9        27      15,992          8
    CA.............................................................       1,538          4        42       2,585          5        71       3,638          3
    CO.............................................................       7,571         19        13      30,816         23        54      57,267         23
    CT.............................................................  ..........  .........  ........  ..........  .........  ........  ..........  .........
    DE.............................................................       1,047          1        25       2,005          1        48       4,161          1
    FL.............................................................       4,242         15         8      18,930         15        34      55,485         15
    GA.............................................................      21,928         42        18      60,727         41        49     123,253         41
    HI.............................................................  ..........  .........  ........  ..........  .........  ........  ..........  .........
    IA.............................................................      30,749         53        48      55,815         52        88      63,645         46
    ID.............................................................       3,176          9        26       6,339          9        53      12,041          9
    IL.............................................................      21,879         28        48      44,580         27        98      45,614         24
    IN.............................................................      23,094         44        52      34,690         41        79      44,132         33
    KS.............................................................      10,080         22        16      53,520         36        87      61,782         34
    KY.............................................................        ,315         25        18      47,504         27        61      78,341         28
    LA.............................................................       8,024         15        21      23,146         14        61      38,120         12
    MA.............................................................  ..........  .........  ........  ..........  .........  ........  ..........  .........
    MD.............................................................       8,747          2        68       5,642          2        44      12,843          2
    ME.............................................................         477          4        27         905          5        52       1,740          3
    MI.............................................................       9,928         13        35      18,200         15        65      28,130         13
    MN.............................................................      32,917         50        30      78,463         53        71     101,477         49
    MO.............................................................      23,253         39        21      82,260         46        75     110,062         46
    MS.............................................................      15,665         23        23      50,921         26        73      69,434         22
    MT.............................................................       3,424         14         8      26,767         25        60      44,495         25
    NC.............................................................      12,911         33        17      40,003         34        53      76,034         28
    ND.............................................................       3,431          7         5      51,838         25        78      66,657         26
    NE.............................................................      12,833         23        38      56,065         36       168      33,437         17
    NH.............................................................       1,414          1        31       2,491          2        54       4,616          1
    NJ.............................................................         415          2        67         561          2        90         622          1
    NM.............................................................       1,535          8         4      19,078         17        48      39,832         17
    NV.............................................................         121          2         3         165          2         4       4,223          4
    NY.............................................................       2,733          6        95       1,719          5        60       2,885          4
    OH.............................................................      19,400         28        52      29,178         30        78      37,491         24
    OK.............................................................      15,676         23        17      59,668         27        65      91,675         26
    OR.............................................................       2,998         12        15       9,561         15        49      19,484         14
    PA.............................................................      10,400         13        40      16,252         13        62      26,068         13
    PR.............................................................  ..........  .........  ........         976          1         6      16,633          1
    RI.............................................................  ..........  .........  ........  ..........  .........  ........  ..........  .........
    SC.............................................................      11,351         23        19      31,211         24        52      59,451         22
    SD.............................................................       2,458          8         4      47,094         34        74      63,486         33
    TN.............................................................      12,358         30        17      42,928         28        58      74,122         25
    TX.............................................................      44,475         72        23     135,854         78        71     191,561         62
    UT.............................................................         754          4        13       1,822          5        32       5,773          5
    VA.............................................................       9,676         16        24      24,656         16        62      39,977         12
    VI.............................................................          52          1  ........  ..........  .........  ........  ..........  .........
    VT.............................................................       1,190          3        41       1,844          3        64       2,870          3
    WA.............................................................       6,360         21        67      11,813         17       125       9,488         11
    WI.............................................................      16,604         32        43      29,880         31        77      39,052         26
    WV.............................................................         548          2        71         570          1        74         771          1
    WY.............................................................       2,439         12         9      13,314         15        51      26,091         12
                                                                    ----------------------------------------------------------------------------------------
          US \1\...................................................     458,264        848        22   1,353,167        982        66   2,043,658        881
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    \1\ Includes Puerto Rico and Virgin Islands.
    Source: Annual Statistical Report, 1945, 1955, 1995.

        Question. The explanatory notes state that the ``Fiscal year 1998
    budget request would also provide the Administrator the ability to move
    subsidy budget authority among the electric programs * * *.'' Please
    explain how the President's proposed request provides the Administrator
    this capability, and why this flexibility is needed.
        Answer. The President's fiscal year 1998 budget request
    specifically proposes that the Administrator of RUS have the authority
    to move subsidy budget authority (BA) among the three electric loan
    programs and among the three telecommunications loan programs. It does
    not propose moving BA from the Electric Program to the
    Telecommunications Program or vice versa.
        In the Electric Program, those programs are the direct hardship,
    ``municipal'' rate and the guaranteed loans. In the Telecommunications
    Loan Program, they are the direct 5 percent (hardship) loans, the Cost
    of Money (Treasury Rate) loans and the guaranteed loans. The subsidy
    rate is considerably different for each of these programs and the
    demand for each of these programs varies from year to year. The ability
    to move budget authority among the different loan programs in each of
    the separate programs will allow us to vary the types and overall
    amounts of funding available consistent with demand while keeping the
    program cost constant.
        Question. The fiscal year 1998 budget request proposes a decrease
    in direct telecommunication loans of $35 million and an increase in the
    subsidy budget authority of $375,000. The budget states that the
    ``increase in projected subsidy rate for this program leads to the
    decrease in program level.'' This results in 5 less loans available to
    be made in fiscal year 1998. The Agency has a reported fiscal year 1997
    backlog of $51 million in hardship loans and expects the amount to
    increase to $98 million by the first of fiscal year 1998. Why is there
    an increase in the subsidy rate? Why is a decrease in the loan level
    being proposed when the backlog for direct 5 percent loans will only
    continue to grow?
        Answer. Direct 5 percent telecommunication loan interest rates are
    set by law at 5 percent. The subsidy rate increased from 1.59 percent
    in fiscal year 1997 to 3.92 percent in the 1998 President's Budget
    because interest rates increased from 1997 to 1998. It now costs the
    government more to subsidize these loans. The decrease in the loan
    level is a direct result of the increased subsidy rate. If the 1997
    loan level of $75,000,000 was maintained, the subsidy level for direct
    telecommunication loans would be $2,940,000 calculated at the 3.92
    percent subsidy rate.
        Question. Are the fiscal year 1998 loan assumptions reflecting the
    actual interest rates currently projected?
        Answer. The fiscal year 1998 subsidy rate for direct 5 percent
    telecommunication loans was based on the fiscal year 1998 President's
    Budget economic assumptions.
        Question. The Commerce Department's National Telecommunications and
    Information Administration announced winners of grants in its 1996
    Telecommunications and Information Assistance Program (TIAP) on
    September 19, 1996. Sixty-seven public institutions in 42 states were
    selected to receive $18.6 million in federal matching grants. These
    grants are used to bring together public and private sectors to improve
    and strengthen communities using advanced telecommunications
    technologies. Please distinguish this program from the RUS
    telecommunications programs.
        Answer. The NTIA TIAP for 1997 will focus on five areas: Community-
    Wide Networking; Education, Culture and Lifelong Learning; Health;
    Public and Community Services; and Public Safety. All awards are
    grants, and the money can be used for a wide variety of applications in
    all geographic areas. The USDA Distance Learning and Telemedicine Loan
    and Grant Program, focuses on different applications, different kinds
    of financial assistance, and applies solely to benefit rural residents.
    The USDA Distance Learning and Telemedicine Loan and Grant Program
    focuses on end-user equipment for interactive distance education,
    telehealth and training. The focus on end-user equipment complements
    the discounts in the Telecommunications Act of 1996 for
    telecommunications services used by all schools, libraries and rural
    health care providers. Those discounts do not include end-user
    equipment. The USDA Distance Learning and Telemedicine Loan and Grant
    Program provides a 100 percent grant, a combination loan and grant, or
    a 100 percent loan to help fund a program. Loans leverage budget
    authority tremendously, while grants are dollar for dollar. The grants
    are targeted to the most needy areas and loans to those providers who
    need assistance, but are more able to help pay from local or enterprise
    resources.
        The USDA Distance Learning and Telemedicine Loan and Grant Program
    focuses on the sustainability of projects to both prove-out and prime
    the pump for the use of telecommunications to address special rural
    education and health care needs. Finally, the USDA Distance Learning
    and Telemedicine Loan and Grant Program is only available to benefit
    rural residents who are challenged by the task of providing services to
    areas separated by great distances, comprised of small towns, or facing
    geographically difficult terrain. The TIIAP and the USDA Distance
    Learning and Telemedicine Loan and Grant Program complement each other.
        Question. The fiscal year 1998 budget request proposes $21 million
    for Distance Learning and Telemedicine grants. What is the backlog in
    funding requests versus available funding for the fiscal year 1997
    appropriation?
        Answer. Since RUS has not opened the application window for
    applicants to request fiscal year 1997 funding, no figures are
    available for actual fiscal year 1997 demand. However, past experience
    has shown that there is an overwhelming demand for distance learning
    and telemedicine grant funding. In fiscal year 1996 alone, where
    applicants only had a 45 day window in which to submit applications,
    and only grants were available, RUS received 150 financing requests
    totaling $38 million--only $7.5 million was available for the fiscal
    year. Since the first year in which the program had been funded, 1993,
    grant requests totaling more than $262 million from 858 applicants have
    been received; the total available funding over this period was only
    $35 million.
        Question. Will the fiscal year 1997 allocations for RUS hardship
    loans, municipal rate loans, and loan guarantees be adequate until the
    end of fiscal year 1997? When will the fiscal year 1997 funding run out
    for each of these categories?
        Answer. The fiscal year 1997 allocations for guaranteed electric
    loans will likely be adequate for requests in fiscal year 1997.
    However, the allocations for hardship and municipal rate electric loans
    will be exhausted by the end of the third quarter. We estimate a
    backlog of approximately $800 million for this type of financing going
    into fiscal year 1998.
        In the Telecommunications Program, loan levels for RUS cost of
    money loans, Rural Telephone Bank Loans, and RUS loan guarantees, $300
    million, $176 million, and $120 million, respectively, should be
    sufficient based on the number and amount of loan applications
    currently on hand. Regarding the Telecommunications Program's hardship
    loan program, a total of $58 million in hardship loans have already
    been approved this fiscal year out of the $75 million available. RUS
    currently has an additional $57 million in processed hardship
    applications on hand.
                              rural telephone bank
        Question. In the prepared testimony, you state, Madam Under
    Secretary, that by the end of the fiscal year 1998 the Rural Telephone
    Bank (RTB) will have sufficient internally generated funds to fully
    retire the government's remaining $574 million capitalization of the
    RTB. The Administration is working on legislation which would allow a
    fully private RTB to leverage its net worth in the private markets.
    What is the status of this legislation? Is passage of this legislation
    necessary to achieve privatization of the bank by the end of fiscal
    year 1998?
        Answer. The Office of Management and Budget has recently completed
    its review of the legislation and we are in the process of assessing
    their comments. We anticipate being able to transmit the package to
    Congress in the near future.
                             water 2000 initiative
        Question. In the prepared statement, Madam Under Secretary, you
    state that the Rural Utilities Service will continue its commitment to
    the Water 2000 Initiative. What are the annual goals that the agency
    has met since the inception of this program?
        Answer. Water 2000 focuses attention on the importance of safe
    drinking water to the overall public, economic and environmental health
    of rural areas. The goal of the Water 2000 initiative is to target the
    largest possible portion of the Federal investment in water projects to
    rural communities with the most serious quality and dependability
    needs. The RUS has not set aside a specific amount of funds from its
    regular Water and Waste Disposal programs appropriation to be used for
    Water 2000. However, the RUS has designated additional funds, such as
    the $36 million transferred from the WIC program in fiscal year 1996
    and, this year, using some dollars from the Fund for Rural America and
    Water and Waste Disposal National Reserve, specifically for Water 2000
    projects. In fiscal year 1995 and fiscal year 1996, the RUS invested
    over $351 million in poverty interest rate loans and $195 million in
    associated grants for 535 projects that met the goals of Water 2000.
        Question. What is the agency's long-term strategy for the Water
    2000 Initiative, and how will it address the backlog of applications
    for water and waste disposal loans and grants totaling over $4 billion?
        Answer. The Agency's long-term strategy for the Water 2000
    initiative and for addressing the backlog of water and waste
    applications will be based on the Strategic Plans prepared by all Rural
    Development State Directors, which set forth their goals and objectives
    through fiscal year 2002. The Strategic Plans assess the current needs
    and resources available in each State, and develop priorities based on
    that assessment.
        Other components include these activities:
        Develop better working partnerships with commercial lenders, state
    revolving loan funds, Community Development Block Grant funders and
    other sources of credit to attract more funding for rural water
    projects. This is happening actively in all states.
        Utilize the Rural Community Assistance Program and State Rural
    Water Associations to identify potential Water 2000 projects and to
    help community groups develop feasible, efficient, cost effective
    projects.
        Continue actively to promote a wide range of alternatives to
    drinking water problems including watershed protection measures, the
    use of individual and cluster wells, and multi-community regional
    approaches.
        Train Rural Development field staff to work hand-in-hand with local
    groups to help them find both Federal and non Federal financing
    solutions for their water needs.
        Streamline the Agency's regulations to allow easier access and to
    more effectively target resources toward the most needy communities. In
    fact, we anticipate that the streamlined Water and Waste loan and grant
    regulations will be published in the Federal Register by July 4.
        Question. Madam Under Secretary, you state that over 80 percent of
    the budget authority proposed for RCAP for fiscal year 1998 is to
    support the water and waste disposal loan and grant programs. How does
    this compare to your Water 2000 initiative goals for fiscal year 1998?
        Answer. The proposed fiscal year 1998 funding for the water and
    waste disposal loan and grant programs will allow the Department to
    make measurable progress toward the central goal of Water 2000. The RUS
    will give priority for funding in fiscal year 1998 to water projects
    that meet the Water 2000 goal.
        Question. The loan and grant regulations have provisions that allow
    a community to implement private well systems as a potable water
    source. In the Water 2000 action plans submitted from the regional
    offices to Headquarters contains very few, if any, projects that have a
    recommendation to implement private well systems. Are private well
    systems more cost effective than to build a public system in an area
    with scattered population? How is cost-effectiveness integrated into
    the decision making process to provide solutions?
        Answer. Cost effectiveness is always a priority. It has been the
    RUS' experience that the reason communities develop or expand public
    water systems is in response to inadequate ground water quantity or
    unacceptable ground water quality. The RUS generally believes that if a
    private well can be constructed at a reasonable cost with a sufficient
    quantity and quality of water, individual private wells may be the best
    solution. However, if well water is contaminated or of an undependable
    quantity, public water systems such as those financed under the RUS
    program would be an option that many communities would want to explore.
    The RUS can and does finance public systems that use wells which serve
    individual residences or businesses or wells that serve small clusters
    of users. Water and Waste Disposal funds must be used to finance public
    facilities--facilities owned and maintained by a public body, non
    profit organization, or Indian tribe. Individual home owners, farmers
    and ranchers, and business owners, if eligible, could access other
    programs to develop or improve an individual well. We would not expect
    to see many public systems being developed using individual wells as
    source water because individual owners could likely operate and
    maintain individual wells more efficiently than public operators.
        Question. How do the regional offices formulate their
    recommendations for potable water needs? Who was consulted and what is
    the criteria established to make the recommendation?
        Answer. The Rural Development state offices administer the water
    and waste water programs in the field. State Offices do not formulate
    recommendations for potable water needs. State Offices have, on
    occasion, assessed the needs based on available information such as
    applications for RUS funding on hand and data from others that have
    such information. These cooperating sources have included state and
    local health, development and environmental agencies, and state Rural
    Water Association technicians.
        Question. How does the agency certify that applicants for funding
    from the rural water financing programs are providing true information?
    Is this information investigated? If so, how?
        Answer. The Rural Development field staffs that process water and
    waste water loan and grant applications review the data provided by
    applicants. The data provided by the applicants comes from public
    documents such as preliminary engineering reports, financial reports,
    etc. In addition, there are one or more public meetings held on each
    project. The RUS has staff engineers who evaluate the technical data
    and loan specialists who evaluate credit and other factors. Funding
    decisions for individual projects are based on a well-established
    priority scoring system that directs the funds to the most needy
    projects within a state. When an applicant for a rural-based project
    meets the statutory eligibility requirements for water and waste
    disposal funding and is unable to obtain commercial credit, then RUS
    can finance that facility (if it is modest in size and design). The
    more needy and less likely to qualify for other credit the communities,
    the more likely their project would be funded.
                             salaries and expenses
        Question. The fiscal year 1998 budget request proposes an increase
    of $4.5 million for salaries and expenses of the Rural Utilities
    Service (RUS) for the improvement of automated business services. Is
    the technology that the RUS is planning to use to update their services
    required to be compatible with the new technology that other agencies
    in USDA are planning to implement?
        Answer. The requested $4.5 million for improvement of the Rural
    Utilities Service (RUS) automated business services is part of an on-
    going effort to modernize the RUS loan accounting system. This effort
    started in fiscal year 1993 when the then Rural Electrification Agency
    (REA) conducted an Information Strategy Plan (ISP) to identify the
    business processes that required re-engineering and modernizing. The
    USDA reorganization necessitated a re-evaluation of the ISP which was
    accomplished in fiscal year 1995 by a team from the St. Louis Finance
    Office and Information Resources Management Division. The Study
    reconfirmed the need to modernize the RUS loan accounting system in
    providing management with the necessary data to make sound business
    decisions. The estimated cost of the modernization effort was
    approximately $12 million dollars. The work was started in fiscal year
    1996 with $2.9 million dollars and is continuing in fiscal year 1997
    with another $1.4 million. The modernization effort for RUS is
    coordinated throughout the Rural Development Mission Area to ensure
    that what is being developed is compatible with effort within the
    mission area as well as the rest of USDA. The development is first re-
    engineering the business processes and then considering Commercial-Off-
    The-Shelf (COTS) software before starting to code any in-house
    requirements. The Chief Financial Officer of USDA is being kept abreast
    of the on-going modernization, as is the Chief Information Officer.
        Question. Have bids been solicited for this equipment and have any
    contracts been signed?
        Answer. There is no equipment being solicited for the RUS
    modernization effort, at this point.
        Question. When does RUS plan to have its field restructuring
    completed? Which areas in the field have completed restructuring and
    which areas have not begun?
        Answer. The field office restructuring process for Rural
    Development Agencies should be substantially complete by the end of
    this fiscal year.
                               universal service
        Question. The Federal Communications Commission is currently
    promulgating the regulations for the 1996 Telecommunications Act which
    proposes to shift universal service support for rural telephone systems
    from the basis of historic costs to some type of forward-looking costs.
    Will the FCC's action of using forward looking costs undermine the RUS
    telephone borrower's loan portfolio? Can RUS telephone borrowers repay
    their loans if the FCC adopts this formula change? How has the 1996
    Telecommunications Act affected the Rural Electrification Act's
    statutory responsibilities? Did the new telecom law modify or repeal
    any of the mandates of the Rural Electrification Act?
        Answer. The Telecommunications Act of 1996 fundamentally changed
    the structure of the telecommunications industry in the United States.
    The Act, among other things, set the framework to move the local
    telephone market from a regulated monopoly structure to a competitive,
    deregulated structure. On May 8, 1997, the Federal Communications
    Commission (FCC) released its Report and Order on Universal Service.
    The FCC stated in the Order that ``consistent with the Joint Board's
    recommendation, we find that a cost methodology based on forward-
    looking economic cost should be used to calculate the cost of providing
    universal service for high cost areas because it best reflects the cost
    of providing service in a competitive market for local exchange
    telephone service.''
        After determining that it would use competitively-neutral forward
    looking costs, the FCC examined computer models which model sponsors
    postulated could accurately predict the cost of serving any high costs
    areas. After an extensive comment period, the FCC determined that none
    of the models presented could accurately predict the cost of providing
    rural service. Consistent with the comments of the RUS, and others, the
    FCC postponed the implementation of the use of the model until January
    1, 1999, for ``non-rural companies'' that serve rural areas, and until
    at least 2001 for ``rural companies'' that serve rural areas. It is too
    early to tell if the FCC can find a model or models that can accurately
    calculate the cost to serve rural areas, or how that will effect rural
    companies. It is clear, in any case, that as of now the FCC has not yet
    found a model that can accurately predict rural costs.
        Support for rural companies, of course, comes from many sources,
    including the Federal Universal Service Fund, state universal service
    funds, access charges and state public utility commission policies. The
    income of RUS borrowers will be affected by changing policies with
    regard to each of these mechanisms. For example, on average, under the
    old system, RUS borrowers received over 55 percent of their gross
    income from access charges and a little over 10 percent from universal
    service funds. Whether any RUS borrower can meet its RUS debt service
    under the changes mandated by the Act, implemented by the FCC, state
    legislatures and state PUC's and, of course, the newly competitive
    marketplace, will depend on a myriad of factors which will vary from
    state to state. What is clear, however, is that at this time most rural
    companies are in good financial shape.
        Therefore, barring significant changes in the totality of Federal
    and State universal service support, Federal and State access charges,
    long distance calling patterns, local revenues, the ability to compete,
    and state legislative changes, RUS borrowers, on average, should
    continue to meet debt obligations. Nonetheless, the RUS has instituted
    a Task Force to review all issues relating to lending policies and loan
    security. The RUS is also advocating Federal and State regulatory
    policies to help ensure sufficient support for rural
    telecommunications. The RUS wants to ensure that it will bring the most
    benefits to rural residents into the future.
        The Act, and the resulting changes in the telecommunications market
    and regulatory structure, has, of course, affected the RUS
    Telecommunications Program. The RE Act contemplates a monopoly
    structure and prohibits the Department of Agriculture (USDA) from
    lending to duplicate service. Today's telecommunications market
    encourages competition and the duplication of carriers and types of
    service, i.e., wireline, wireless and satellite. In areas served by
    ``rural companies,'' state public utilities commissions will regulate
    the type and extent of competition, using a public interest test. Also,
    the Federal Universal Service support is portable to new, competitive,
    universal service providers. The RUS Task Force is examining this issue
    as well. Regarding the preemption by the Telecommunications Act of
    1996, the RUS has no current belief that the Telecommunications Act
    modifies or repeals any section of the RE Act.
        Question. RUS has proposed a rule which rations available credit in
    the concurrent Cost-of-Money and Rural Telephone Bank loan programs by
    limiting the amount of funds loaned to a single borrower. The agency
    has failed to meet the minimum loan levels prescribed by Congress in
    each of these loan programs in fiscal year 1996 and may not meet them
    in fiscal year 1997. What is the justification for such a proposal?
    Please cite the specific provision of the authorizing act which would
    give the agency authority to make loans for less than the full amount
    applied for when the application is for authorized act purposes.
        Answer. From fiscal year 1991 through 1995, RUS had an average
    backlog of $55 million for telecommunications loans. If the 10 percent
    limitation had been in place during that period, the backlog would have
    be negligible. In past years, several borrowers have submitted loan
    applications of over $100 million each. Because the size of the
    construction projects for these borrowers would not have expended the
    funds requested over the 5-year forecast period, about one half of
    these funds would have been just a line-of-credit and other borrowers
    would have been delayed in receiving funding. At the current level of
    funding the 10-percent limitation would equate to a concurrent loan of
    $48 million. Because the average size of an RUS loan has been about $9
    million, the 10-percent limitation will impact only a small segment of
    the borrowers, will make funding available to a larger number of rural
    areas per fiscal year, and will have no adverse impact on building
    rural infrastructure.
        The limited requests for loans in fiscal years 1996 and 1997, can
    be attributed to the uncertainty in the industry on support mechanisms
    caused by the Telecom Act of 1996. After more information is available
    on the FCC universal service proceedings, we expect to see an increase
    in loan requests that will exceed available funds.
                               rural development
                      rural community advancement program
        Question. The President's fiscal year 1998 budget request proposes
    a program level of $209 million for direct community facility loans
    which is an increase of $72.5 million. The Explanatory Notes state that
    300 applications totaling $304 million are currently on hand. When were
    these applications received by the department? Is there any unobligated
    monies available from past fiscal years to fund these loans? If so, how
    much is on hand, by fiscal year, and how many applications will be
    funded?
        Answer. The majority of these applications were received by the
    Department during the past fiscal year, although a few were received
    prior to that. Applications may be submitted at any time during the
    year, and are prioritized as they are received. Applications on hand at
    the end of the fiscal year are not withdrawn, but remain active for
    funding consideration during the next fiscal year. All funds authorized
    during the previous fiscal years have been obligated.
        Question. Is the Department currently receiving new applications?
        Answer. The Department receives new applications throughout the
    fiscal year.
        Question. What is the backlog of applications?
        Answer. There are nearly 300 applications on hand totaling $304
    million.
        Question. How many loans will be funded with the fiscal year 1998
    request?
        Answer. We expect to fund approximately 315 loans with the fiscal
    year 1998 request. The average size of our loans has been decreasing in
    recent years as we have been emphasizing the need to leverage funds
    from other sources. This has allowed us to stretch our scarce resources
    to serve more needy rural communities.
        Question. The budget requests an earmark for direct community
    facility loan budget authority, community facility grant budget
    authority, and for guaranteed business and industry loan budget
    authority for fiscal year 1998 totaling $2.5 million for the
    Empowerment Zone and Enterprise Community Program. Will this money be
    distributed to the State Directors? If so, how will it be distributed
    since it is earmarked?
        Answer. Earmarked funds are retained in a reserve account
    controlled by the National Office and are allocated to States on a
    project by project basis. State Directors are responsible for reviewing
    applications to determine if the project is specifically identified in
    the EZ/EC strategic Plan and approved benchmark documents. Requests for
    funds are sent to the appropriate Division in the National Office in
    the same manner as requesting reserve funds for regular programs. The
    priority/selection scoring criteria outlined in application regulations
    are addressed and forwarded along with funding requests. Projects are
    ranked based upon scores and funded accordingly.
        The appropriate Divisions send these requests to the Office of
    Community Development for review, comment, and coordination.
        Question. The explanatory notes state that the USDA Rural
    Development State Offices completed a Needs Assessment that shows rural
    water needs of about $10 billion. Would you please expound on this
    assessment. Did all 50 states participate in this assessment?
        Answer. The Rural Utilities Service coordinated this assessment
    through the USDA Rural Development State offices in the second half of
    1995. State office Rural Development personnel worked with
    representatives from county and local governments, the Rural Community
    Assistance Program network, the State Rural Water Association network,
    other Federal agencies, State public health and other State agencies,
    and other groups as appropriate to complete the assessment. The results
    indicated that just over 3 million rural households have drinking water
    improvement needs of approximately $10 billion. All 50 States
    participated in the assessment, which used the requirements of the
    State Drinking Water Act as the basic standard of estimating need.
        Question. The President's fiscal year 1998 budget request proposes
    a decrease in the program level funding for direct water and waste
    disposal loans. The fiscal year 1997 level was $739 million and the
    fiscal year 1998 proposed level is $734 million. The subsidy
    appropriation for these loans increases under the proposed request from
    $66.7 million in fiscal year 1997 to $71.6 million in fiscal year 1998.
    How many loans can be funded in each of fiscal years 1997 and 1998 at
    these proposed levels?
        Answer. In fiscal year 1997, the RUS estimates that 1,068 direct
    loans can be made at the current estimated program level. The fiscal
    year 1998 estimate is 1,034 direct loans. However, as with the Rural
    Utilities Assistance Program of 1996 and 1997, the Rural Community
    Advancement Program provides funding flexibility between the Water and
    Waste Grant and Loan programs. Also up to 25 percent within a State's
    allocation can be transferred between program areas within RCAP.
    Further, the matching and mandatory grants to States must be used for
    RCAP program purposes, so the loan level will very likely be enhanced
    above the amount currently projected if States have a priority need for
    direct water and waste loans.
        Question. Given the need, why does the fiscal year 1998 budget
    propose a decrease below the fiscal year 1997 program level?
        Answer. The decrease in water and waste program levels is due
    primarily to designating a portion of the Water and Wastewater Program
    monies for matching and mandatory grants for state governments as
    required under the Rural Community Advancement Program. If total RCAP
    funding for fiscal year 1998 were compared to program funding in fiscal
    year 1997, there is, in fact, an increase in BA and program level.
    Comparable figures are:
              Fiscal year 1997 RCAP funding: BA $636 million with program
            level of $2.249 billion.
              Fiscal year 1998 RCAP funding: BA $688 million with a program
            level of $2.494 billion.
        Question. The fiscal year 1998 budget request proposes a decrease
    for the circuit rider program from the fiscal year 1997 level of $5.2
    million to $5.15 million. Why does the Administration propose a
    decrease in this very important technical assistance program? What
    other means does the agency have to provide technical assistance to
    small communities?
        Answer. Mr. Chairman, we believe our current request will help us
    fulfill those program objectives, yet appropriately reflects the fiscal
    restraint required of all government programs today. The circuit rider
    program provides an invaluable service to small communities, and saves
    the government significant sums as well. The technical assistance
    rendered through the circuit rider program enhances the life of the
    water and waste water treatment systems and means that the Federal
    government will not have to finance the replacement of these systems as
    frequently.
        Besides the circuit rider program, our staff is also able to
    provide some technical assistance.
        Question. The Administration has proposed no increase in fiscal
    year 1998 for direct business and industry loans. The subsidy budget
    authority does not need to be appropriated since the borrower interest
    rate has changed to a rate equal to prime, producing a negative subsidy
    rate. Would you please explain why the Administration proposes no
    increase and the effects of a negative subsidy rate.
        Answer. The Administration believes $50 million is an appropriate
    loan level for the direct Business and Industry program. It is a
    relatively new program which will be targeted to persistent poverty
    program areas. Once the program is operational and customers are more
    aware of the program, the Administration will review the program and
    propose funding levels consistent with demand and other priorities.
        Question. For the guaranteed business and industry loans, the
    fiscal year 1998 budget request proposes a decrease of $77 million. The
    fiscal year 1997 program level was funded at $688 million and the
    fiscal year 1998 proposed program level is $610 million. There is a
    proposed decrease in the subsidy appropriation also. The fiscal year
    1997 subsidy level was funded at $6.4 million and the proposed fiscal
    year 1998 level is $5.9 million. How many loans will be made at the
    level proposed for fiscal year 1998 versus that proposed for fiscal
    year 1997?
        Answer. The average guaranteed loan in fiscal year 1996 was $1.14
    million. If the average loan size remains constant, then 603 loans
    would be made in fiscal year 1997 and 535 in fiscal year 1998.
        Question. With no change in the proposed fiscal year 1998 funding
    level for direct loans and a decrease for the guaranteed loans, should
    the committee be of the opinion that there will be less of a demand for
    guaranteed loans in the future?
        Answer. The President's budget assumes a fairly consistent level of
    demand between 97 and 98. Assistance is available to states for
    business assistance through the grants to states as well as the rural
    business and cooperative development funding stream.
        Question. Why does the Administration propose to not fund rural
    business opportunity grants for fiscal year 1998? How many applications
    for these grants does the agency have on hand? Is the available funding
    adequate to meet this demand?
        Answer. Although specific funding is not requested for the rural
    business opportunity grants, it would be an eligible purpose for
    funding appropriated to the rural business and cooperative development
    funding stream, allowing State Directors to provide these grants in
    those cases where it is a priority. In addition, the regulations for
    the program will not be published until later in the fiscal year and
    under the terms of the Rural Business Assistance Program, we have the
    authority to shift funds from other business programs into this account
    if needed. We have no applications on hand, as of yet, because the
    regulations have not been published.
        Question. In your prepared statement, Madam Under Secretary, you
    state that the agency will be able to track the expenditures for RCAP.
    Please describe the tracking system that the agency has developed. How
    will the Rural Development Agency inform the Committee of the amounts
    of funding transferred within RCAP?
        Answer. Mr. Chairman, the system simply reflects each program under
    RCAP and the applicable budget authority and permits the State Director
    and the appropriate Administrator(s) simultaneously to see the effects
    of the proposed transfer on each program, both within the State and at
    the National cap of 10 percent. If the transfer were to be agreed upon,
    the State Director would still be required to submit a written transfer
    request to be signed by the appropriate Administrator(s). Hence,
    transfers could be summarized by program and by state. That information
    could be made available to the committee on a regular basis as
    frequently as desired.
                                     ______

                     Questions Submitted by Senator Stevens
                               rural development
                             fund for rural america
        Question. The Fund for Rural America is intended to improve
    economic stability and quality of life in rural America, as well as
    improve the competitiveness of the U.S. agriculture and forestry
    industry sectors. I understand that of the $100,000,000 made available
    under this program, some funds are intended to establish Centers to
    administer this new initiative. Have locations for these Centers been
    decided?
        Answer. Senator Stevens, the part of the Fund for Rural America to
    which you speak is within the jurisdiction of the Under Secretary for
    Research, Education and Extension, but I understand the centers will
    not be established until the grant awards are announced.
        Question. Are you considering the needs of Alaska?
        Answer. The Congressional and Departmental guidelines for the fund
    for Rural America will insure that Alaska's needs are considered. The
    Fund focuses on practical problem solving by research, education, and
    extension teams working across institutions and disciplines in areas
    faced with the greatest agricultural, environmental, and rural
    development challenges. Alaska clearly faces serious challenges in all
    of these areas. Moreover, Alaskan institutions have submitted 10
    applications for Planning Grants, several of which cross traditional
    disciplinary and institutional lines. These applications will be
    considered by panels of peer experts in May and June as part of the
    Fund decision-making process.
        However, awards will ultimately be made on a merit basis that looks
    across all of the 425 Planning Grant proposals submitted. Hence, it
    would be premature to conclude that Alaskan institutions will or will
    not win grant support. Award decisions will be announced in late June
    or early July. If proposals are not selected for support, each of the
    principal investigators will receive an explanation of the process,
    copies of the materials developed during the review, and information on
    similar projects that were selected for funding and will share project
    results.
        Question. The University of Alaska has applied for a grant to
    locate one of the program's Centers in Alaska. Would such a Center
    assist rural Alaskans improve their dire sanitation, water supply,
    energy, high unemployment and economic development circumstances?
        Answer. Several Alaskan institutions have submitted proposals that
    address the concerns you raise. The concerns are at the core of the
    Fund's mandate to enhance rural economies and improve the quality of
    life in rural communities. Hence, if funded, an Alaskan Rural
    Development Center would be expected to focus on these issues. As noted
    in the previous question, however it would be premature to conclude
    that the University of Alaska proposals or any of the other Alaskan
    proposals will be funded until after the merit review of all the
    applications submitted is completed.
                       rural business-cooperative service
                           rural business enterprises
        Question. Last year the Committee provided an appropriation of
    $53,750,000 for the Rural Business-Cooperative Program for activities
    supporting rural business enterprises. This program is particularly
    important to Alaska's timber dependent communities as they struggle to
    adjust to the loss of timber supply from federal lands. The Committee
    included report language last year encouraging consideration of the
    needs of our Alaska Villages initiative and the community of Thorne
    Bay, Alaska. What is the status their grant requests?
        Answer. RBEG applications were received for both of these projects
    and were forwarded by the State to the National Office for funding from
    the National Office reserve. These projects will compete with other
    projects on the National Office reserve list for the next funding
    cycle, which is scheduled to occur sometime after pooling on July 11,
    1997.
                                     ______

                     Questions Submitted by Senator Bumpers
                               rural development
                           the fund for rural america
        Question. The 1996 Farm Bill provided the Secretary authority to
    expend $100 million on a number of programs at his discretion. Can you
    provide a list of actual program awards that have been made using this
    fund? Please explain why you think the use of this fund for rural
    development programs has been more innovative than how this
    subcommittee might have allocated the funds. How do you intend to use
    the $1 million allocated in the Fund for Rural America for technical
    assistance for enterprise communities and empowerment zones and will
    they be available on a competitive basis?
        Answer. Senator Bumpers, a portion of the Fund for Rural America
    was used to augment the 1997 program level for single family housing
    loans. This was necessitated by the shortfall in program level caused
    by higher interest rates which were higher than anticipated when the
    1997 budget was being developed. In this specific instance, individual
    projects cannot be identified because the funds were allocated to the
    States and commingled with the appropriated level. Other project
    decisions have not yet been made even though negotiations have been
    completed. However, I will provide for the record specific projects in
    distance learning and telemedicine grants, rural business enterprise
    grants, and water and waste disposal loans and grants.
        [The information follows:]

                           DISTANCE LEARNING AWARDEES
    ------------------------------------------------------------------------
                 Project                  Amount            City/State
    ------------------------------------------------------------------------
    Hubbard Independent School Dist.        $249,492  Hubbard, TX
    Amber State University..........         115,000  Ogden, UT
    Sweet Grass County High School..         319,906  Big Timber, MT
    Delta Research Center...........         160,000  Portageville, MO
    North Central School District...         302,009  Rock Lake, ND
    Merged Area (Education) V                330,000  Fort Dodge, IA
     Community College Dist..
    Allen Parish School Board.......         330,000  Oberlin, LA
    Educational Service Unit of Unit         330,000  Beatrice, NE
     5.
    Hamilton-Jefferson Counties              330,000  Mt. Vernon, IL
     Regional Office of Education.
    Junior College Dist. of                  330,000  Hillsboro, MO
     Jefferson County.
    Southeast Alabama Regional               330,000  Dothan, AL
     Planning and Development Commis-
       sion.
    Montgomery Community College....         127,593  Troy, NC
    Southwest Virginia Educations            177,600  Abingdon, VA
     and Training Network.
    Center for Rural Development....         303,900  Somerset, KY
    Middle Tennessee State                   300,000  Murfreesboro, TN
     University.
    Regional Education Service               330,000  Shawboro, NC
     Alliance.
    Fayette County Board of                  189,280  Fayette, AL
     Education.
    ------------------------------------------------------------------------

                              TELEMEDICINE AWARDEES
    ------------------------------------------------------------------------
                 Project                  Amount            City/State
    ------------------------------------------------------------------------
    Rapid City Regional Hosp........         $330000  Rapid City, SD
    The Evangelic Lutheran Good              330,000  Sioux Fall, SD
     Samaritan Society.                               (also serves ND)
    Medcenter One Health............         300,178  Bismarck, ND
    St. Charles Medical Center......         330,000  Bend, OR
    Ohio State University...........         325,837  Athen, OH
    University of South Carolina             329,200  Columbia, SC
     School of Medicine.
    ------------------------------------------------------------------------

                          RURAL BUSINESS ENTERPRISE GRANTS FUNDED FROM FUNDS FOR RURAL AMERICA
    ----------------------------------------------------------------------------------------------------------------
                    State/project                      Amount                          Community
    ----------------------------------------------------------------------------------------------------------------
    AK: Kootznoowoo, Inc.........................        $250,000  (No city listed) Angoon County
    IL:
        Lincoln Land Community College...........       1,500,000  Springfield, Sangamon County
        Prairie Hills Resource Conservation and           300,000  Macomb, McDonough County
         Development, Inc.
        Two Rivers Council Foundation, Inc.......          48,500  Quincy, Adams County
        Village of Lena..........................         199,000  Lena, Stephenson County
        Edgar County Board.......................         100,000  Paris, Edgar County
    ME: City of Lewiston.........................         200,000  Lewiston, Androscoggin Cty
    NJ: Borough of Buena.........................         300,000  (No City Listed) Angoon County
    ND: Mercer Oliver Economic Development.......         500,000  (No City Listed) Mercer County
    ND: Tuttle Area Development Corporation......         479,100  Tuttle, Kidder County
    SC: South Carolina Healthcare Recruitment and         900,000  Entity in Richland County. Projects can be
     Retention Centers.                                             located in Newberry, Allendale, Bamberg, and
                                                                    Florence Counties
    SD: National Enterprise Development Center...          98,400  Huron, Beadle County
    UT: Wendover Town............................         500,000  Wendover, Tooele County
    VA:
        Franklin County Commerce Center..........         475,000  Rocky Mount, Franklin County
        Southside Trng Employment Placement, Inc.         500,000  Farmville, Prince Edward
    ----------------------------------------------------------------------------------------------------------------

                           RURAL UTILITIES SERVICE--WATER AND WASTE PROGRAM EARTH DAY PROJECTS
                                                    [April 16, 1997]
    ----------------------------------------------------------------------------------------------------------------
                                         National reserve funds       Rural dev. totals      State's allocated funds
               State/project           -----------------------------------------------------------------------------
                                            Loan        Grant         Loan        Grant         Loan        Grant
    ----------------------------------------------------------------------------------------------------------------
    AR:
        Perry (in Town)...............     $166,300       $6,800     $961,000   $1,674,000     $794,700   $1,667,200
        Pangburn......................      145,600      266,400      146,737      266,400        1,137  ...........
    AZ:
        Maricopa Water Dist...........  ...........      100,000  ...........  ...........  ...........  ...........
        Havasu Heights Dist...........  ...........       80,000  ...........  ...........  ...........  ...........
        City of Eloy..................  ...........      800,000      318,000      800,000      318,000  ...........
    CA: Allensworth...................      114,540      506,250      114,540      506,250  ...........  ...........
    IL: Ford Heights..................      500,000      500,000    1,500,000    1,258,000    1,000,000      758,000
    KY: Nicholas County...............      247,000      247,000      247,000      247,000  ...........  ...........
    LA:
        Town of Pollock...............      150,500      599,500    3,425,000      652,000    3,274,500       52,500
        White Castle..................      230,000  ...........      230,000  ...........  ...........  ...........
        Dequincy......................  ...........      227,000      349,500      275,000      349,500       48,000
    MD: Allegany (Old Town)...........      245,000      550,000      245,000      550,000  ...........  ...........
    ME: Great Salt Bay................      700,000  ...........      700,000  ...........  ...........  ...........
    MI: Village of Benzonia...........      600,000      171,000      600,000      171,000  ...........  ...........
    MN: Ormsby........................      250,000  ...........      250,000      175,000  ...........      175,000
    MO: Reeds Spring..................  ...........       72,200  ...........  ...........  ...........  ...........
    MS:
        Harmony Water Assoc...........    1,144,000    1,400,000    1,144,000    1,400,000  ...........  ...........
        Delta City....................       78,400      198,600       78,400      198,600  ...........  ...........
    MT: Columbus......................      700,000  ...........    2,064,000  ...........    1,364,000  ...........
    NH: City of Berlin................  ...........      444,510  ...........    1,500,000  ...........    1,055,490
    NJ: Elmer.........................      449,383  ...........      702,000  ...........      252,617  ...........
    NM: Acoma Pueblo..................      375,000    1,125,000      375,000    1,125,000  ...........  ...........
    PA:
        Shannock Valley General.......  ...........    1,650,000    2,600,000    2,705,000    2,600,000    1,055,000
        Otto Township.................  ...........    1,650,000    3,665,000    2,299,000    3,665,000      649,000
    TN:
        West Warren-Viola.............      597,000      300,000      597,000      398,000  ...........       98,000
        Calhoun Charleston............      103,000  ...........      103,000  ...........  ...........  ...........
    TX: Arroyo Water Supply...........      593,000      756,200      593,800      756,200          800  ...........
    UT: Leeds Town....................      160,000      495,000      160,000      495,000  ...........  ...........
    VA:
        Wythe County--Ft Chiswell.....    1,260,600  ...........    6,512,100    4,400,900    5,251,500    4,400,900
        Henry Co.--Oak Level..........    1,282,840    1,036,200    1,282,840    1,036,200  ...........  ...........
    WV: Reedsville....................      450,000      514,000      450,000      514,000  ...........  ...........
    ----------------------------------------------------------------------------------------------------------------

        As you are aware the Act requires the funds to be expended through
    existing rural development programs which means the existing statutes
    and regulations apply to funding decisions. This, in addition to the
    decision of the Secretary to reduce the backlog of applications within
    these programs, limited the innovative nature of projects funded. We
    are, however, making $1.7 million available from the FUND for value-
    added cooperative development projects for which there is no specific
    appropriation in fiscal year 1997. This is one area in which we hope to
    fund some innovative projects.
        The $1 million made available for technical assistance to
    empowerment zones/enterprise communities will also be innovative. In
    order to maximize the use of Federal dollars, we are negotiating
    agreements with private foundations which will inject some of their
    funds, along with ours, into a pool of funds which will be used for
    technical assistance. These funds will be available on a competitive
    basis.
        Question. I note that some of the Fund for Rural America has been
    allocated to programs where there has been a decline from the expected
    program level (such as section 502 housing) and other programs where
    there is a backlog. Would you please provide this subcommittee a list
    of programs under the Rural Development mission area for which there is
    a backlog and indicate the level necessary to fund those applications?
        Answer. In fiscal year 1996, RUS' Distance Learning and
    Telemedicine Grant Program received 150 financing requests totaling $38
    million--only $7.5 million of funding was available for the fiscal year
    and that amount was provided to 29 applicants. This resulted in a
    backlog of applications totaling $31.5 million. In January 1997, RUS
    received an additional $6.5 million in funding authority from the Fund
    for Rural America. Utilizing those funds, RUS was able to approve an
    additional 23 financing requests, reducing the backlog to $24 million
    for applications received in fiscal year 1996.
        The RUS Telecommunications Loan Program has a backlog of $57
    million, all of which is for hardship loans.
        The RUS Electric Program currently has a backlog of 98 applications
    totaling $580 million.
        The Water and Waste Program currently has on hand $2.72 billion in
    loan applications and $1.27 billion in grant applications. The RUS
    Water and Waste Disposal Program was allocated $16,695,115 from the
    Fund for Rural America. Those monies have been used to help fund
    approximately 31 projects in 22 states.
                             rural housing service
        The Community Facilities Direct Loan Program has a backlog of
    applications on hand in the amount of $304 million. We expect to fund
    approximately 290 loans in fiscal year 1997. However, new applications
    are received continuously throughout the fiscal year, and based on
    experience, we expect that the backlog will remain at its current
    level.
        The single-family backlog is listed below as follows:

    ------------------------------------------------------------------------
                                                Backlog of
                     Program                   applications    Funding level
    ------------------------------------------------------------------------
    Sec. 502 direct SFH.....................          35,000          $1.75B
    Sec. 504 housing repair grants..........           3,200            $15M
    Sec. 523 self-help housing..............          \1\ 92       \1\ 10.6M
    Housing Credit Sales....................         ( \2\ )          52-70M
    ------------------------------------------------------------------------
    \1\ The Agency was unable to fund 23 grantees requesting $4.5 million in
      fiscal year 1997. Sixty-nine grantees were funded for fiscal year 1997
      at 75 percent of their request creating a balance, or backlog, of $6.1
      million. Therefore, the total backlog for funding Section 523 Self-
      Help Housing applications is $10.6 million.
    \2\ There is no ``backlog'' of applications for credit sales; however,
      we average 1,500-2,000 properties in inventory.

                            rural utilities service
                      electric and telecommunication loans
        Question. RUS has initiated a plan to require rural electric
    borrowers to submit plans based on a four year period rather than the
    traditional two year period. What did this change do to demand for RUS
    financing?
        Answer. In January 1995, RUS published regulations that allow
    distribution borrowers to submit loan applications covering a period of
    up to four years. The period covered by the application is determined
    by the borrower, up to a maximum of four years. The longer loan period
    was intended to reduce administrative costs to borrowers, to
    supplemental lenders, and to RUS of preparing and processing frequent
    loan applications.
        The longer loan period has resulted in applications for larger
    loans. In fiscal year 1996, RUS used all its budget authority for
    municipal rate loans and hardship rate loans, approving 97 municipal
    rate loans ($544,616,858) and 23 hardship rate loans ($90,577,664).
        At the end of fiscal year 1996, RUS had a backlog of 106
    applications for municipal rate loans ($709.0 million) and 28
    applications for hardship rate loans ($119.9 million). These carryover
    applications from fiscal year 1996 exceed the total budget authority
    for fiscal year 1997 ($455,564,516 for municipal rate loans and
    $68,785,578 for hardship rate loans). Additional applications have been
    received in fiscal year 1997.
        Because of this backlog, RUS published interim final rules in
    February 1997 that allow the agency to process loans in two parts
    during a fiscal year when applications substantially exceed available
    funds. The first part of the loan is processed in its regular place in
    the queue. The second part will be automatically processed based on the
    same application documents as if it were received by RUS exactly two
    years later than the first part.
        Because of the two-part loan processing, the queue for municipal
    rate and hardship rate loans is now about 8 months. A year ago the
    queues for municipal and hardship rate loans were 4 months and 9
    months, respectively.
        Question. What is the current status of the planning requirement?
        Answer. The borrower's construction planning requirement is based
    on the loan application periods selected by the borrower. A
    construction work plan in support of a loan application must cover a
    period at least as long as the period covered by the loan application.
        The borrower's financial planning requirement is not affected by
    the loan application period. Borrower financial forecasts submitted in
    support of distribution loans cover a minimum period of ten years.
        Question. Can you please respond to the continuing claims that
    rural electrification is a completed mission and not in need of further
    federal assistance?
        Answer. The mission of the Electric Program is to ensure that rural
    customers continue to have access to reliable, reasonably priced
    electric service to enable a reasonable quality of life and the
    possibility of continued economic development. Serving rural areas
    costs more than serving urban or suburban areas and the RUS program
    provides some measure of assistance for universal electric service.
    Like universal service assistance in the telecommunications and
    transportation industries, the need to support a national basic
    infrastructure is still a challenge. The RUS program provides
    assistance, leverages both public and private funds and sets standards
    for this basic infrastructure in rural America.
        Electric service in rural areas must be both reliable and
    reasonably priced. Today's technology places ever greater demands on
    rural electric systems. In addition to regular periodic maintenance,
    borrowers must continuously upgrade their systems to ensure that rural
    residents have access to the power needed to support their farms,
    industries, supermarkets, medical centers, and schools.
        Electric bills reflect both the cost of generating power and the
    cost of lines to deliver the power. The entire industry is highly
    capital intensive, and economies of scale are a significant factor in
    the cost of serving electric consumers. Data from 1995 show that RUS
    borrowers serve only about 6 consumers per mile of line, compared with
    about 35 consumers per mile for investor owned systems.
        Since virtually all RUS borrowers are cooperatives or other non-
    profits, their electric rates are based on the cost of service, with no
    profit component. Based on the cost of service, the relatively low
    consumer density translates directly into higher rates. Department of
    Energy data for 1995 show that the average residential rate for
    borrowers in 36 states is higher than the state average, even with RUS
    financing.
        The high per consumer cost of electric lines in rural areas will
    persist even in a restructured industry. Rural economic development and
    the well being of rural residents depends on high quality and
    reasonable priced electricity. Without federal assistance and
    assurance, many rural areas may be left behind.
        Question. Of electric power available in rural areas, what portion
    of the customer cost is associated with generation, transmission,
    distribution, and maintenance?
        Answer. Customer cost depends on the costs of generating and
    delivering power. Both costs vary widely. Generating costs depend on
    the fuel source, plant characteristics such as age and size, and other
    factors. Transmission and distribution costs depend on consumer density
    and factors such as local geography and weather. An additional
    significant factor is state and local utility taxes associated with
    generation, transmission, and maintenance. These taxes vary widely
    across the country. Current consumer bills do not show a breakdown of
    these costs.
        For CY 1995, the total costs reported by RUS borrowers were as
    follows:

                         Distribution borrowers ($1,000)

    Cost of power.................................................$9,975,078
    Distribution expense--operation...............................   387,443
    Distribution expense--maintenance.............................   709,168

                         Power supply borrowers ($1,000)

    Cost of power.................................................$5,758,350
    Transmission..................................................   291,651
    Distribution..................................................    14,673
    Maintenance expense...........................................   528,840

        Question. What is the current status of rural electric funds for
    fiscal year 1997?
        Answer. For municipal rate loans, loan authority for fiscal year
    1997 is $455,564,516. As of April 24, 1997, RUS had approved 78 loans
    totaling $397,559,000, with $58,005,516 remaining. Eighty five
    applications are pending, totaling $575,013,820.
        For hardship rate loans, loan authority for fiscal year 1997 is
    $68,785,578. As of April 24, 1997, RUS had approved 13 loans totaling
    $45,435,000, with $23,350,578 remaining. Twenty-one applications are
    pending, totaling $86,697,900.
        For loan guarantees, loan authority for fiscal year 1997 is
    $300,000,000. As of April 24, 1997, RUS had approved 6 loans totaling
    $67,852,000, with $232,148,000 remaining. Five applications are
    pending, totaling $176,783,000. In addition, RUS guaranteed FFB loans
    totaling $68,439,408 have been repriced or refinanced in fiscal year
    1997.
                             rural housing service
        Question. The President's National Partnership for Home Ownership
    calls for a goal of 8 million homes by the year 2000. What is the
    projected federal cost to attain this goal?
        Answer. It is not anticipated that the federal government will fund
    all 8 million homes for the President's National Partnership for Home
    Ownership. These homes will also be funded by other partnerships, such
    as, private lenders, state agencies, and non-profits. If Congress were
    to provide $1 billion of funding in fiscal years 1998, 1999, and 2000
    to the Section 502 Direct Single Family Housing loan program and $3
    billion in fiscal years 1998, 1999, and 2000 to the Section 502
    Guaranteed Single Family Housing loan program, the Rural Housing
    Service would be able to assist 210,000 families with home ownership at
    a budget authority cost of $475 million.
        Question. I understand your agency has begun to use escrow accounts
    to help borrowers better manage their financial resources. How has the
    use of escrow accounts for rural housing borrowers effected the program
    in terms of savings, defaults, and other identified goals of this
    action?
        Answer. The Agency is completing the conversion in seven phases.
    Beginning February 1, 1997, approximately 100,000 loans were converted
    and an equal amount is converted monthly until completion of the
    process in September of 1997. Therefore, it is too early to measure
    results as only approximately 200 borrowers are currently on escrow.
    This number will grow quickly as all new borrowers are required to
    escrow and it is estimated that 60-70 percent of the existing caseload
    (600,000 borrowers) will be on escrow by the end of fiscal year 1998.
    Savings will be substantial and will be realized from three main areas.
        1. Significant reductions in tax vouchers from program loan
    accounting funds. Over the past 3 years the Agency has vouchered an
    average of $50 million per year to pay overdue taxes. In many cases
    these vouchers were just to prevent a tax sale and not to pay all
    delinquent taxes owed.
        2. Uninsured losses. This is estimated a figure that the Agency was
    never able to adequately capture under the old program loan accounting
    system. In the past these losses were buried in the foreclosure loss
    category. Force placed insurance should eliminate these losses.
        3. Reduced foreclosures. Timely, consistent servicing, escrow and
    force placed insurance should greatly increase the Agency's ability to
    provide supervised credit to rural housing borrowers. With these new
    tools added to existing subsidy and moratorium authorities, the Agency
    is confident that the number of foreclosures will be reduced by at
    least 50 percent.
        Question. The budget request includes $52 million for HUD section 8
    contracts. Why should this subcommittee be expected to help provide
    funding for HUD programs?
        Answer. Over time, the Federal government will save money from
    replacing expiring Section 8 contracts in Section 515 projects with
    USDA rental assistance. RHS recommends this transfer if the
    Appropriations Committee is willing to increase the Agriculture
    Appropriation Sub Committee's Mark this year to allow these long term
    savings for the government.
        Question. Can you identify any RHS programs we could reduce in
    order to provide the $52 million for section 8?
        Answer. If the $52 million for the conversion of HUD section 8 HAP
    contracts to RHS RA contracts is not to be funded as requested in the
    President's Budget, the Administration would object to funding the
    conversion at the expense of other Rural Housing Programs. We have
    respectfully requested that the Congress make the necessary adjustments
    during its consideration of the fiscal year 1998 Budget Resolution,
    602(b) allocations, and appropriations bills. The President's request
    will substantially reduce our future needs for total rental assistance
    funding and administrative costs.
                         section 515 rental assistance
        Question. I note the section 515 rental assistance increases by
    $16.8 million to $540.9 million? Does this include the assumption of
    HUD section 8 contracts?
        Answer. For the traditional Section 521 rental assistance grants,
    $541 million is requested. That is $16.8 million above the fiscal year
    1997 enacted level and does not include the section 8 contracts. An
    additional $52 million is requested above $541 million for the
    conversion of the dual track Section 8/515 HAP contracts to Section 521
    RAP contracts. The total request is $593 million.
        Question. Is this amount for both renewal of existing contracts as
    well as new commitments?
        Answer. The funding request will address the renewal of 34,100
    expiring RHS rental assistance units. In addition, the fiscal year 1998
    request will fund new rental assistance units to be used in conjunction
    with rehabilitation new construction loans.
                          section 502 housing program
        Question. As you note, the program level for section 502 housing
    dropped from the projected $1 billion to $582 million due to increased
    interest rates. You imply that the increased budget authority in this
    account for fiscal year 1998 will still result in a $1 billion program.
    However, already we have seen interest rates increase since submission
    of your budget request. Give current interest rates, what do you
    project the program level would be for section 502 housing at your
    requested level of budget authority?
        Answer. Senator Bumpers, as I have testified, accurate estimates of
    long-term interest rates within this economy are very difficult to
    make. In mid March of 1997, I was very comfortable with the estimates
    because the rates at that time and those reflected in the budget were
    less than 50 basis points apart. As you note, we have recently seen the
    rates increased by the Federal Reserve Board, and now there is a
    difference of 100 basis points. If that difference remains in effect,
    the program level for 502 housing would drop to about $750 million.
        Question. Will you submit re-estimates nearer to enactment of the
    fiscal year 1998 appropriations bill in order to better coordinate
    budget authority with expected program levels?
        Answer. While I do not anticipate the Administration will formally
    submit re-estimates of the subsidy rates, I will assure you that my
    staff will keep the subcommittee staff informed of the difference in
    rates and the resulting effects as frequently as the staff desires.
    However, the forecasted rates are the Administration's assumptions and
    we anticipate an appropriate loan level in the 502 program.
                          community facilities program
        Question. You mention a number of types of projects, such as day
    care, fire protection, etc. that can be funded through your Communities
    Facilities program. What types of projects have communities identified
    as their highest demand in terms of program dollars and number of
    actual projects?
        Answer. The following types of projects have been identified by
    communities as their highest demand in terms of program dollars and
    number of actual projects funded:

    ------------------------------------------------------------------------
                    Purpose                      Amount           Number
    ------------------------------------------------------------------------
    Health Care...........................    $1,956,000,000           2,282
    Public service \1\....................     1,011,000,000           2,161
    Public safety.........................       476,000,000           2,880
    ------------------------------------------------------------------------
    \1\ Public service includes cultural, educational, energy, and
      transportation facilities, public buildings, and industrial sites.

                     rural business and cooperative service
                          business and industry loans
        Question. I have heard complaints from some states that the
    Business and Industry fund was pooled earlier than usual this year.
    When was the B&I account pooled this year? Was that the normal time for
    national pooling? If not, were states allowed the opportunity to
    obligate funds in a normal manner from obligations on hand? Was this
    action disruptive to states?
        Answer. The pooling of the Business and Industry (B&I) Guaranteed
    Loan Program funds normally has been done in two stages, the first
    occurring in April and the second in August of each year. In an effort
    to give State Directors more flexibility as well as control over their
    allocation of guarantee authority, a decision, early in the fiscal
    year, was made to pool only once during fiscal year 1997. This was to
    occur on July 11, 1997. However, numerous States, through extensive
    outreach activities, depleted their B&I Guaranteed Loan Program
    allocation and requested funding from the National Office reserve,
    while several States had not obligated nor had application activity to
    utilize 50 percent of their allocation. National reserve funding was
    depleted, and a large demand from numerous States for National Office
    reserve funding continued, thus it was decided to conduct an early
    pooling of the B&I funds, which was done on March 10, 1997.
                appropriate technology transfer for rural areas
        Question. You mention that the ATTRA program received a record
    number of inquiries in fiscal year 1996. Would you please distinguish
    ATTRA activities from those of Extension?
        Answer. The Appropriate Technology Transfer for Rural Areas (ATTRA)
    program serves as the central source for answering questions about and
    encouraging agricultural producers to adopt sustainable agricultural
    practices which allow them to maintain or improve profits, produce high
    quality food and reduce adverse impacts to the environment. ATTRA
    effectively combines the knowledge of the university system, the
    Extension Service, and other state and commercial entities into a
    single comprehensive center of expertise.
        ATTRA offers a unique and complementary service to that provided by
    Extension, as illustrated by a continuing increase in the number of
    annual requests to ATTRA, from 4,000 annually in fiscal year 1989 to
    more than 18,000 in fiscal year 1996. Response by mail (more than 67
    percent in less than a week) and, increasingly, by electronic means,
    offers farmers the convenience of receiving information on options and
    choices at home or on the farm. Because of its national scope, ATTRA
    staff more frequently access information on successful alternatives to
    conventional production methods for commodities, as well as a wider
    diversity and scale of enterprises, practices, and farmer experiences
    specifically related to sustainable agriculture. Through ATTRA, useful
    ideas and solutions can more easily cross state and agency lines, and
    can also include those developed and tested by innovative farmers and
    organizations. Through ATTRA caller surveys, farmers consider these
    kind of resources to be very important, and they value approaches which
    differ or add to the approaches taken by university-based research
    sources accessible to extension.
        Question. What role is ATTRA playing in the overall goal of
    achieving a more sustainable agricultural base?
        Answer. ATTRA combines the knowledge of the university system, the
    Extension Service, and the State and commercial entities into a single
    comprehensive center of expertise on sustainable agriculture practices.
        Question. Is there anyway to document the role of ATTRA's role in
    environmental protection or assisting rural economies?
        Answer. Over the last 12 months, 77 percent of the requests to
    ATTRA have pertained to production and management options which
    contribute to environmental protection. Farmer requests tallied in
    ATTRA's database include questions about: (a) reducing pesticide and
    other chemical use; (b) improving soil fertility with less
    environmental impact, especially on water quality; (c) diversifying
    crop and animal production in ways that diversify income sources; (d)
    meeting new markets created by greater numbers of consumers interested
    in food produced in more environmentally sound ways; and (e) keeping
    more of the income for the farm family by cutting costs and making
    greater use of local resources.
        ATTRA maintains a database and other electronic and physical
    information files which track caller requests, background on their farm
    enterprises and staff responses, now numbering more than 100,000 as of
    March 1997. ATTRA is also currently analyzing hundreds of feedback
    surveys which describe how callers have put ATTRA's information to
    work.
        During their calls to the national 800 line, reasons given for
    seeking out ATTRA include one or more of these motivating factors:
    Strong desire to continue making a living from agriculture, a priority
    on being good environmental stewards as well as good farmers, and the
    importance of contributing to the economic well-being and future of
    their local rural communities. When ATTRA staff interview callers, a
    majority of them (62 percent in a recent sample) say that they were not
    able to get their questions answered elsewhere.
      alternative agricultural research and commercialization corporation
                         project investment repayments
        Question. You mention that AARC has begun receiving repayments from
    program participants. How much has been repaid?
        Answer. To date, the AARC Corporation has received $82,700 in
    royalties, $50,000 from the sale of stock.
        Question. What kind of equity positions does AARC have with
    borrowers?
        Answer. AARC-funded companies are not ``borrowers'' in the
    traditional sense of the word, i.e. someone with whom a loan has been
    arranged. Loans usually carry a set repayment schedule and a pre-
    determined rate of interest that is assessed as the price of borrowing
    the money. Although authorized to make loans under the enabling
    legislation that established the AARC Center (now AARC Corporation),
    the Corporation's Board of Directors has decided not to use that
    authority. Instead, the Corporation makes investments much as any
    private sector venture capital fund does. The major differences between
    AARC's approach and the private sector are that AARC is more patient
    about when it expects to see some return and, overall, the rate of
    return is less demanding than that generally required by the private
    sector. This is because social externalities beyond project economics
    are inherent considerations in AARC investment decisions. Investment
    preference is given to projects that benefit rural communities, are
    environmentally friendly, and open non traditional markets for farm and
    forest products. Private venture capital firms do not make allowances
    for such considerations. Nevertheless, when AARC assumes an equity
    position within a company, it does so in the same manner as any private
    investor would. In some situations AARC has taken common stock, in
    others AARC has taken its own class of preferred stock. At times, when
    it has made sense to the structure of an investment, AARC has taken
    warrants against the future purchase of stock. In all cases, the Board
    of Directors negotiates an exit strategy. Ideally, AARC would cash out
    its equity position when a company either went public, or was acquired.
    If neither happens, AARC always has a negotiated put option, whereby
    the company agrees to repurchase the stock by a pre-determined future
    date. The repurchase price is typically calculated on the basis of a
    formula tied to a multiple of the company's net sales for a period of
    time prior to the repurchase.
        Question. Is there a maximum length of time AARC can hold equity
    positions?
        Answer. There is no set period of time for which AARC can remain an
    equity investor in a company. However, absent an Initial Public
    Offering (IPO) or acquisition, the repurchase strategy described above
    is usually set to occur within six to eight years from the date of the
    investment.
        Question. Does AARC intend to be self-sustaining at some point?
        Answer. Under the provisions of the 1996 Farm Bill, AARC has
    prepared a business plan that shows a self-sustaining fund by the end
    of 2002.
                                     ______

                     Questions Submitted by Senator Harkin
                       rural business-cooperative service
                         business and industry programs
        Question. Clearly, one of the biggest problems facing economic
    development in rural areas is capital. AARCC is crucial to providing
    venture capital for new nonfood products. But, we also need capital for
    a variety of economic ventures. And, for new mid sized companies, the
    B&I program is the only effective substantial USDA business capital
    assistance program that is available. Fortunately, it has proven to be
    both efficient and effective. Unfortunately, it is under funded. For
    this year, $1 of BA provides for about $93 in loan guarantees. We have
    had a reawakening of the B&I program over the past four years. Demand
    has been steadily rising since fiscal year 1994 and with the new
    provisions now in place, demand has been further increasing. Do you
    believe the B&I loan guarantee program has been crucial to generating
    job creating businesses in Rural America?
        Answer. Yes, so far this fiscal year, the loan guarantees made
    under the B&I program have created 4,710 jobs and saved 7,873 jobs. For
    the past two years, 17,787 jobs were created and 23,276 were saved. In
    1995, 8,076 jobs were created and 14,300 jobs saved. In 1996, 9,711
    jobs were created and 18,976 saved.
        Question. What is the current level of new loan requests that have
    been coming in to state offices over the past several months?
        Answer. At the beginning of fiscal year 1997, there were 217 B&I
    applications and preapplications on hand totaling $348,200,333 with an
    allocation of $680 million. Currently, there are 455 B&I applications
    and preapplications on hand totaling $779,540,930 with only
    $247,245,145 of the funds, allocated through the Rural Business-
    Cooperative Assistance Program, not obligated.
        Question. If there is not a request to have processing slow down or
    acquisition of new funds, when will the program run out of funds?
        Answer. There are requests for funds from the National Office
    reserve currently on hand totaling $33.23 million, which cannot be met
    because the reserve is out of money. Nine States have already exhausted
    their allocation and, out of the remaining State Offices, only 4 States
    have enough funds remaining in their allocation to cover the
    applications and preapplications that have been filed. Unobligated B&I
    guaranteed funds are scheduled to be pooled on July 11. If processing
    continues at its current pace and additional funds are not made
    available, we estimate that we will have exhausted funds by mid-August.
        Question. What options do you now see for shifting funds into this
    important program?
        Answer. The program is funded under the Rural Business Cooperative
    Assistance Program (RBCAP) along with the Business and Industry Direct
    Loan, Rural Business Opportunity Grant, Rural Cooperative Development
    Grant, and Rural Business Enterprise Grant Programs. We are currently
    evaluating options to administratively transfer RBCAP budget authority
    set-asides for these programs to the B&I Guaranteed Loan Program.
        Question. If the program was allowed to continue with normal
    approval timing of loan guarantees with a supplemental appropriation,
    what would be your estimate of the size of the loan guarantee program
    in fiscal year 1997?
        Answer. If the demand for the Business and Industry Guaranteed Loan
    Program continues in a linear progression from the October 1, 1996,
    level of $348,200,000 through the current level of $779,540,930 as of
    April 22, 1997, it is estimated that the total demand for the program
    for fiscal year 1997 will be nearly $1.6 billion. This estimate is
    based on the average daily increase in loan activity of $2.1 million
    for the remaining 161 days in fiscal year 1997 minus the appropriated
    funds not obligated.
        Question. What do you think the likely demand for the program would
    be in fiscal year 1998, if it were not restricted by budget
    limitations?
        Answer. Following the same assumptions used in the previous answer
    of an average daily increase in loan activity of $2.1 million plus the
    existing demand of $779,540,930, we estimate the size of the program
    would be $1.5 billion in fiscal year 1998 if unrestricted by budget
    limitations.
        Question. For maintaining the integrity of the B&I loan portfolio,
    what kind of exceptions to authority, waivers, are there to standard
    policy? What kind of assistance to state directors is being provided to
    maximize the quality of the portfolio?
        Answer. The Administrator has been delegated the authority, on
    individual cases, to grant an exception to any requirement or provision
    of regulations, which is not inconsistent with applicable statutes,
    where the application of the requirement or provision of the regulation
    would adversely affect USDA interests. Exception have been granted on
    individual projects where USDA's minority business outreach initiative
    would have been adversely impacted if the exceptions were not granted.
        Training assistance has been provided and is available to Rural
    Development State personnel to maximize the quality of the portfolio.
    In addition, training material is being developed to assist State
    personnel in training certified or non-bank lenders that are new to the
    program. A ``jump team'' of qualified, experienced, field personnel has
    been identified to provide assistance to State Directors on processing
    and servicing situations as needed. We perform annual business programs
    assessment reviews on state office activities regarding the business
    programs including servicing and portfolio management. Also, RBS is
    developing loan portfolio improvement to management procedure for
    implementation. This will coordinate early warning systems into the
    existing activity performed by our Lenders, State Offices and National
    Office on servicing our portfolio. Currently our management and
    maintenance of our portfolio by the National Office Staff have allowed
    us to reduce our loan delinquency to 7.5 percent of the outstanding
    loan portfolio of $1.5 billion.
                                  cooperatives
        Question. What do you see as the biggest obstacle facing people out
    in the countryside who want to develop cooperatives?
        Answer. Two major barriers that people face are organizational
    ability and the need for start-up financing. Understanding what a
    cooperative business is and how to approach the organization of
    cooperatives are obstacles that can be addressed through various types
    of educational and technical assistance. Often the most valuable
    assistance is helping people understand their roles as members
    (potential members) in organizing and operating the cooperative.
        The other barrier, financing, relates to the development process
    and business start-up. Lack of readily accessible funds to carry out
    phases (a business plan, make financial projections, and legal
    structure) of the development process are often major obstacles to
    start-up groups. This is particularly true of many low resource groups
    who are exploring cooperative business structure.
        Question. What is the biggest obstacle USDA faces as it attempts to
    promote cooperative development in the field?
        Answer. The biggest obstacle USDA face is the insufficient number
    of highly qualified and experienced staff with the responsibility of
    providing cooperative development assistance and programs at the
    National and State Offices. Cooperative development requires advanced
    skills in cooperative structure, finance, business planning,
    facilitation and small group process, and leadership development. There
    is limited availability of such expertise in USDA today. Development of
    a skilled staff to do cooperative development work will require
    training (both formal and on-the-job) and a commitment to recognize
    cooperative development as a primary (not secondary) job function. It
    must also be recognized that to develop this expertise will take time,
    perhaps 3-5 years.
        Also, we must begin to measure the outcome of our cooperative
    development work in providing technical assistance. For many State
    staffs, performance is based upon number and amount of loans and grants
    processed, jobs created, delinquency rates, etc. Cooperative
    development (technical) assistance is measured by different criteria in
    meeting felt needs by farmers and other rural residents. Recognized and
    accepted measures are being implemented in the field to encourage staff
    to promote cooperative development
        Question. Given the experiences in promoting considerable economic
    development through the creation of cooperatives by federally-sponsored
    programs that fostered rural electric cooperatives, telephone
    cooperatives, the farm credit cooperative lending system, etc., how
    might we undertake a similar approach to promoting cooperatives as an
    economic development tool today?
        Answer. The concept of using programs similar to that used in
    sponsoring electric and telephone cooperatives is excellent. The
    cooperative approach is far from exhausted as a developmental tool for
    strengthening rural America. The potential use of cooperatives for
    fulfilling a wide variety of economic and social needs in rural America
    is significant. To accomplish this, several coordinated steps are
    needed. First, the Department must be given the authority to provide
    technical and other assistance to all types of rural cooperatives, in
    addition to its present authority to work with agricultural
    cooperatives. Secondly, development of an extensive educational program
    about the cooperative method of conducting business is an essential
    ingredient to successful program delivery. In addition, like the
    electric and telephone cooperative success stories, groups forming
    cooperatives of all types must have adequate equity capital and access
    to sources of debt capital. A coordinated strategy of promotion,
    technical assistance, and funding can build a rural cooperative system
    that will make a real development impact on our most needful rural
    areas.
        Question. Cooperatives, both existing cooperatives and new, start-
    up cooperatives, may cross State lines. Does this create problems in
    generating State matching funds?
        Answer. While some cooperatives have members located in more than
    one State (a few even have Canadian memberships), a cooperative's
    headquarters address is always in a single State. Therefore, from the
    perspective of programs offered by Cooperative Services and our State
    Cooperative Development Specialists, multi-state cooperative membership
    does not create a State matching funds problem. We recognize that many
    cooperatives to be effective must be regional in nature such as efforts
    to organize livestock producers in the Northern Plains States. This
    requires more flexibility and ability to adapt and coordinate
    activities by State Offices.
        Question. What can USDA do to take the cooperative model to other
    government agencies and make it part of their development outreach
    programs? Would it be logical to provide set-asides for certain other
    agencies, requiring them to commit a specific minimum of their
    development dollars to cooperative development?
        Answer. USDA can partner with other agencies at the Federal, State,
    and local level to insure that information on the cooperative form of
    business is being fully disseminated to all those who might benefit
    from its use. Such partnering could be encouraged by the Congress as it
    authorizes funding for all development programs. We encourage a
    strategy which recognizes USDA's present lead agency status with
    respect to cooperative development activities and builds upon it
    through increased funding and broader authorities. Other Department's
    cooperative developmental programs are encouraged to work with USDA to
    insure the provision of strong programs.
        While earmarking certain portions of funds for cooperatives will be
    beneficial, we also encourage an approach that focuses on reducing
    regulatory barriers to program access so that cooperatives can compete
    for program funds on an equal footing with other forms of enterprise.
        Question. USDA has developed a number of public/private
    partnerships in rural America? What have been your most successful,
    creative efforts to date and to what extent can these success stories
    be made widely used models across the country?
        Answer. We feel we have great success over the years in working
    with the land grant university system in carrying out programs of
    research, education, and technical assistance that serves the needs of
    local residents. Through cooperative agreements, we have been able to
    leverage financial resources and expertise in a manner that has been of
    real benefit to the rural community. We have maintained active
    partnerships with cooperative centers organized as non-profit private
    sector organizations in providing a range of cooperative education
    activities and programs. Through extensive joint planning, program
    development, and sponsorship, we have been able to make significant
    contribution to a greater public understanding of cooperatives through
    such diverse programs as the Cooperative Development Forum, the
    National Institute on Cooperative Education, the Graduate Institute of
    Cooperative Leadership, and a range of other programs.
        Question. I believe that RDA should be able to provide assistance
    to cooperatives without regard to specific agricultural linkages in the
    same ways RDA can assist other forms of business enterprises. I
    understand USDA is considering such an expansion in authority. What is
    the status of those plans? If so, what plans are there to ensure that
    additional personnel and other resources are allocated to take on the
    work load?
        Answer. Yes, we are seeking legislation which would expand the
    authority of Cooperative Services to provide the same type of advice
    and assistance to non-agricultural rural cooperatives as they are
    currently doing for agricultural cooperatives. These include applied
    research, technical assistance to existing cooperatives, assistance to
    newly developing cooperatives, education and training, and statistical
    services. The legislative package for this expanded approval has
    cleared the Department and is awaiting approval at OMB.
        We are examining ways of ensuring that additional personnel and
    other resources are available to handle this additional work. Since so
    many of the missions carried out by Cooperative Services are human-
    intensive, we recognize that additional personnel will be needed such
    that current services to agricultural cooperatives do not deteriorate.
        Question. A major obstacle to cooperative development is finding
    pre-development funds to get a project started. What suggestions do you
    have for how USDA can help provide pre-development funds? Have you
    considered generating a revolving loan fund for that purpose?
        Answer. First, we want to point out that it is our belief that
    strong cooperatives are more likely to be developed if the potential
    members see the need for the cooperative rather than for a
    ``developer'' to try to ``sell'' the idea. Through State and National
    Offices, where RBS can best assist is providing technical advisory
    assistance at no cost to a developing group, after the economic need is
    determined and thereby reducing the need for pre-development funding
    for projects that are top-down advocacy rather than bottom-up member
    driven. This technical assistance is often in the form of providing a
    feasibility study for which groups otherwise seek outside funding.
    Further, strong cooperatives usually require financial commitments from
    their members, thus the need for pre-development funding is often at
    the member or producer level. With this in mind, the FAIR Act
    authorized the use of Business and Industry loan funds to be used for
    producers to purchase stock in start-up cooperatives. Additionally, the
    Rural Cooperative Development Grant Program, operated by RBS, helps
    fund Cooperative Development Centers who in turn help do some of the
    pre-development activities. Further, the revolving fund program
    operated in conjunction with Rural Utilities Service's borrowers is
    used as a source of funding some pre-development activities. We are
    receptive to consideration of a revolving loan program for cooperative
    development purposes, although such a program would be competing with
    others for scarce budget resources.
                         intermediary relending program
        Question. The IRP program is allocated on a project by project
    basis through a national pool. Has the Department considered allocating
    a portion of those funds to the states under an administrative formula?
    If not, why not?
        Answer. There has been considerable internal Agency discussion
    about changing to a system of allocating IRP funds to the Rural
    Development State Offices by administrative formula, rather than
    through a national competition. There is a significant amount of staff
    support for such a change. However, there are also several reasons why
    such action has not yet been taken.
        The current program regulations require applications to be ranked
    on a national basis and funded in order of priority ranking. Therefore,
    it would be necessary to go through the rulemaking process, with
    opportunity for public comment, before a change could be implemented.
    The issue was not considered prior to publishing a proposed rule for
    new IRP regulations in the Federal Register in January 1995 and was not
    the subject of public comment on that proposed rule. The Agency is
    still working on that rulemaking action and wants to publish a final
    rule to implement that action before developing a new proposed rule for
    additional program changes.
        The existing requirement for a national ranking was put into the
    program regulations in 1990 at the insistence of the Office of
    Management and Budget (OMB). OMB thought a national ranking was the
    fairest way to distribute the small amount of funds expected to be
    available for IRP. How current OMB staff would react to a proposal to
    remove that requirement is not known.
        Recent appropriation levels are still small enough that formula
    allocation to State Offices would cause fundamental changes in the
    program. For example, if the fiscal year 1997 appropriation amount of
    $37,155,765 was allocated according to the formula used by the Agency
    for other business programs, very few State Offices would receive an
    allocation as large as $1 million, which has been the approximate
    average amount of one IRP loan. The average size of IRP loans would be
    reduced dramatically. The amount available to some State Offices would
    not be sufficient to provide adequate funding to justify the creation
    and administration of a revolving fund by an intermediary.
                             rural housing service
        Question. The Rural Housing Service budget for personnel is being
    slashed with the hope that significant savings can be realized from the
    DLOS single family servicing. While there are many demands on the
    federal budget, the severe reduction in personnel in RHS could
    jeopardize the government's multi-billion dollar investment in multi-
    and single-family housing. Even if additional funding is not possible,
    the Agency needs to maintain its skilled and knowledgeable personnel in
    the complex multi-family program. To what extent is the USDA
    considering this important question as it develops possible further
    USDA Reductions-In-Force.
        Answer. Senator Harkin, when we made the decision to implement the
    Dedicated Loan Origination and Servicing System (DLOS), one of the
    primary objectives was to mitigate reductions in our staffing levels.
    As you may be aware, had the servicing of these loans been shifted to
    the private sector, as was strongly suggested by some, the loss of
    staff would have been in the neighborhood of 2,700. Implementing the
    system internally enabled us to hold the staff reduction to only 600
    and provided the opportunity to transfer 900 other positions, no longer
    needed for servicing single family housing loans to other functions
    that were critically understaffed, one of which was multi-family
    housing. The majority of the positions transferred went to this program
    and this was a result of decisions reached jointly with the program
    staffs in Washington and the State Directors.
        Regarding the second part of your questions and future reductions-
    in-force, it is my policy that a reduction in positions involved in the
    delivery and servicing of our programs will be considered only after
    all other options are exhausted. As you know, we are in the process of
    a reduction-in-force presently for those positions that are to be
    eliminated with the implementation of DLOS. The scope of this
    particular reduction-in-force was held to a minimum with the help of
    the Appropriations Committee's enactment of voluntary separation
    authority beginning in fiscal year 1997. We limited participation in
    the voluntary separation to those states that would need to conduct a
    reduction-in-force associated with DLOS.
        Question. The single family direct loan program must be preserved
    at an appropriate level without the vast difference in loan volume
    experienced from year-to-year due to changing subsidy rates caused by
    variations in interest rates. This is particularly important regarding
    this program where Realtors and banks need to acquire long term
    relationships in order for the program to smoothly function over the
    long term. Will the USDA provide the Committee with their best
    judgments of the likely program to budget authority rate for fiscal
    1998 prior to the subcommittee's markup and conference this year?
        Answer. We would be most happy to keep the subcommittee informed of
    the changes in the subsidy rate.
                                     ______

                      Questions Submitted by Senator Byrd
                            rural utilities service
                             water and waste loans
        Question. The proposed budget for the water and waste disposal
    accounts remains approximately at the fiscal year 1997 level. With the
    1995 Water 2000 report identifying the need for some $10 billion in
    water and waste disposal projects, why has there been no increase in
    funding for the water and waste disposal program?
        Answer. There is great need in rural America for decent, safe
    drinking water, as reflected in the Water 2000 needs assessment. There
    continues to be a heavy demand for water and waste disposal funds.
    Currently the RUS has on hand $2.72 billion in loan applications and
    $1.27 billion in grant applications. The requested fiscal year 1998
    water and waste disposal funding levels take into consideration all the
    rural development needs in rural America. The requested funding level,
    combined with funds from State, other Federal, and private sources will
    help achieve measurable progress in meeting the water and waste needs
    of rural people. The base amount of funding for water and waste grants
    and loans has remained stable. However, since these programs are
    included in the Rural Community Advancement Program (RCAP) there is
    funding flexibility between the water and waste grant and loan
    programs. Also up to 25 percent within a State's allocation can be
    transferred between program areas within RCAP (water and waste,
    community facilities, and business and industry). Further, the matching
    and mandatory grants to States must be used for RCAP program purposes,
    so the water and waste program level will very likely be enhanced above
    the amount currently projected if States have a priority need for water
    and waste grants and loans.
        Question. Under your proposed budget, when will the goals of Water
    2000--to provide reliable, clean water for rural Americans--finally be
    reached in the nation? And West Virginia?
        Answer. The RUS has not established a specific time frame for
    achieving the goals of Water 2000 in the nation or West Virginia. This
    will be an on going initiative that targets resources from the rural
    water and waste disposal loan and grant program to all communities with
    the most serious needs, as soon as possible within overall budgetary
    constraints.
        Question. If additional funding were provided for Rural Development
    programs, would you agree with me that priority should be given to the
    water and waste disposal accounts?
        Answer. Certainly providing a water supply or waste disposal system
    to eliminate some acute health or environmental problems is a very
    important first step for many communities. However, attempting to set
    priorities among various services when much of the population that we
    serve has been without water supply or waste disposal, housing, health
    care, or employment for decades is very difficult. We think priorities
    should be set by the communities and the people they serve, and we are
    now attempting to work with communities and their residents in
    developing plans to determine their priorities rather than simply
    process loan and grant applications. Implementing the Rural Community
    Advancement Program goes to the heart of that effort. The communities
    with whom we have worked have found the process to be very helpful and
    responded very favorably to this process.
        Question. In your prepared statement, you observe that this budget
    reflects the President's belief that jobs create opportunity and long-
    term community stability. How do you expect to achieve these economic
    goals without providing adequate funding for essential water and waste
    disposal systems?
        Answer. Given the budget constraints that all of us are forced to
    work within, we think we have submitted a very responsible budget,
    particularly with regard to water and waste disposal grants and loans.
    This funding level along with the total program level for all Rural
    Development, will be adequate to achieve job opportunities and
    community stability for Rural America.
                      rural community advancement program
        Question. Your budget calls for funding for the RCAP, a new funding
    initiative. Given the current shortfalls in funding available to meet
    needs already identified within the community facilities, water and
    waste disposal, and business assistance accounts, why pull funds from
    these critical programs to establish a new funding mechanism?
        Answer. Senator Byrd, the 1996 Farm Bill authorized the Rural
    Community Advancement program (RCAP) as a means of providing
    flexibility in the administration of the programs you referenced. This
    flexibility is badly needed by our State Directors as they attempt to
    stretch shrinking Federal resources further to meet growing demand for
    these programs and to target their funds appropriately.
        Question. What is the cost associated with establishing RCAP?
        Answer. There is no cost associated with implementing RCAP. RCAP
    only changes how we administer our programs.
                                     ______

                      Questions Submitted by Senator Leahy
                       rural business-cooperative service
                          business and industry loans
        Question. On March 7, the Vermont Rural Development office received
    a letter from Rural Business Cooperative Service Administrator, Dayton
    Watkins announcing that 50 percent of all unobligated Business and
    Industry Loan Guarantee program funds should be returned immediately to
    the national office for re-pooling. This unwarned early re-pooling cost
    Vermont $600,000 and New Hampshire $2 million. The letter claimed this
    was necessary to address a backlog of projects. Early re-pooling causes
    significant problems for Vermont. First, the State's strategic plan
    targets new construction in rural areas which requires time consuming
    project development. Second, because of the short construction season,
    businesses often do not approach Rural Development for funding until
    close to the beginning of the building season in March or April. The
    Department normally ``re-pools'' funds in July. Why did Administrator
    Watkins make the decision to change the rules on the states in
    midstream? Can I have your assurance that states will not be subjected
    to this kind of unexpected and unplanned for program change in the
    future? What procedures does USDA currently have in place to ensure
    that field offices are not taken off guard by sudden changes in program
    funding or operation?
        My concerns about moving up re-pooling dates is not limited to the
    B&I program. The factors which contribute in Vermont to the need for
    availability of program funding through the Spring are equally
    applicable to many other Rural Development programs. I would repeat my
    first question with regard to the steps that the office has in place to
    protect state funds from unexpected early re-pooling for all Rural
    Development programs.
        Answer. The pooling of the Business and Industry (B&I) Guaranteed
    Loan Program authority has normally been executed in two stages, the
    first occurring in April and the second in August each year. In an
    effort to give State Directors more flexibility in managing their
    program resources, the Administrator decided to have only one pooling
    in fiscal year 1997, which was to occur July 11, 1997. However, because
    of the tremendous demand for the B&I program nationally, it became
    necessary to implement an early pooling to accommodate those demands.
    By the end of February 1997, many States had used their entire
    allocation and needed additional guarantee authority in order to keep
    their B&I program open and to enable them to maintain new relationships
    with business communities and lenders. Other States have not used or
    had application activity in amounts that would use their allocation. In
    addition, the National Office Reserve was completely exhausted of
    funds, yet, there was a backlog in demand from States for the reserve
    resources. Out of several options presented to the Administrator to
    handle this program, the Administrator chose to pool fifty (50 percent)
    percent of the balance resulting from subtracting the preapplications/
    applications on hand from the unobligated B&I allocation for each
    State.
        At the time of pooling, Vermont and New Hampshire had a total of
    $2,698,000 and $4,074,000, respectively, in unobligated B&I authority,
    with only $1.5 million of preapplications/applications on hand in
    Vermont. New Hampshire had no preapplications/applications. The amount
    pooled for Vermont and New Hampshire, respectively, was $599,000 and
    $2,037,000. This left a total of $2,099,000 and $2,037,000 for the two
    States until additional resources could be made available.
        According to our latest B&I report, Vermont has obligated $520,000
    of its fiscal year 1997 allocation, and New Hampshire has not obligated
    any funds. While Vermont and New Hampshire have approximately $5
    million and $4 million in preapplications, we hope to have authority to
    cover these demands after the July 11, 1997, pooling.
        With regard to the issue of advance notification to State Directors
    regarding the B&I program status, in the future we will notify our
    State Directors through their Executive Committee of the
    Administrator's plans. In this instance, the Administrator did not have
    the time to give advance notice to States of this action.
        Also, please note, that procedures for the field office funding
    allocations are administrative in nature, which offers the
    Administrator flexibility in administering programs in the Rural
    Business-Cooperative Service agency. The authority used is executed in
    a prudent, rational, and logical manner always considering the
    potential impact on all rural America and the States responsible for
    making programs available to them. It has been our experience in the
    past that some States do not use all of their B&I allocations, while
    others may use much more. If the Administrator did not have flexibility
    in managing the RBS programs, it's probable that we would not utilize
    all of our B&I authority nationwide.
                               rural development
                              field restructuring
        Question. The Department has made significant progress in meeting
    staff reduction goals as required by the USDA Reorganization bill that
    Senator Lugar and I authored in 1994. In fact the Rural Development
    Office in particular has exceeded those goals--in Vermont by 20
    percent--with the implementation of centralized loan servicing. I
    commend you for your commitment to increasing the efficiency of USDA
    offices--that was also the driving goal behind my Reorganization bill
    three years ago. However, I want to be sure that additional staff
    reductions do not come at the expense of customer service. The Vermont
    Rural Development office in particular is undergoing major changes to
    maximize efficiency with significantly reduced staff. Where once seven
    offices served Vermonters, by the end of the year only one central
    office will remain. What steps is the Department taking to encourage
    feed-back from field offices on the restructuring? How are you
    monitoring any changes in office performance or program participation
    to make sure that the level of customer service is being maintained?
        Answer. We appreciate and share your concern that the quality of
    service received by our customers should not be reduced as a result of
    reduced staffing levels. While our current staffing levels will not
    allow us to maintain the number of offices we have had in the past, we
    are providing our field staff with training to assist them in
    responding to the transition and to customer service changes that may
    be required. This training is designed to: 1) help our field employees
    cope with the changes brought about by the reorganization and 2)
    provide them with the skills required to satisfy our customers' needs
    from the downsized structure. This training is being provided at the
    local USDA Service Center level and includes employees from the Farm
    Service Agency (FSA) and the National Resources and Conservation
    Service (NRCS), as well as Rural Development employees. As part of this
    training session, feedback is solicited from field office employees on
    issues related to the downsizing and barriers to providing good
    customer service are identified. This information will be helpful in
    determining what changes are needed in processes or organization to
    ensure quality customer service is provided. We will also be monitoring
    quality of service performance by obtaining periodic feedback directly
    from customers through mail or telephone surveys or through focus
    groups.
                             rural housing service
               dedicated loan origination service system (dloss)
        Question. The 1996 Farm bill eliminated much of the administrative
    work required by many Farm Service Agency programs. The changes should
    mean that far fewer employees will be needed at FSA to run these
    programs. Are you working with other Department offices like FSA to
    make sure that staffing needs are addressed Department-wide and not on
    an agency by agency basis?
        Answer. Rural Development is working with both FSA and NRCS to
    ensure that, wherever possible, administrative activities are shared.
    Joint task forces are looking at short and long term procedures that
    can improve the support necessary to deliver our programs. We hope that
    in the long run this will result in economies of scale in staffing
    needs devoted to non-program activities in the field. We also hope that
    this effort will result in some standardization of these policies among
    the three agencies that will reduce confusion from inconsistencies for
    both our employees and our customers.
        Question. I understand that the Department expects the centralized
    loan servicing system to be fully operational by the Fall of 1997. Have
    you experienced any problems so far in the transition to the
    centralized system? Has the office noticed any changes in program
    participation, the time required to process loans, program costs, or
    delinquency rates to date? What steps are you being taken to ensure
    that changes like this will be tracked and addressed?
        Answer. The Department does expect to be fully operational by
    October 1, 1997. The development of the Centralized Servicing Center
    and conversion of the Rural Housing Service Single Family Housing
    portfolio from the old system to the new centralized environment
    continues to progress on time and on budget. Any project as large and
    aggressive as the reinvention of an $18 billion, 700,000 plus loan
    portfolio would experience some problems. Nothing, however, has arisen
    to date that would throw the conversion off track or off schedule.
        As of April 15, 1997, the Agency is on track for full utilization
    of loan funds and in fact there continues to be a shortage of funds
    needed to finance all pending applications.
        The new UniFi loan origination system has been well received in the
    field. UniFi is a state-of-the-art windows-based program which
    automates much of what was a manual process. Therefore, the time
    required to process loans is reducing and will continue to improve as
    the field becomes more experienced on the new system.
        The conversion process will continue through September of 1997.
    Therefore, it is too soon to make any definitive judgments as to
    impacts on program costs or delinquency rates.
        The new commercial-off-the-shelf system that the Agency purchased
    from Fiserv Mortgage Systems, which has been enhanced to accommodate
    the unique nature of the Rural Housing Service Single Family loan
    program, will be able to track the status of the portfolio in a much
    more comprehensive manner then ever before in the history of the
    program. We will be able to more accurately monitor every area of the
    program including costs and delinquencies. The DLOS system will give us
    much improved checking and management information data, for example:
        We will be able to monitor first-year delinquencies by county which
    allows the Agency to better evaluate underwriting practices, and
    respond to delinquencies much faster, thereby, improving the
    probability of the borrower to become a successful homeowner and reduce
    cost to the taxpayer.
                               rural development
        Question. In 1995 the National Science Foundation completed a study
    on measuring poverty. The report concluded that the way the government
    measures poverty today is inaccurate and that shelter costs among other
    things should be factored into the measure. The findings of a recent
    report by the Peace & Justice Center in Vermont supports the argument
    that poverty in Vermont is underestimated. Other states have conducted
    similar surveys, with largely similar results. Many USDA programs
    including those run by Rural Development base state program funding on
    the poverty measure. The Office on Management and Budget has recently
    formed an inter-agency task force to decide if changes to the poverty
    measure are needed. Is Rural Development participating in that task
    force? Would you consider alternatives to the current poverty measure
    to determine funding needs?
        Answer. We would certainly be willing to consider alternative
    measures of poverty. Rural Development has not been asked to
    participate in the inter-agency task force on poverty. The Office of
    Management and Budget advises that they have formed a steering
    committee. We will ask to be added to the committee.
        Question. I was disappointed that Rural Development chose to use
    its portion of the fiscal year 1997 Fund for Rural America for program
    backlogs. While some supplemental funding was legitimately needed, in
    the housing program in particular, I feel that this opportunity to do
    something innovative was largely missed. Will the office be looking for
    more creative uses of the Fund for Rural America in fiscal year 1998?
    Will you work with Congress in determining an appropriate use for the
    Fund? Will Rural Development provide adequate time between the
    announcement of how the Fund will be used and the distribution of that
    funding to allow states with projects under development to submit
    applications for consideration?
        Answer. Senator Leahy, as you are aware, the provisions of the Fund
    for Rural America require that the rural development portion of the
    Fund be used through existing programs which means that existing
    statutes and regulations apply. This limits our ability to use the
    funds for innovative purposes. However, as I am sure you will agree,
    the distance learning/telemedicine grant program is one of the most
    innovative and effective uses of funds. It combines the advancement of
    technology with the need to provide higher quality education in rural
    areas that will allow rural students the opportunity to be competitive
    in an economy increasingly dependent on technology.
        It is difficult to weigh the need for innovation against providing
    basic services that residents of rural areas have been without, such as
    safe drinking water in their homes and adequate housing. However, we
    would be happy to consider any suggestions you have in using the funds
    in more innovative ways. As you are aware many members of Congress
    urged the Department to address the substantial backlogs of
    applications in many of our programs and we attempted to balance the
    two demands, along with addressing the funding shortfall in the single
    family housing program.
                       rural business-cooperative service
                        intermediary re-lending program
        Question. The Department has been working on changes to the
    Intermediary Re-lending program for two years. These changes are needed
    to eliminate the $2 million cap for successful lending organization,
    and to streamline the operation of the program. What is the status of
    the IRP proposed rules? What steps remain before the final rule will be
    ready? When does the office expect the final rule to be approved?
        Answer. The Final Rule for the Intermediary Relending Program has
    recently cleared the USDA Office of the General Council. It is in the
    final steps of the process of being cleared through the Department.
        The Final Rule will then be forwarded to the Office of Management
    and Budget (OMB) for review and clearance. OMB has up to 60 days to
    review and clear the regulation.
        Upon OMB clearance, the Final Rule will be published and effective.
                               rural development
                      rural community advancement program
        Question. I understand that Rural Development's fiscal year 1998
    budget request incorporates the RCAP authorized in the 1996 Farm Bill.
    Specifically how will funding be divided among the RCAP programs, and
    what steps has the Department taken to ensure that transfers between
    RCAP programs will be documented and tracked? Has the Department
    noticed any change in the way states operate programs in the RCAP or
    spend money from those programs?
        Answer. The budget documents provide a table of the programs and
    requested funding levels for the RCAP. The Rural Development Mission
    Area has developed a simple software package to track transfers. This
    software will be made available to State Directors and Agency
    Administrators so they can discuss suggested transfers and both parties
    will be able to examine the effects of the transfers simultaneously. If
    a transfer is agreed to, the State Director will transmit a formal
    request to the appropriate Administrators for concurrence and the
    transfer then can be executed. The software will summarize transfers by
    program and by state in order to ensure the 10 percent national cap on
    transfers is adhered to. In fiscal year 1996, 44 transfers were made in
    the Rural Utilities Assistance program, 34 of the transfers involved
    shifting budget authority from grants to loans, thereby increasing the
    number of loans that were made. One state shifted all of the grant
    funds to loans because there was not a current demand for grant funds.
    The remaining transfers shifted small amounts of budget authority from
    the loan program to the grant program primarily to complete financing
    for specific projects. In every instance, the funds were used wisely
    and effectively and the State Directors are to be commended for their
    decisions.
        Question. The Federal Agriculture and Improvement and Reform Act
    authorized a rural capital demonstration program as a way to get more
    private sector investment into rural business enterprises. Both the
    Senate report and the conference report on the fiscal year 1997
    Agriculture Appropriations Act provided for funding of this
    demonstration out of the Business and Industrial loan program. Instead,
    USDA has just issued an `Advanced Notice of Proposed Rulemaking'. This
    appears to me to be little more than a delaying tactic. What is the
    reason for the delay in going forward with this program? Is there a
    need for corrective legislation? How can we expedite the implementation
    of this important program?
        Answer. Senator Leahy, the fiscal year 1997 Agriculture
    Appropriations Act blocked implementation of the venture capital
    demonstration that you have referred to. The Advance Notice of Proposed
    Rulemaking to which you refer is not a delaying tactic, in fact, it is
    quite the opposite. The staff of the Rural Business-Cooperative Service
    that will administer the program has no experience with venture capital
    funds and with the notice is soliciting ideas from interested parties
    about how best to administer such a program. As you are aware, venture
    capital is very risky and we want to be certain we take every step
    possible to protect the public's interest.

                              Subcommittee Recess

        Senator Cochran. Thank you all very much for your
    cooperation with the subcommittee and your attendance at this
    hearing.
        Our next hearing will be on Tuesday, April 22, at 10 a.m.,
    in room 138 of the Dirksen Senate Office Building. At that
    time, we will review the budget request for the Department's
    research, education, and economics programs. Until then, the
    subcommittee stands in recess.
        [Whereupon, at 11:30 a.m., Tuesday, April 15, the
    subcommittee was recessed, to reconvene at 10:10 a.m., Tuesday,
    April 22.]

    AGRICULTURE, RURAL DEVELOPMENT, AND RELATED AGENCIES APPROPRIATIONS FOR
                                FISCAL YEAR 1998

                                  ----------

                            TUESDAY, APRIL 22, 1997

                                           U.S. Senate,
               Subcommittee of the Committee on Appropriations,
                                                        Washington, DC.
        The subcommittee met at 10:10 a.m., in room SD-138, Dirksen
    Senate Office Building, Hon. Thad Cochran (chairman) presiding.
        Present: Senators Cochran, Gorton, Burns, and Bumpers.

                           DEPARTMENT OF AGRICULTURE

    STATEMENT OF DR. CATHERINE E. WOTEKI, ACTING UNDER
                SECRETARY, RESEARCH, EDUCATION, AND
                ECONOMICS
    ACCOMPANIED BY:
            DR. FLOYD P. HORN, ACTING DEPUTY UNDER SECRETARY, RESEARCH,
                EDUCATION, AND ECONOMICS
            DENNIS KAPLAN, DEPUTY DIRECTOR, OFFICE OF BUDGET AND PROGRAM
                ANALYSIS

                         Agricultural Research Service

    STATEMENT OF DR. EDWARD KNIPLING, ACTING ADMINISTRATOR

          Cooperative State Research, Education, and Extension Service

    STATEMENT OF DR. B.H. ROBINSON, ADMINISTRATOR

                           Economic Research Service

    STATEMENT OF KELLEY WHITE, ASSOCIATE ADMINISTRATOR

                    National Agricultural Statistics Service

    STATEMENT OF DONALD BAY, ADMINISTRATOR

                                Opening Remarks

        Senator Cochran. The subcommittee will please come to
    order. We welcome all of you today to our hearing reviewing the
    President's budget request for the Department of Agriculture,
    specifically in the area of agriculture research, education,
    and economics. This includes the Agricultural Research
    Service's budget; the budget of the Cooperative State Research,
    Education, and Extension Service; the Economic Research
    Service; and the National Agricultural Statistics Service.
        Our witnesses this morning are Dr. Catherine Woteki, who is
    Acting Under Secretary for Research, Education, and Economics;
    Dr. Floyd Horn, Acting Deputy Under Secretary for Research,
    Education, and Economics; Dr. Edward Knipling, Acting
    Administrator for the Agricultural Research Service. I am not
    sure about the titles of the rest of the witnesses. They
    probably are all Ph.D's in something, but also here with us are
    Dr. Bob Robinson, Administrator, Cooperative State Research,
    Education, and Extension Service; Kelley White, Associate
    Administrator for the Economic Research Service; Donald Bay,
    Administrator for the National Agricultural Statistics Service;
    and Dennis Kaplan, with the Office of Budget and Program
    Analysis of the Department of Agriculture.
        We appreciate very much your attendance at the hearing and
    your cooperation with our subcommittee. We have your written
    testimony which we will put in the record in full, and
    encourage you to make any summary or additional comments you
    desire. Then we will have an opportunity to take questions from
    the subcommittee members.
        Before calling on you to proceed, I am going to recognize
    the distinguished ranking member of the committee, Senator
    Bumpers from Arkansas, for any comments that he might have.
        Senator Bumpers. Mr. Chairman, I do not have an opening
    statement.
        Senator Cochran. Senator Burns, do you have any comments?
        Senator Burns. Just one. Thank you, Mr. Chairman, for
    holding this hearing. It is ironic that just down the hall I am
    also involved in a hearing with the Office of Science and
    Technology Policy, which is Dr. Jack Gibbons and Dr. Neal Lane
    and the National Science Foundation. It is just down the hall.
        I made the statement 3 years ago that I was concerned about
    the declining dollars in agricultural research, and I am still
    concerned about that, and said at that time when I was serving
    on the authorizing committee over in Commerce and Science and
    Technology that maybe we are going to have to use some of their
    resources and funds to really pick up the shortages that were
    lacking in agriculture, because I do not think there is any
    other part of science and technology that is any more important
    to us as a society and as a country than the work that we do in
    agricultural research, and also in extension and getting that
    information out.
        But it is pretty hard to get people excited about
    agricultural research when their mouths are full and their
    stomachs are full, but we can see the day--and all you have to
    do is travel around the world.
        Just go around the world and see a system like Russia, that
    has fallen apart because of the lack of interest in their
    agriculture. In fact, theirs is a society that cannot even feed
    themselves and have all kinds of prospects to do so.
        So I think it is very, very important, and I am interested
    in hearing from our witnesses today, but I appreciate the
    attitude and the working relationship, especially with Dr.
    Horn, and what we have tried to do in agriculture research. We
    still have a long way to go to get it at the levels that we
    both would like to see it, because we both, I think, share the
    same feeling about the subject.
        Thank you very much.
        Senator Cochran. Thank you, Senator.
        Senator Bumpers. Mr. Chairman, may I make just one
    statement?
        Senator Cochran. Senator Bumpers.
        Senator Bumpers. I think I have made this before to this
    committee, but it is so good it is worth repeating. I have been
    increasingly concerned about the amount of money we put into
    agricultural research. It seems to me that we have got a real
    train wreck coming, and that we have yields that are either
    static or in 1995 a lower yield per acre on corn for the first
    time in modern history.
        I think that when it comes to research in agriculture we
    should reflect on this. We spend $36 billion a year on trying
    to make things explode down at the Defense Department in
    research. We spend $13 billion at the National Institutes of
    Health, which incidentally should be considerably higher. We
    spend $12 billion a year on space, which we have gotten very
    little from and in the future we will get even less, and we
    spend $1.2 billion a year on agricultural research. Dr. Horn,
    is that about right?
        Dr. Horn. That is correct.
        Dr. Woteki. That is correct.
        Senator Bumpers. When you consider the fact that of the 438
    million arable acres of land in the United States, and the fact
    that we are taking 3 or 4 million acres out a year for
    highways, suburban sprawl, shopping centers, you name it, so
    what you have is a static production level, yield, you have a
    loss of your crop base to urban sprawl, and finally, there will
    be about 10 million more people in the United States about 10
    to 15 years from now than there are now, when you put all those
    together, to call it a train wreck is probably being moderate.
        Now, this is not going to happen overnight, but all I am
    saying is that since we have the Agricultural Research Service
    here this morning I wanted to make that point and say again
    there is not anything wrong with Congress or anything wrong
    with this country except misspent priorities.
        When I consider the fact that we are putting so much in
    space and so much in the military, and as I say,
    explosionmaking, and yet you have a really macroproblem staring
    us in the face, I say our priorities are wrong.
        Thank you, Mr. Chairman.

                              Prepared Statements

        Senator Cochran. Thank you, Senator Bumpers. We have
    prepared statements from Senator Byrd and Senator Dorgan that
    will be made part of the record.
        [The statements follow:]
                       Prepared Statement of Senator Byrd
        Chairman Cochran, Senator Bumpers, members of the subcommittee, and
    Under Secretary Woteki, I am pleased to be here today to review the
    U.S. Department of Agriculture's (USDA) research, education, and
    economics programs. The mission of these accounts is three fold:
    meeting the challenges of an increasingly competitive global market,
    supplying safe, wholesome food produced under environmentally friendly
    conditions, and responding to the industrialization of American
    agriculture.
        Today, I would like to discuss the unique needs of West Virginia's
    rural farmers and citizens, and the importance that USDA programs play
    in their future. While West Virginia may lack a concentration of farm
    activities compared to other states, West Virginia farmers are hard
    working family operators who take pride in the quality of their
    production and in a self-imposed stewardship of their ancestral lands.
    It is my opinion that small and part-time businesses, such as West
    Virginia farm operations, represent the backbone of our nation's
    economy.
        I believe that the USDA must have the foresight and the funding
    necessary to help rural, small family farmers, and their communities,
    stay in the lead of emerging opportunities, which I believe is
    essential to creating and retaining jobs. In this regard, I will give a
    quick illustration of an Agricultural Research Service (ARS) project,
    which I thank this subcommittee for making possible, that has already
    had a valuable economic impact on West Virginia, although the facility
    has yet to be constructed. I refer to the National Center for Cool and
    Cold Water Aquaculture. All leading sources of data now confirm that
    aquaculture production will create hundreds of jobs and generate
    millions of dollars in the state, and the development of this industry
    is a state government priority. Many reports further suggest that
    abandoned mine sites can be used for aquaculture with impressive
    economic results. Already, West Virginia boasts forty-plus active
    aquaculture producers, with increased activity expected this year. The
    new center will be an important link in maximizing this emerging field.
        I have several questions regarding the Agricultural Research
    Service (ARS) facilities in West Virginia that support the development
    of research important for West Virginia farmers.
                                  conclusions
        I hope that this subcommittee will join me in supporting ARS
    projects, and I look forward to working with the Chairman, ranking
    member, and other subcommittee members, in conjunction with the Under
    Secretary, in ensuring that the ARS's mission is achieved.
                                     ______

                      Prepared Statement of Senator Dorgan
        Mr. Chairman, thank you for the opportunity to submit this
    statement. Since I was accompanying President Clinton on his trip to
    Grand Forks, North Dakota to view the flood devastation in the Red
    River Valley, I was not able to attend the hearing to express my deep
    concern on an issue of great importance to the Northern Plains.
        At a time when production agriculture is being required to become
    more environmentally sensitive and globally competitive, I believe it
    would be a giant mistake for the Agricultural Research Service (ARS) to
    close its Northern Great Plains Research Center at Mandan, North
    Dakota, as is currently proposed within the fiscal year 1998 budget for
    the U.S. Department of Agriculture.
        The Northern Great Plains is a semi-arid region, with wide climatic
    extremes in temperature, wind, and moisture conditions, resulting in
    considerable variation in growing seasons. This region has a mixed
    agricultural base of grains, livestock, and other crops produced within
    a complex, but fragile ecosystem.
        The Mandan ARS laboratory is the only ARS facility which has been
    conducting comprehensive agricultural production research as it
    specifically relates to the ecosystem of the Northern Great Plains.
    Since it was established by Congress in 1912, this research facility
    has been providing sound agricultural research for the unique needs and
    the environmental challenges facing farmers and ranchers in this
    region.
        The Mandan ARS facility is centrally located in the Northern Great
    Plains. Its location is a critical component of the value of its
    research and the importance of this facility to this region.
        The proposed closing of this station is not a simple matter of
    transferring research projects to other ARS locations. Nor is it a
    matter of eliminating research projects that duplicate similar research
    at other ARS locations. This closing would be the end of ARS research
    that is site specific to the Northern Great Plains ecosystem. It would
    leave a void for the region's agriculture that simply could not be
    effectively filled from other research resources.
        The closing of this facility would be a serious blow to the future
    capability of agriculture in the Northern Great Plains to be
    competitive in the new global marketplace. At the same time the closure
    would be devastating to the continued development of environmentally
    sensitive and sustainable production systems for this region. I believe
    this ARS facility and its research programs are a vital link to the
    future economic and environmental health of the Northern Great Plains.
        I have reviewed the project evaluation process by which ARS made
    its determination to close the Northern Great Plains Research Center. I
    believe a fundamental weakness in the subjective point system by which
    ARS projects were judged is that this process did not give adequate
    importance to research specific to the needs of a regional ecosystem.
        Unfortunately, the decision data by which ARS screened its projects
    has not been made available to Congress or to the affected ARS
    facilities. However, I have been told by USDA officials that the
    projects proposed for termination at the Mandan ARS facility were right
    at the cutting line. I believe this makes it even more important not to
    predetermine the fate of this facility which is critically important to
    the future of Northern Great Plains agriculture.
        If ARS is allowed to proceed with the closure of the Northern Great
    Plains Research Center, this facility would be precluded from
    undergoing the strategic planning review process established by Section
    884 of the 1996 farm law.
        This section requires the Secretary of Agriculture to establish a
    Strategic Planning Task Force to review ``all currently operating
    agricultural research facilities constructed in whole or in part with
    Federal funds,'' as well as proposed future facilities. These
    facilities were to be reviewed in the context of the development of a
    ten-year strategic plan which reflects ``both national and regional
    perspectives for development, modernization, construction,
    consolidation, and closure of Federal agricultural research
    facilities.''
        It is both presumptive and premature to make a decision on the
    closure of the ARS Northern Great Plains Research Center at this time.
    This facility should have the full opportunity to undergo the review
    process established by the 1996 farm law. The law's emphasis on having
    both national and regional perspectives considered by the Strategic
    Planning Task Force would give the Northern Great Plains Research
    Center the consideration that it deserves.
        I want to underscore that the Northern Great Plains Research Center
    deserves the same consideration and review that will be accorded all
    other existing and proposed federally-funded research facilities under
    the provisions of the 1996 farm law.
        This facility has an excellent history of providing sound
    conservation research which has enhanced both the productivity and the
    environment of the Northern Great Plains. It has been particularly
    responsive to the conservation needs of the region.
        The fragile environment of this region with its low rainfall,
    shallow soils, and intense winters presents a unique challenge for
    effective conservation. Through its research into minimum-till, no-
    till, and reduced fallow cropping and conservation systems, the Mandan
    ARS facility has already made great contributions to reduced soil
    erosion and improved environmental quality.
        This nation is making a considerable investment in the revised
    Conservation Reserve Program (CRP). This facility's research in grasses
    and grassland management has provided the base of information needed
    for land going into the CRP. Through its research into crop rotation
    and continuous cropping systems, it provides the needed information for
    land coming out of the CRP to be farmed within established conservation
    standards.
        The nation has also embarked on the newly-established Environmental
    Quality Incentives Program (EQIP), which replaces and expands the Great
    Plains Conservation Program. The ARS facility at Mandan is central to
    these programs in the Northern Plains. Without the ongoing grasslands
    and grazing research at this location, we will not be able to achieve
    the full economic and environmental benefits envisioned by these
    programs. This is particularly true if the range management
    conservation component of the EQIP program is to be successful.
        The Northern Great Plains Research Center has unique land and
    physical facilities and has developed particularly strong ties to the
    farmers and ranchers who are the beneficiaries of its research
    activities. One example of this is Area IV Soil Conservation Districts,
    which provide a 400-acre farm to the center for conducting field-scale
    research.
        While its tree research project was terminated a year ago, this
    facility continues to provide a tremendous resource of information and
    tree cultivars. It should be also noted that this facility was the
    primary research center for reclamation of surfaced-mined land. This
    reclamation research has been essential to the region's lignite mining
    and energy production industry in establishing and meeting reclamation
    requirements.
        This facility has a long list of accomplishments to its credit.
    Both the facility and its scientists are internationally recognized for
    their work. It is not surprising that this ARS facility has received
    support from a broad base of farm, environmental, and research
    communities. It is particularly noteworthy that organizations such as
    The Wildlife Society, Ducks Unlimited, and the Audubon Society have
    expressed opposition to the closure of this facility and instead, call
    for its expansion.
        The long history of contributions that this facility has made to
    agriculture and the environment in the Northern Plains region gives
    credence to giving this facility a second look and allowing it to
    undergo the Strategic Planning Task Force review process.
        Therefore I urge the Subcommittee to maintain the existing programs
    at the Northern Great Plains Research Center and to defer any decision
    on closure of this facility until that process is completed.
        Mr. Chairman, I want to thank you again for the opportunity to
    outline the importance of this research facility to the Northern
    Plains.

                            Statement of Dr. Woteki

        Senator Cochran. Dr. Woteki, you may proceed.
        Dr. Woteki. Thank you very much, Mr. Chairman, and members
    of the committee. We very much appreciate the opportunity to be
    here with you this morning and to present to you the research,
    education, and economic fiscal year 1998 budget request.
        I might say that both Senator Burns and Senator Bumpers,
    your opening comments very much reflect our own concerns both
    about the importance of agricultural research for the future of
    this country and also our concerns about the level of funding
    for agricultural research. But before I begin what is going to
    be a very brief overview of our fiscal year 1998 budget
    request, I would like to draw your attention to a recent
    development that affects our fiscal year 1997 budget.
        On April 16 the House Appropriations Subcommittee marked up
    the Department's request for supplemental funding, and in the
    course of the markup cut $20 million from the Fund for Rural
    America as an offset for emergency funding for fiscal year
    1997.
        Secretary Glickman is drafting a letter to express his
    concerns about this reduction, but let me take this opportunity
    to emphasize my personal dismay and disappointment that the
    Fund for Rural America was identified for this reduction.

                             Fund for Rural America

        The Fund for Rural America was authorized under section 793
    of the Federal Agricultural Improvement and Reform Act of 1996,
    and it provides $100 million in each of three increments
    beginning this year, 1997, for the provision of rural
    development programs and also a competitive grants program for
    research, education, and extension activities.
        In the most extreme case, if this entire offset were to
    come out of the competitive grants program, that $20 million
    offset will reduce the $46 million the Secretary has designated
    for research, education, and extension projects by about 40
    percent.
        At first glance, Mr. Chairman, it may seem simple to reduce
    the Fund for Rural America grants program. After all, the
    closing date for applications is next week, April 28, and as a
    new program it does not as yet have a very obvious
    constituency. However, the enthusiasm for this program has been
    unprecedented, and the program has been of particular interest
    to the schools of 1890, the tribal colleges, Hispanic-serving
    institutions, as well as the land-grant universities.
        As of yesterday, Mr. Chairman, 425 applications have been
    received for center grants which will award up to $1 million
    each year over 4 years, and we have made a rather conservative
    estimate of the number of grant applications we expect next
    week for the project grants, which would be up to $600,000 for
    a project for up to 4 years.
        We anticipate that we will get at a minimum 1,100 grant
    applications for those project grants, so I am not exaggerating
    when I say the Fund for Rural America has been a very popular
    program, and that I believe we will have a very diverse pool of
    applicants representing the private, as well as nonprofit and
    university, sectors.
        Congress created the Fund for Rural America at the same
    time that it fundamentally reformed the Federal farm programs.
    These policy changes are likely to have a substantial and
    dramatic impact on production agriculture by shifting price and
    income risk management away from Government programs to
    individual farmers.
        Cuts in the research, education, and extension portion of
    the fund are going to substantially impair the goal of this
    transitional program that has been designed to advance the
    findings of research into very practical applications to
    address emerging problems and to develop new opportunities for
    the benefit of rural America.
        It is our very great hope, Mr. Chairman, that the cuts to
    the Fund for Rural America will be restored when your
    subcommittee considers the emergency supplemental
    appropriations legislation next week.
        At this point, I would like to turn to highlight our fiscal
    year 1998 budget request for research, education, and
    economics. It totals $1.8 billion. It is a decrease of $49
    million, or about 2.6 percent from our fiscal year 1997
    appropriation.
        I believe that this budget request both in the total
    funding as well as in the specific initiatives it contains
    represents a sound balance between our commitment to research,
    education, and extension on the one hand and the
    administration's commitment to a balanced budget on the other.
        To get on the path to a balanced budget by fiscal year
    2002, the four agencies that are represented here, along with
    other USDA agencies, have had to make some rather difficult
    decisions to reduce or to terminate some important programs in
    order to fund what we now consider to be higher priority
    programs. However, we have done a careful assessment of our
    priorities and we have been able to fund an increase of $11
    million, or about 1 percent, in research in this budget
    request.
        The Agricultural Research Service budget is essentially the
    same as this year, $800 million. The request reflects adjusted
    priorities leading to an additional $10 million in research and
    a commensurate decrease in funds for buildings and facilities.
    The budget also provides for redirecting some funding,
    permitting the agency to allocate a total of approximately $30
    million in funding for high-priority research programs.
        The Cooperative State Research, Education, and Extension
    Service budget request is $840 million. Funding for formula
    programs is held constant at the fiscal year 1997 appropriated
    level. The National Research Initiative [NRI], as it is called,
    is increased by $36 million. Decreased funding is proposed for
    earmarked special grants programs, buildings and facilities
    projects, and selected extension programs.
        The administration continues to believe that the NRI
    competitive grants program provides our most effective
    mechanism for eliciting and supporting the most meritorious
    science being conducted by university scientists.
        The Economic Research Service's request is $54 million.
    With an increasingly market-oriented agricultural sector, the
    need for economic analysis to understand the implications of
    new developments in technology, in policy, and in trade is
    critical for both public, as well as the private sector,
    decisionmakers. The fiscal year 1998 budget request provides
    funds to secure critical data to underpin these very important
    analyses.
        The National Agricultural Statistic Service request is $120
    million, which represents an increase of $20 million, largely
    for funding the peak year of the census of agriculture.
        Responsibility for the census of agriculture was
    transferred from the Department of Commerce to NASS on October
    1, 1996, and NASS is conducting the census under the Agency's
    broad authority to conduct agricultural surveys. We are seeking
    specific authorizing legislation to clarify those authorities,
    and I also ask your assistance and support for swift passage of
    this legislation.
        In addition to the census, which is a very high priority
    for us, our budget request focuses on some high-priority
    administration initiatives, and these include food safety, with
    an increase of $8 million, human nutrition, with an increase of
    $12 million, germplasm collection and preservation, $2 million,
    integrated pest management, an increase of $15 million,
    emerging infectious diseases, an increase of $5 million, and
    children, youth, and families at risk, an increase of $2
    million.
        This last increase will restore funding for this program to
    its fiscal year 1995 level, and provides an additional $1.7
    million to be targeted to the 1890 institutions that are now
    eligible to receive Smith Lever 3(d) funding directly.
        I mentioned earlier the slight decreases in the collective
    Research, Education, and Economics Agency budgets. This is due
    largely to reductions in the Agricultural Research Service and
    the Cooperative State Research, Education, and Extension
    Service budgets for buildings and for modernization of research
    facilities.
        The funding level for buildings and facilities reflects a
    decrease of $72 million this year, $10 million from the
    Agricultural Research Service, and $62 million in CSREES. Given
    the constraints in this budget, as well as the future costs
    that are associated with maintaining new facilities, we believe
    it is more important to put funds into research and education
    than into bricks and mortar, and we also believe that, since
    the Secretary has just recently appointed the members of a new
    task force to review our agricultural research facilities and
    to make recommendations on a strategic plan for investment in
    agricultural research facilities, that it is wise at this point
    to defer decisions about new construction.
        In closing, I would like to express my interest in working
    closely with you and with this subcommittee as we continue to
    develop the strategic plans and our annual performance plans
    that are required under the Government Requirements and Results
    Act. I thank you for the opportunity to present our budget
    request for fiscal year 1998, and my colleagues and I are going
    to be happy to answer any questions you might have.

                              Prepared Statements

        Senator Cochran. Thank you very much, Dr. Woteki. We have
    your written statement and it will be made part of the record
    along with statements from Dr. Knipling, Dr. Robinson, Dr.
    Offutt, and Mr. Bay.
        [The statements follow:]
                 Prepared Statement of Dr. Catherine E. Woteki
        Mr. Chairman, Members of the Committee, I am Dr. Catherine Woteki,
    Acting Under Secretary for Research, Education, and Economics (REE) at
    the Department of Agriculture. I am accompanied by Acting Deputy Under
    Secretary, Dr. Floyd Horn, and the Administrators of the four agencies
    in the Research, Education, and Economics mission area: Dr. Edward
    Knipling, Acting Administrator of the Agricultural Research Service;
    Dr. Bob Robinson, Administrator of the Cooperative State Research,
    Education, and Extension Service; Dr. Susan Offutt, Administrator of
    the Economic Research Service; and Mr. Donald Bay, Administrator of the
    National Agricultural Statistics Service. Each Administrator has
    submitted written testimony for the record. We have come with a few of
    our senior staff to discuss the fiscal year 1998 Budget proposal in
    detail. Before we begin, however, I would like to make a few general
    remarks about the REE mission area and its four agencies.
        In 1994, as a part of the USDA reorganization, the REE mission area
    was created, bringing together the Department's primary agencies
    responsible for research, statistics, education, and extension. Drawing
    on their distinct, yet complementary capacities, the REE agencies play
    a critical Departmental role by supporting the work of agencies in
    other USDA mission areas--agencies responsible for programs that focus
    on the environment and natural resource conservation, human nutrition,
    food safety, rural development, and the production and marketing of
    agricultural products. REE funded physical and biological research
    continues to play a central role in providing the scientific foundation
    for a vast array of advances being made in agriculture and related
    industries. Our data collection and analysis provide policy makers,
    program managers, and producers critical information about agricultural
    commodities and markets. In collaboration with other USDA agencies, REE
    also supports research, education, and extension to better understand
    how good nutrition contributes to good health, to develop efficient
    production practices that respect the integrity of the environment, to
    facilitate adoption of food processing practices that promote safe
    food, and to assist in the development of the food and agricultural
    scientific and professional work force.
        A compelling reason for reorganizing the four agencies into one
    mission area, and therefore bringing together the biological and
    physical sciences with the economic and statistical disciplines, was
    the realization that this would create synergies leading to a stronger
    research, education, and extension capacity in the Department; that it
    would facilitate greater multi-agency and interdisciplinary
    collaboration, resulting in more valuable and effective programs to
    address agricultural, food and nutrition, environmental quality, and
    rural development challenges facing the country.
        I believe we are making the reorganization vision a reality, and
    our efforts are beginning to pay dividends. In a little more than two
    years, REE agencies have made great progress in meeting customer and
    Department challenges through heightened cooperation. Evidence of that
    collaboration is found in the fiscal year 1998 budget, as I will
    discuss in a moment. The budget includes several initiatives
    strengthened by participation of more than one REE agency.
        More evidence of an increasingly effective Departmental research-
    education-extension capacity is found in mission area and agency
    activities related to implementation of the Government Performance and
    Results Act of 1993 (GPRA). Working together, the REE agencies are
    finding that GPRA affords us a valuable process for enhancing the
    effectiveness of our programs. It will also help us convey to our
    stakeholders, including Congress; the National Agricultural Research,
    Education, Extension, and Economics Advisory Board, which has specific
    GPRA-related responsibilities; and the general public, what the nation
    is getting for its investment in agricultural research and extension.
        The mission area, collectively, and the REE agencies, individually,
    have developed draft strategic plans, framed by five general goals to
    which the mission area is committed. The goals are: an agricultural
    system that is highly competitive in the global economy; a safe and
    secure food and fiber system; a healthy, well-nourished population;
    greater harmony between agriculture and the environment; and enhanced
    economic opportunity and quality of life for Americans. These goals are
    derived from the broad public debate that codified the purposes for
    agricultural research in the 1990 and 1996 Farm Bills. In addition, the
    REE and agency plans have been reviewed by REE stakeholders, partners,
    and customers. The mission area held three regional listening sessions
    at which stakeholders from industry, the academic community, public
    interest groups, farmers, ranchers, and others interested in REE
    programs provided useful feedback on the REE plan.
        Continuing its implementation of GPRA, the mission area is nearing
    completion of a draft performance plan, framed by the five general
    goals of the strategic plans. During the spring, the REE agencies also
    will prepare individual performance plans using the framework of the
    REE performance plan.
        Preparation of the strategic and performance plans, as might be
    expected, has been challenging. Particularly difficult is development
    of annual or even five-year performance goals and performance measures
    for fundamental research where potential payoffs are large but are
    realized over longer time horizons. Our general approach to GPRA
    performance measurement will be to use quantitative measures where
    appropriate, but not to lose sight of the qualitative factors that are
    ultimately so important in making judgments on the value of our work.
    Executive branch officials and appropriators have mutual interests in
    improving our systems for establishing goals, fixing accountability,
    measuring progress, and communicating success. We intend to carryout
    our responsibilities under GPRA with these points in mind. We look
    forward to consulting with this subcommittee as we move forward
    implementing GPRA.
                         ree's fiscal year 1998 budget
        Now I would like to highlight the fiscal year 1998 budget for the
    Research, Education, and Economics mission area. The REE budget request
    for fiscal year 1998 is $1.816 billion, a decrease of $49 million or
    2.6 percent from fiscal year 1997. I believe the budget, in total
    funding and specific initiatives, represents a sound balance among
    USDA's commitment to research, education, and extension investment and
    the Administration's commitment to a balanced budget. To get on the
    path to a balanced budget by fiscal year 2002, REE agencies, along with
    other department agencies, have had to make difficult decisions to
    reduce or terminate important programs in order to fund higher priority
    programs. However, through a careful assessment of priorities, funds
    for research actually increase by $11 million or 1 percent.
        Returns on investment in public agricultural research and
    development continue to be very strong. For example, the percentage of
    disposable personal income we spend on food continues to decline,
    reaching a low of 11 percent in 1995. This decline, sustained over many
    decades, has been possible in large part due to increases in
    agricultural productivity, which in turn is a product of research and
    development and a central reason for its continued support.
    Productivity growth has been higher in agriculture than most other
    sectors of the economy, with an average annual rate of 1.9 percent
    since the 1940's. Recently, our investments in agricultural research
    have resulted in new technologies that enable farmers to prevent
    adverse effects of production practices on the environment, to improve
    our capacity to prevent and detect food-borne contaminants, and to
    enhance the nutritional content of food. Studies, such as Huffman and
    Evenson's 1993 study Science for Agriculture, continue to find that the
    investment return on publicly-funded agricultural research and
    development is high and greater than for most other sectors. The
    returns for all research and development in agriculture are estimated
    to be 35 percent annually, while those for pre-technology or pre-
    development research--much of the kind of work funded through the
    National Research Initiative--are considerably higher.
                               ree agency budgets
        The Agricultural Research Service (ARS) fiscal year 1998 budget
    stays essentially the same, $800 million, as in the current fiscal
    year, although the fiscal year 1998 budget reflects adjustment of
    priorities leading to an increase of $10 million in research and a
    commensurate decrease in buildings and facilities improvement funds.
    The budget also provides for redirected funding, making it possible for
    the agency to allocate a total of approximately $30 million in
    increased funding for high priority research programs. As the principal
    intramural biological and physical science research agency in the
    Department, ARS continues to play a critical role for the Department
    and the larger agricultural community. Results from ARS's fundamental
    research provide the foundation of applied and development research
    carried out in many public and private institutions. The agency also
    draws on its fundamental research to conduct research directed at
    solving specific problems of national and regional importance and
    responding to the research needs of other USDA agencies.
        The Cooperative State Research, Education, and Extension Service's
    (CSREES) budget decreases by $69 million to $840 million in fiscal year
    1998. Funding for formula programs is held constant at fiscal year 1997
    appropriated levels. The National Research Initiative (NRI) is
    increased by $36 million, an increase of 38 percent. Decreased funding
    is proposed for earmarked special grants programs, buildings and
    facilities projects and selected extension programs. The Administration
    continues to believe that the NRI competitive grants program provides
    the most effective mechanism for eliciting and supporting the most
    meritorious science being conducted by public and private universities,
    Federal laboratories, and other research institutions and individuals
    across the country. This year's increase in the NRI will be focused on
    expanded research in three key areas: food safety, genetic enhancement
    of plants, and environmental quality. In providing critical funding to
    the research, education, and extension programs of the Land Grant
    Universities and other higher education institutions across the
    country, CSREES continues to play a central role in helping generate
    new knowledge and technology and facilitating the transfer of that
    knowledge and technology to those who can use it best.
        The Economic Research Service's budget increases from $53 million
    to $54 million. As the Department's principal intramural economics and
    social science research agency, ERS conducts research and analysis on
    the efficiency, efficacy, and equity aspects of issues related to
    agriculture, food safety and nutrition, the environment, and rural
    development. In an era of an increasingly market-oriented agricultural
    sector, the need for economic analysis to understand the possible
    implications of any new developments in such areas as technology,
    policy, and trade agreements is critical for both public and private
    sector decision makers. The fiscal year 1998 budget provides funds to
    secure critical data to underpin that analysis.
        Largely due to funding for the peak year of the Census of
    Agriculture, the National Agricultural Statistics Service (NASS) budget
    rises from $100 million to $120 million. Responsibility for the Census
    of Agriculture was transferred from the Department of Commerce to NASS
    as of October 1, 1996 and is being conducted under the agency's broad
    authority to conduct agricultural surveys. We are seeking specific
    authorizing legislation to clarify our authorities. I urge you to
    support swift passage of this legislation. The changes in agricultural
    policy in the 1996 Farm Bill make the need for NASS's statistical data
    program more essential than ever. Comprehensive, reliable, and timely
    data on U.S. agricultural commodities are critical for farmers,
    ranchers, and other agribusinesses to make informed production and
    marketing decisions in a highly competitive market. The new Census of
    Agriculture program at NASS complements its core program and affords
    the agency new program efficiencies benefiting the whole agency.
        REE research activities soon will be enhanced by the Fund for Rural
    America mandated in the 1996 Farm Bill. In January of this year, the
    Department announced plans to allocate $46.1 million of the Fund's $100
    million fiscal year 1997 funding for research, education, and extension
    activities. Projects that address international competitiveness,
    environmental stewardship, and rural community enhancement will be
    supported with $33.3 million of these funds. The other $12.8 million
    will be focused on Department priorities, including livestock
    concentration, food safety, nutrition, food recovery, and
    telecommunications. The grants will be awarded on a competitive basis
    for multi-disciplinary projects that address short-and intermediate-
    term issues. A request for proposals was published in January. Planning
    grants will be made in late spring; standard grants in early fall.
        I want to stress the importance of the competitive process for
    making awards under this and other programs. Given the overall budget
    constraints, the enormous needs for science and technology to address
    agricultural-related issues and the general skepticism that
    characterizes attitudes toward so many publicly supported activities,
    it is important that we establish mechanisms to identify and support
    work on the highest priorities by the best performers.
                        ree fiscal year 1998 initiatives
        In developing the fiscal year 1998 budget request, we in REE have
    focused on those activities that reflect the nation's and the
    Administration's highest priorities. And we have targeted those
    activities for new or increased funding. Those fiscal year 1998
    priorities include food safety, human nutrition, integrated pest
    management, emerging infectious diseases, the Census of Agriculture,
    and Children, Youth and Families At-Risk. The new initiatives or
    increases for on-going initiatives are closely aligned with the general
    goals of our strategic plans. While some involve only one REE agency,
    others take advantage of the complementary strengths of two or three. I
    would like briefly to discuss each of these initiatives and relate them
    to our general goals.
        First, food safety. Our nation has the world's safest food supply,
    yet we continue to experience outbreaks of foodborne illnesses. Each
    year, foodborne diseases result in thousands of deaths, millions of
    illnesses, significant loss of productivity, and costly medical
    treatment nationwide and around the world. Enhancing our understanding
    of the basic science underlying these diseases and promoting
    development and adoption of food production, processing and handling
    practices that significantly reduce their incidence will advance the
    REE general goal of a safe and secure food and fiber system.
        On January 25, 1997 the President unveiled a Food Safety Initiative
    that will move us in that direction. The President's $43 million
    initiative not only focuses on inspection, surveillance, and rapid
    detection but also on research and education. Approximately $8 million
    is included for REE agencies. Those funds will allow CSREES to launch a
    $2 million food safety competitive special research grants program to
    expand the base of knowledge needed to address high priority food
    safety issues such as Campylobacter, E. coli, and salmonella. It will
    add $4.1 million in ARS research into production, harvesting, and food
    handling practices that would reduce the incidence of exposure to
    microbial pathogens and improve methods to detect and survey the
    pathogens. Building on the CSREES competitive grants program and the
    ARS research component, the initiative provides CSREES $2 million in
    additional funds for its Food Safety Extension Program to further
    enhance food safety education programs, such as compliance education,
    State food handler certification, and rapid exchange of food safety
    information. Complementing this Administration initiative, food safety
    will be one of three priority areas targeted for NRI increases in the
    CSREES budget.
        A second national initiative supported with fiscal year 1998
    funding addresses human nutrition. It is increasingly clear that diet
    and the nutritional content of food have a profound effect on human
    growth, development, and life-long health. Yet our knowledge in these
    areas is limited. We know that proper nutrition can reduce the risk of
    chronic diseases of aging, such as heart disease, cancer, osteoporosis,
    diabetes, hypertension, and obesity, but we still have a limited
    understanding of these relationships. Contributing to the REE general
    goal of a healthy and well-nourished population, this initiative
    includes $12 million in the first of a new multi-year initiative to
    significantly increase the ARS research capacity at its six national
    nutrition research centers. In this first year, half the funds will
    support research to further understand human dietary requirements, with
    an emphasis on how nutrition relates to cognitive development in
    children. The other half will fund a survey of food consumption by
    infants and children to be used by the Department and the Environmental
    Protection Agency (EPA) to assess dietary exposures to pesticides and
    establish pesticide residue tolerance levels on agricultural
    commodities in accordance with the Food Quality Protection Act of 1996.
    The overall human nutrition initiative not only promises to increase
    our understanding of how food affects health, but has other beneficial
    effects as well. The knowledge gained will help set the research agenda
    for animal and plant breeding. And promoting a healthier population can
    indirectly help our economy by reducing medical costs and productivity
    losses due to illness.
        USDA's germplasm collections, supported by ARS, underpin much of
    the cutting edge research currently being conducted in crop and animal
    breeding and other biotechnology research to develop crops and
    livestock that are resistant to disease, pests, and stress due to
    adverse growing conditions. The collections are the source of important
    traits that can be used in developing new crop varieties and animal
    breeds with desirable characteristics. The $2 million funding increase
    in the germplasm initiative will allow us to fill gaps in our National
    Plant Germplasm System, preserving valuable plant and microbial
    germplasm. In so doing, we will be facilitating the science that
    supports several REE goals, including a secure production system and
    increased commodity production. Research on genetic enhancement of
    plants is also a priority area for the proposed NRI increase.
        This fiscal year 1998 budget also includes funds to continue
    implementation of USDA's Integrated Pest Management Initiative (IPM), a
    multi-agency effort to develop environmentally-valuable IPM strategies
    and bring 75 percent of the nation's cropland under integrated pest
    management practices by the year 2000. In developing and promoting the
    adoption of pest management strategies that carefully balance
    environmental quality goals with producers' need to have economically
    viable enterprises, this initiative is focused squarely on achieving
    the REE general goal of enhanced harmony between agriculture and the
    environment. As part of this initiative, the ARS budget includes $3
    million for research that will focus on biological control of pests.
    Another $1 million increase will permit ARS to conduct area-wide and
    pilot test programs on ARS-developed technology ready for large-area
    demonstrations. Increased IPM funding will allow CSREES to increase
    research and extension support of regional IPM development and
    implementation projects and research to develop pest management
    alternatives to replace pest control technologies under consideration
    for regulatory action by EPA. For the Economic Research Service, the
    initiative includes an increase to support empirical analysis of the
    relationships among adoption of conserving farm practices, economic
    incentives, and environmental protection, recognizing that ultimate
    adoption of IPM strategies depends heavily on their economic
    implications for producers. A priority research area for the requested
    increase in the NRI will be environmentally-oriented research.
        The threat of emerging infectious diseases and exotic pests is the
    focus of another new initiative that will contribute to the REE general
    goal of a safe and secure food and fiber system. Whether a threat to
    livestock and the safety of our food supply, such as ``Mad Cow
    Disease'' or to plants, such as Karnal bunt, the introduction of
    foreign diseases and exotic pests can pose a threat to consumer
    confidence and raise the potential for economic disruption of
    production. As part of the Administration's Emerging Infectious
    Diseases Initiative, the budget includes an increase of $2.5 million
    for research on both domestic and exotic emerging diseases of
    livestock, focusing on understanding how the pathogens are transmitted,
    what production conditions contribute to their incidence, and
    development of detection methods. A second $2.5 million will be devoted
    to developing methods to detect and strategies to control important
    emerging plant diseases, such as Karnal bunt, a wheat disease found in
    the U.S. for the first time in March 1996.
        As the agriculture sector becomes more market-oriented and more
    dependent on exports, the need for good information on that sector,
    including production and markets, is greater than ever. Reliable data
    is a prerequisite for the nation to have an agricultural sector that is
    highly competitive in the global economy, one of the REE general goals.
    This need exists for producers and others who want to make informed
    decisions as they buy and sell in commodity markets, as well as for
    public decision makers who need good information to make informed
    decisions on public policies and programs. An important source of such
    information is the Census of Agriculture. Every five years the Census
    provides comprehensive statistical information on the agricultural
    sector of the economy at the National, State, and county level. Because
    of the six-year Census funding cycle, the funding level required to
    support the Census program varies from year to year. We appreciate the
    committee's support for our request for funding last year. We are
    seeking an additional $18.5 million in fiscal year 1998 for the fourth-
    and peak-year costs for final preparation of questionnaires, data
    collection, and processing of 3.5 million Census forms.
        Consistent with the President's commitment to improving our
    children's education, the fiscal year 1998 budget includes increased
    funding to expand CSREES's Children, Youth and Families At Risk (CYFAR)
    program. Designed to ultimately empower youth, parents, and community
    leaders to take responsibility for their own lives and that of their
    community, the additional funding of $2.1 million will be focused on
    enhancing statewide Extension capacity for developing and supporting
    community-based programs for at-risk children and families. In so
    doing, this initiative contributes to the REE general goal of enhancing
    economic opportunity and quality of life for Americans, particularly
    Americans who for one reason or another are not taking advantage of the
    economic and other opportunities found in their communities. This
    increase restores funding for CYFAR to its fiscal year 1995 level and
    provides an additional $1.7 million to be targeted to the 1890
    Institutions now eligible to receive Smith Lever 3(d) funding directly.
        These are the highlights of six initiatives in the REE budget. A
    full discussion of them can be found in the agencies' Explanatory
    Notes.
                        building and facilities program
        I mentioned earlier the slight decrease in the collective REE
    agency budgets. This is due largely to reductions in the ARS and CSREES
    budgets for building and modernization of research facilities. The
    funding level for buildings and facilities decreases by $72 million,
    $10 million in ARS and $62 million in CSREES. Given the overall
    constraints within which we developed the REE budget, we continue to
    believe that the Federal government should generally leave the
    investment decisions on university facilities to State and institution-
    level decisionmakers. In addition to the significant capital
    commitments, these facility decisions entail major commitments for
    programming, operations, and maintenance, commitments that Federal-
    level officials are not in a position to make.
        The Subcommittee should be aware that we are moving ahead on the
    Strategic Planning Task Force mandated in the 1996 Farm Bill. Under the
    Farm Bill provision, the Secretary of Agriculture is to establish a
    Task Force to prepare a 10-year strategic plan for guiding future
    Federal investment for constructing, renovating, consolidating, and, if
    appropriate, closing agricultural research facilities. The Secretary
    will be announcing the membership of the Task Force within a few weeks.
    The Task Force will have two years to conduct a thorough study of the
    building and facilities needs of the agricultural research system and
    the capacity of the current facilities to meet those needs and, from
    that assessment, develop the 10-year plan.
        While we look forward to the recommendations of the Task Force,
    nevertheless we believe we must move forward now on several projects
    where needs are critical and immediate. We believe our reasoning for
    funding these few crucial improvements is sound and would be consistent
    with any future Task Force recommendations. The budget contains $23
    million in funding for the U.S. Horticultural Crop and Water Management
    Research Laboratory in Parlier, California. The product of careful
    planning over several years, the new facility will allow consolidation
    of several outmoded facilities and yield significant efficiencies when
    compared to current operating costs. The Melaleuca Research and
    Quarantine Facility at Ft. Lauderdale, Florida, reflects a continuing
    Administration commitment to restoration of the Everglades ecosystem
    and was designated by the Administration's South Florida Ecosystem Task
    Force as a top priority. Melaleuca, an exotic weed tree, is adversely
    affecting much of South Florida's fragile wetlands. This funding,
    coupled with proposed research funding, will accelerate integration of
    biological control technology into Melaleuca management efforts.
        The budget also includes funding for a new facility in Montpellier,
    France to house the European Biological Control Laboratory. The new
    facility will replace crowded and dispersed temporary facilities that
    seriously impede the Laboratory's program focused on discovering and
    developing biological control agents for insect pests and weeds in the
    U. S. that immigrated from Eurasia, the Middle East, and North Africa
    and now seriously threaten U.S. agriculture. The new European
    laboratory is essential to ensure future success of many domestic
    laboratory programs directed toward biological control of agricultural
    pests, including salt cedar, knapweeds, Russian wheat aphid, and many
    other invasive insects and weeds. All other buildings and facilities
    funding in the budget is for modernization of selected ARS facilities.
    All the facilities designated for modernization currently have serious
    deficiencies that are barriers to conducting efficient and effective
    research.
                                    summary
        In summary, I want to emphasize that this budget, while very tight,
    represents a continued recognition of the value of and commensurate
    commitment to investment in agriculture research, statistics,
    education, and extension. If U.S. agriculture is to continue to be a
    dynamic, competitive sector in the global economy, and we as consumers
    are to continue to harvest the fruits of agriculture's historical
    success, then our national commitment to research, education, and
    extension must continue. I thank you for this opportunity to share with
    you my thoughts about the mission area and its agencies' budgets. We
    welcome your questions.
                                     ______

                  Prepared Statement of Dr. Edward B. Knipling
        Mr. Chairman, and members of the Subcommittee. I appreciate this
    opportunity to present the Agricultural Research Service's budget
    recommendations for fiscal year 1998, and highlight some of the
    Agency's accomplishments of the past year.
        In the past, the Congress has provided strong support for ARS and
    its research mission. We appreciate the fact that this Subcommittee has
    been instrumental in marshaling critical resources for USDA research.
    Attaining national goals of a healthier population, environment
    quality, and economic prosperity will require continuing the Nation's
    commitment and investment in agricultural research.
        The research that ARS performs, in the areas of health,
    environment, and agricultural competitiveness, are more important than
    ever. Projected population and economic growth over the next half
    century will require world food production to double. Meeting this
    demand will require new crops and new methods to maximize crop and
    livestock yields consistent with recognized needs for environmental
    stewardship.
        Research can help the nation meet the food demands of the growing
    population as well as address our food safety and environmental goals.
    Research in genetics is producing increased crop yields by developing
    crops that can resist disease, insects, and frost. Through genetic
    engineering, traits that retard spoilage are being introduced to reduce
    postharvest losses and costs, and increase the availability of
    wholesome food. Genome maps will make it possible to identify gene
    codes for specifically desired traits, such as lower fat content in
    meat animals. With genome maps, scientists will also be able to produce
    safer food by breeding animals resistant to foodborne pathogens, such
    as E. coli 0157:H7 and Salmonella.
        E. coli and Salmonella are two of the most prominent bacteria
    associated with serious foodborne illnesses. Campylobacter causes an
    estimated two million cases of illness each year. Another 800 Americans
    become seriously ill each year from Listeria monocytogenes. The Centers
    for Disease Control estimate that foodborne pathogens cause millions of
    illnesses and contribute to thousands of deaths annually. Medical costs
    and productivity losses total from $5 to $13 billion per year.
        ARS scientists are hard at work to help ensure a safe, adequate,
    and sustainable food supply. To reduce pathogen contamination in the
    slaughter and processing of meat and poultry products, a Hazard
    Analysis and Critical Control Point (HACCP) system is being
    implemented. ARS is supporting that effort by identifying critical
    points of pathogen contamination, and points where they can be reduced
    or eliminated. The science-based HACCP system represents a significant
    improvement over previous organoleptic systems which used sight, sound,
    smell and touch to test the end-product for wholesomeness.
        For example, faster, more accurate tests are being developed to
    combat E. coli 0157:H7. Traditional tests for this foodborne bacteria
    are time consuming and technically difficult to conduct, thus limiting
    their usefulness. ARS scientists at Clay Center, Nebraska devised a
    simple, rapid diagnostic test which will increase the testing of meat
    and meat products, and substantially improve food safety. Numerous
    other systems and technologies are being developed in both pre- and
    post-harvest areas to reduce foodborne pathogens.
        Our food supply is also being increasingly threatened by new and
    emerging plant diseases and pests that affect the approximately 150
    crops grown in the United States. Exotic organisms, once introduced
    into this country, can explode into an epidemic. Just a few examples:
    Karnal bunt disease of wheat has seriously disrupted the export market
    for wheat growers in the southwestern U.S. Head scab of wheat and
    barley has caused an estimated $2 billion in losses since 1993. Barley
    stripe rust, which first appeared in Texas in 1991, has spread
    throughout the western U.S. Soybean rust, a disease recently discovered
    in Hawaii, is expected to cause serious losses should it migrate to the
    mainland. And noxious and invasive exotic weeds which already infest 17
    million acres of public lands are expected to double in five years.
        Strategies for controlling emerging diseases and exotic pests
    include the development of new and rapid tests for detection,
    containment, and eradication. One of the strategies ARS is employing
    involves Integrated Pest Management (IPM). As crop yields increase and
    production systems change, the importance of protection from pests
    increases. To maintain good stewardship over the environment,
    strategies for pest management must shift from primary reliance on
    chemicals to IPM strategies which combine multiple approaches, conserve
    natural controls, and utilize chemicals when other means of control
    have failed.
        USDA has established an ambitious goal of deploying IPM on 75
    percent of the Nation's crop acreage by the year 2000. Reaching this
    goal will result in reducing environmental damage, particularly to the
    water supply which can be contaminated by runoff from farms. AMS/PDP
    samples tend to find no, or very low, residue. These pest management
    strategies will be more cost-effective and sustainable over the long
    term. The Food Quality Protection Act of 1996 may lead to tighter
    controls on pesticides registered by EPA (due to tolerance
    reassessment?) and farmers will have even greater need for the
    alternative pest control technologies developed by and through USDA
    programs in the IPM initiative.
        Human nutrition plays a critical role in growth and development,
    and good nutrition enhances an individual's productivity and quality of
    life. Poor nutrition underlies many chronic conditions, such as
    obesity, cardiovascular disease, cancer, osteoporosis, and diabetes.
    Research is only now beginning to reveal how nutrients and genes
    interact to cause various diseases. As the lead Federal agency in human
    nutrition research, ARS scientists are researching the relationships
    between diet and resistance to diseases, and determining the
    nutritional needs of specific population groups, including infants,
    children, and the elderly.
        The agriculture-food sector is the country's largest industry,
    responsible for over 15 percent of the Gross Domestic Product. U.S.
    agricultural exports are projected to exceed agricultural imports by
    $30.5 billion in 1996. Employment in the U.S. food and fiber system
    represented 18 percent of all civilian jobs in the U.S. in 1995.
        Over the past several years, ARS requests for funding increases for
    genetics, food safety, human nutrition, environmental quality, and IPM
    research have been supported by this Committee. During these same
    years, ARS has also redirected base funds to finance these critical
    initiatives.
        In fiscal year 1998, ARS requests the Congress' continued support
    for research--research which would increase crop and livestock yields,
    improve food safety and nutrition, optimize the preservation of land
    and water resources, and promote agricultural sustainability.
        The Nation faces many challenges as this century draws to a close
    and it moves into the 21st century--challenges to health and safety,
    environment, and economy arising from a growing world population, an
    increasing number of emerging diseases and pests, and an ever more
    demanding concern for the environment. The ability to meet these
    challenges depends upon the decisions that are made today.
                               ars strategic plan
        All of the research that ARS currently performs and the research
    initiatives ARS proposes to conduct in fiscal year 1998 meet one or
    more of the Agency's five Strategic Plan goals. They are to provide
    research which:
        (1) Ensures the Nation an agricultural system that is highly
    competitive in the global economy.
        (2) Maintains a safe and secure food and fiber system.
        (3) Maintains a healthy, well nourished population.
        (4) Promotes greater harmony between agriculture and the
    environment.
        (5) Enhances economic opportunities and quality of life for
    Americans.
        Let me take a minute to identify where ARS' research programs fall
    within these goals. The first goal includes research on cost-effective
    agricultural production systems, postharvest control of pests, new uses
    and products, and new and alternative crops. The second goal includes
    ARS' pre- and postharvest food safety research. It also includes
    research on plant and animal production systems, product quality,
    reproduction and biological processes, germplasm and genetic resources,
    and other research designed to ensure the security of U.S. food and
    fiber production. All ARS' human nutrition research falls under the
    third goal. The fourth goal includes research on natural resources,
    waste management, integrated agricultural production systems, cropland
    and grazingland sustainability, environmentally safe pest management,
    and global change. And the fifth goal includes research which expands
    economic opportunities to rural communities by providing new crops,
    products and technologies; expanding markets; making small-scale
    processing capabilities available, and sharing new knowledge through
    information access and technology transfer.
        These five broad goals are part of a draft Strategic Plan ARS has
    developed in response to the Government Performance and Results Act of
    1993. ARS' Plan establishes the broad structure for setting Agency
    research priorities and allocating resources over the next five fiscal
    years. It also provides for a broad framework for systematically
    evaluating the impacts or outcomes of ARS' research programs.
                            fiscal year 1998 budget
        ARS proposes funding of $726,797,000 for fiscal year 1998, an
    increase of $9,971,000 over the fiscal year 1997 appropriation level.
    The fiscal year 1998 Budget includes increases for selected research
    initiatives which build upon ARS' base and contribute to the Nation's
    economic well-being and quality of life. To help finance these
    initiatives, ARS is recommending the elimination of important but
    lesser priority research projects. In addition, ARS is recommending
    modest increases for pay costs which will be partially offset by
    proposed reductions in staff years.
        Under its Buildings and Facilities account, ARS proposes
    $59,300,000 for fiscal year 1998. These funds will be used to continue
    the ARS facilities' replacement and modernization program.
                         proposed research initiatives
        ARS is requesting $36,523,000 for new and expanded research
    initiatives, and increased pay costs. These initiatives cover an array
    of national research needs which directly respond to Administration and
    Congressional priorities. They respond to the priorities of enhancing
    the national economy and trade, preserving the environment, and
    providing for a healthy citizenry.
        Food Safety ($4,114,000).--As part of the Administration's Food
    Safety Initiative, ARS is proposing $4,114,000 for pre- and post-
    harvest food safety research. Further research into food-production,
    harvesting, and handling practices that will reduce human exposure to
    microbial pathogens, chemicals, and biotoxins--as well as into improved
    methods to detect and survey these hazards--can eliminate or
    significantly reduce an important cause of illness in the U.S. ARS
    proposes $1,614,000 for additional research in preharvest food safety.
    The research will develop methods and strategies for detecting and
    controlling pathogens in the production of live animals to prevent the
    contamination of meat and poultry products.
        Postharvest operations, that is slaughter and processing, can be a
    source of contamination of meat and poultry products. These operations
    offer opportunities for intervention to prevent further spread of
    pathogens to food products. ARS is recommending an increase of
    $2,500,000 in postharvest food safety, for the development of advanced
    systems and new technologies that prevent or reduce pathogen
    contamination of meat, poultry, and egg products. The research will
    also provide technologies to reduce pathogens in fruits and vegetables.
        Emerging Diseases/Exotic Pests ($5,000,000).--The introduction of
    foreign animal diseases, incidence of diseases transmitted from animals
    to humans, and prevalence of meatborne food pathogens have increased
    dramatically over the past five years. Prevention and control of
    emerging animal diseases can avoid economic disruptions and loss of
    consumer confidence like that caused by Bovine Spongiform
    Encephalography (``Mad Cow Disease'') in Great Britain. Measures to
    control organisms affecting humans, such as E. coli 0157:H7,
    Salmonella, Cryptosporidium, Lyme disease, and Hantavirus disease will
    prevent serious illness and disease. One-half of the proposed increase
    will be used to research emerging exotic diseases of livestock, and
    emerging domestic and zoonotic diseases of livestock.
        The other half of the proposed increase will be used to fund
    research on emerging plant diseases, and noxious and invasive weeds.
    With rapidly expanding international commerce and travel, the
    introduction of new pests and diseases into U.S. agriculture is more
    ominous and threatening. For example, the silverleaf whitefly which
    invaded the U.S. in the 1980's, now attacks hundreds of plant species
    including important agricultural species such as cotton and vegetable
    crops. Karnal bunt disease of wheat, which was first recognized in the
    U.S. in 1996, has seriously disrupted the wheat market for growers in
    the southwestern U.S.
        Grazinglands ($1,000,000).--Grazinglands which include irrigated
    pastures, perennial forage crops, and the prairies and arid rangelands
    of the West cover about half of the Nation's land surface. They also
    encompass most of the country's wildlife habitat. Most of our water for
    industry, domestic use, and irrigated agriculture comes from grazed
    watersheds. Grazinglands support about 100 million beef cattle, 10
    million dairy cattle, and 11 million sheep. They also provide food and
    fiber for domestic consumption and export, and directly support the
    economies of rural communities.
        Despite the importance of grazinglands, critical gaps exist in the
    knowledge required to develop better management technologies. More
    efficient and profitable forage production systems are essential for
    U.S. agricultural production to remain competitive. New knowledge and
    technology is needed for mitigating the impacts of intensive forage/
    livestock production systems. The proposed increase will be used to
    produce more profitable forage/livestock production systems while
    minimizing environmental impacts.
        Genetic Resources ($2,000,000).--USDA's plant germplasm collections
    underpin crop breeding efforts in this country. The collections are the
    sources of important crop characteristics, such as host plant
    resistance to combat pests and stresses. The National Plant Germplasm
    System (NPGS) presently maintains over 450,000 different germplasm
    samples. Of the proposed increase, $1,500,000 will be used to fill gaps
    in the NPGS collection, and to preserve rare and unique germplasm
    samples.
        Microorganisms can play positive roles in the soil and the
    detoxification of the environment, nitrogen fixation in lieu of
    chemical fertilizers, insect control, and decomposition of organic
    wastes. Other pathogenic strains of microorganisms are destructive to
    crops and livestock. Plant breeders need to have access to the strain
    diversity of important diseases affecting crops in order to build broad
    spectrum host resistance. Veterinarians also need access to pathogenic
    strains to develop effective vaccines to protect live animals. Numerous
    valuable microorganisms will be lost soon unless a concerted effort is
    made to acquire, document, and preserve them. Of the proposed increase,
    $500,000 is recommended for preservation of a microbial germplasm
    collection.
        Integrated Pest Management ($4,000,000).--USDA has established a
    goal of deploying IPM on 75 percent of the Nation's croplands by the
    year 2000. Two kinds of research are needed to meet this goal. First,
    basic studies are needed that generate new fundamental knowledge, with
    a focus on pests and the means of controlling them. Second, a more
    holistic, systems-oriented approach is needed to put together the
    components of an IPM strategy in the best combination. The proposed
    increase will focus on areawide IPM and pilot test programs;
    augmentative and biologically-based IPM in field, horticultural and
    vegetable crops; and host-plant resistance and pest management
    strategies.
        South Florida Ecosystem Restoration ($2,000,000). In 1993, a 5-year
    Interagency Agreement on South Florida Ecosystem Restoration was signed
    by the Departments of Interior, Commerce, Army, Justice, Agriculture,
    and EPA. As part of a task force, the Department of Agriculture has
    been asked to perform research to resolve the ecological, hydrological,
    and agricultural problems which hinder sustainable agricultural
    production in the Everglades Agricultural Area. The requested funds
    will be used to develop management strategies and biological agents for
    the control of melaleuca and other harmful nonindigenous species.
    Related to this initiative, ARS is also requesting $4,000,000 for
    construction of a quarantine facility in Ft. Lauderdale.
        Human Nutrition ($12,000,000).--ARS is the lead Federal agency for
    human nutrition research. The Agency has the infrastructure and
    scientists required to improve the nutritional health of all Americans,
    a goal of this Administration.
        Nutrition has a profound effect on human growth and development,
    yet there is only limited knowledge in this area. Additional research
    is needed to understand how proper nutrition can prevent the
    development of lifelong nutritional deficiencies that lead to chronic
    diseases, such as obesity, heart disease, cancer, osteoporosis, and
    diabetes. Similarly, research is needed to understand the nutritional
    requirements that promote health and enhance quality of life.
        Half of the proposed increase will be used to fund research to
    further understand dietary requirements. The other half of the proposed
    increase will fund a survey of food consumption by infants and
    children. The survey has been requested by the EPA which is concerned
    that current food consumption data do not provide sufficient sample
    sizes to adequately estimate pesticide intakes by children.
        In addition to the proposed research initiatives, ARS is also
    recommending $6,409,000 to finance anticipated fiscal year 1998 Federal
    pay raises and associated costs.
                 project terminations and staff year reductions
        In order to meet Administration streamlining goals, the Agency is
    proposing a decrease of $3,500,000 consistent with the reduction of
    Agency staff years. To help finance the fiscal year 1998 proposed
    research initiatives, ARS is recommending the termination and
    reallocation of selected research projects totaling $23,023,000. These
    projects represent important but lesser priority research projects. The
    termination of these projects, along with additional funding for the
    proposed increases, will enable ARS to more sharply focus its limited
    resources on national research priorities identified in the fiscal year
    1998 Budget Estimates.
                            buildings and facilities
        Many of ARS' facilities are inefficient and outdated. Major systems
    (i.e., water, heating, ventilation air-conditioning, electrical, etc.)
    in many of ARS' facilities have long passed their useful life
    expectancy and fail to meet building code requirements. The
    modernization or replacement of these facilities which began several
    years ago remains a high priority.
        In fiscal year 1998, ARS recommends under its Buildings and
    Facilities account a total of $59,300,000 for continuing the
    modernization or replacement of selected laboratories and facilities.
        Beltsville Agricultural Research Center, Beltsville, Maryland
    ($3,200,000).--The Center is recognized as one of the largest
    agricultural research centers in the world, in both program scope and
    concentration of scientists. Over 300 scientists and 1200 support
    personnel work at the Center on programs in animal and plant
    productivity, natural resources and environmental sciences, product
    quality, and human nutrition. Modernization of the Center began in
    fiscal year 1985. Funding will be used to continue the modernization
    program, including miscellaneous small projects and contingencies.
        National Center for Agricultural Utilization Research, Peoria,
    Illinois ($8,000,000).--The Center performs vital research on new
    agricultural uses and food safety. Funding will be for continuation of
    the facility modernization program, specifically for renovation of the
    North Wing.
        Eastern Regional Research Center, Philadelphia, Pennsylvania
    ($5,200,000).--The Center conducts critical research on new uses for
    farm commodities that leads to the development of new domestic and
    foreign markets. A facility condition study indicated that the
    utilities and building infrastructure have reached the end of their
    usefulness. A modernization program was developed and divided into 9
    phases. The proposed funding will be used for construction of phase 4
    of the Chemical Wing laboratory.
        Southern Regional Research Center, New Orleans, Louisiana
    ($1,100,000).--The Center performs research on postharvest processing,
    product enhancement, and safety and use of agricultural commodities.
    The Center research includes: improving the quality of cotton products,
    and the safety and health of cotton workers; increasing the efficiency
    of food-processing systems; and enhancing the nutritional value of food
    products, such as rice and peanuts. The proposed funding will be used
    to continue with the modernization of the Center, specifically to begin
    the design of the Industrial Wing.
        Plum Island Animal Disease Center, Greenport, New York
    ($5,000,000).--The Center conducts research and diagnostic work on
    foreign animal diseases that are an ongoing threat to U.S. livestock.
    It is the only site in this country authorized by Congress to carry out
    such research. Funding will be for continuation of the modernization of
    the Center, principally replacement of the boiler plant and
    miscellaneous projects.
        U.S. Horticultural Crops and Water Management Research Laboratory,
    Parlier, California ($23,400,000).--The proposed funding will be used
    to finance the construction of a replacement laboratory in Parlier. The
    U.S. Horticultural Crops and Water Management Research Laboratory which
    investigates problems related to Western production and postharvest
    agriculture is currently in Fresno. New housing developments to be
    built one quarter mile from the laboratory has placed restrictions on
    agricultural spraying which makes the present site unsuitable for
    research activities.
        Melaleuca Research and Quarantine Facility, Ft. Lauderdale, Florida
    ($4,000,000).--Melaleuca is adversely affecting Lake Okeechobee, the
    Everglades National Park, and Big Cypress National Preserve. This weed
    tree reduces wildlife and native vegetation, pumps large quantities of
    water into the air via evapotranspiration, and is a navigational and
    fire hazard. The proposed funding is for construction of a facility
    which will serve as the quarantine facility for melaleuca biological
    control insects brought into the United States from Australia.
    Construction of this facility was designated by the South Florida
    Ecosystem Restoration Task Force as one of the highest priority
    initiatives to ensure restoration of the Everglades National Park.
        National Agricultural Library, Beltsville, Maryland ($6,000,000).--
    NAL, which is the largest agricultural library in the world, serves as
    a national resource for access to information on agriculture and
    related sciences. Built in 1968, many of the building systems are
    becoming unreliable and require replacement. A facility condition study
    identified numerous code, mechanical, electrical, and architectural
    deficiencies. The proposed funding will be used to begin addressing
    some of the major deficiencies, including installation of sprinklers,
    first floor renovations, replacement of boilers, and miscellaneous
    projects.
        European Biological Control Laboratory, Montpellier, France
    ($3,400,000).--Many of the insects pests and weeds in the U.S. are of
    European or Asian origin. The insect pests attack crops and domestic
    animals, ornamentals, and forests; the weeds infest millions of acres
    of pasture and croplands. The Laboratory researches and introduces
    suitable natural enemies (i.e., insects, mites, and pathogens) into the
    U.S. to control insect pests and weeds. Currently, the Laboratory is
    housed in temporary facilities which are crowded and dispersed. In
    addition, there is no quarantine greenhouse. Purchase of a new
    laboratory site, and planning and design of the new facility has been
    completed. The proposed funding will be used to proceed with
    construction.
        Mr. Chairman, this concludes my statement. I will be happy to
    respond to any questions you may have.
                                     ______

                    Prepared Statement of Dr. B.H. Robinson
        The mission of CSREES is to benefit people, communities, and the
    Nation through cooperative work with our partners and customers to
    advance research, extension, and higher education in the food and
    agricultural sciences and in related environmental and human sciences.
    CSREES is a Federal partner in a partnership that includes the 59 State
    and Territorial Agricultural Experiment Stations; the 17 1890 land-
    grant institutions, including Tuskegee University; the 63 Forestry
    Schools; the 27 Colleges of Veterinary Medicine; 42 Schools of Home
    Economics; and the 29 Native American Institutions which now have land-
    grant status.
        In addition to the land-grant partners, CSREES has partners in
    virtually all segments of the agricultural community, including private
    and public colleges and universities; Federal laboratories; private
    industry; State, county, and local governments and entities; and
    individuals. The Cooperative Extension Services, our state partners for
    extension programs at the land-grant universities, link the education
    and research resources of the U.S. Department of Agriculture and the
    land-grant universities with 3,150 county and administrative units
    throughout the country.
        This is certainly an indicator of the breadth of the partnership to
    which we belong. In fact, we look forward to further expansion of that
    partnership to include Hispanic-Serving Institutions with the
    initiation in 1997 of the our new Hispanic-Serving Institutions Grant
    Program. This array of CSREES partners assures that the best and most
    diverse talents are tapped to address current and future problems
    facing agriculture and rural America, particularly as we prepare for
    the 21st Century.
        The research, extension, and education components of the
    partnership interact to provide coordinated approaches to problems of
    regional and national interest. Our land-grant universities and other
    partners conduct fundamental and applied research to provide the
    knowledge required to combat problems encountered in the development
    and sustainability of agriculture and forestry and in the improvement
    of the economic and social welfare of rural and urban citizens. Our
    land-grant partners, through the Cooperative Extension System, funnel
    this research to a network of nonformal educational, or extension,
    programs. This knowledge is used as a basis for practical
    decisionmaking to strengthen and sustain individuals, families, and
    rural and urban communities throughout the Nation. And, finally,
    recognizing that education is the catalyst for moving this nation
    successfully into the next century, CSREES supports several integrated
    higher education programs to stimulate and enable colleges and
    universities to provide the quality of education necessary to
    strengthen and replenish the nation's food and agricultural scientific
    and professional work force.
        Changes in agriculture and the world in which we live have
    necessitated that the programs we administer and the client base we
    serve be broadened. While the scope and complexities of our programs
    have expanded, CSREES has continued to operate on extremely low
    administrative costs of about 3-4 percent. This indicates that we
    function effectively on a very small percentage of an annual
    appropriation of approximately $900 million, making maximum program
    funding available to the American public through our partners.
        As CSREES enters its third year after the merger of two former
    agencies, the Cooperative State Research Service and the Extension
    Service, we have been successful in meeting many of the early
    challenges facing us to find innovative and efficient approaches to
    integrating extension programs with parallel research programs. We have
    strived to link research and extension objectives under single programs
    where appropriate.
        One example of our efforts to integrate research and extension
    objectives is the food safety area. The public is demanding, and should
    be assured of, a safe, high-quality food supply. Finding ways to reduce
    or eliminate food-borne risks spans both research and extension, from
    developing risk minimizing practices in growing animals and crops,
    attending to safety issues, including proper pre- and post-harvest
    practices, to introducing food processing methods at plants that
    incorporate pathogen reduction and Hazard Analysis and Critical Control
    Point (HACCP) measures, to handling the food safely during
    transportation and distribution and, finally, to promoting safe food
    handling by the consumer.
        Food safety is one of three broad categories of research which is
    proposed for increased funding in 1998 under our National Research
    Initiative (NRI) Program. In addition, we are requesting funding in
    1998 for a new competitive Food Safety Special Research Grant. Food
    safety is also one of the Cooperative Extension System's National
    Initiatives, and extension activities in food safety are funded under
    Smith-Lever 3(d) funds. Our goal is that these programs will complement
    each other to foster multi-disciplinary collaboration and participation
    from diverse sectors to solve complex food safety issues, provide the
    basis for new training programs and, ultimately, assure public health.
        Other examples of parallel extension and research programs that we
    have been integrating are Water Quality, Sustainable Agriculture,
    Integrated Pest Management, and Pesticide Impact Assessment.
    Coordinating and integrating extension, research, and higher education
    activities effectively at the national level to solve critical issues
    faced by the agricultural community can only be achieved in cooperation
    with the university system and other partners.
        The Congressionally mandated Government Performance and Results Act
    (GPRA) requires that Federal agencies develop strategic plans that
    correlate to the formulation of agency budget requests and that adhere
    to the ``management for results'' concept. The draft CSREES Strategic
    Plan outlines our expectations for agricultural research, education,
    and extension for a five-year period from 1997-2002. It also provides a
    mechanism for assessing and redirecting agency programs to achieve
    strategic goals.
        CSREES is one of four agencies in USDA's Research, Education, and
    Economics (REE) Mission Area. The draft CSREES Strategic Plan is linked
    to five broad goals or outcomes for the plan of the REE Mission Area
    and represents the work of our administrative and program staff and
    partners with input at the Federal, State and local levels.
        The broad goals or outcomes of the REE Mission Area are the
    underpinnings from which CSREES has and will continue to initiate
    program strategies which will be explicitly stated in the annual
    performance plans. These strategies, in combination with program action
    and implementation by the university system and other partners, will
    lead to joint accomplishments in research, extension, and higher
    education in the food and agricultural sciences and related
    environmental and human sciences. The five broad goals or outcomes of
    the REE Mission Area are: An agricultural production system that is
    highly competitive in the global economy; a safe and secure food and
    fiber system; healthy, well-nourished population; greater harmony
    between agriculture and the environment; and enhanced economic
    opportunity and quality of life for Americans.
        Framed by the same goals, our draft Strategic Plan focuses on
    planning and attaining measurable outcomes and allows for the
    accountability of funds in response to shared priorities for work at
    the national and State levels. Of course, our Strategic Plan will be an
    ever-changing document.
        With input from the university system and other partners, the
    Strategic Plan will be continuously reviewed and updated to respond to
    new and emerging issues important to the citizens and the Nation.
                        fiscal year 1998 budget request
        The budget submitted to Congress by the President requests
    $840,153,000 for the Cooperative State Research, Education, and
    Extension Service. This is a decrease of $69.2 million, or
    approximately 8 percent, from the current appropriation. Budget
    highlights are provided below:
                                  food safety
        Reducing the incidence of food-borne illness is a top priority of
    the Administration. On January 25, 1997, President Clinton announced an
    interagency Food Safety Initiative in which USDA, including CSREES, is
    an important participant. As part of the Administration's Initiative,
    CSREES is requesting $2 million in fiscal year 1998 to establish a new
    competitive Ensuring Food Safety Special Research Grant Program.
    Foodborne pathogens such as E. coli, and water-borne pathogens such as
    Cryptosporidium, have become major threats to public health. These
    threats and those of other new and re-emerging infectious diseases that
    affect our food supply mandate that we enhance and expand our existing
    programs in food safety to find ways to reduce and eliminate food-borne
    diseases. USDA's action agencies, including the Food Safety and
    Inspection Service, look increasingly to research programs to provide
    scientific information on which to base their regulatory and policy
    decisions about these issues. This addition to the CSREES funding
    portfolio would expand the base of knowledge needed to address high
    priority food safety issues facing industry and consumers.
        The new Ensuring Food Safety Special Research Grant program will
    consider pre- and post-harvest/slaughter issues related to biological
    aspects of food safety, reductions in microbials and pathogens, as well
    as the social and economic implications of ensuring a safe food supply.
    It will complement the longer term, more fundamental food safety
    research supported under our NRI Program, the more longer-term food
    safety research programs of ARS, and the food safety education and
    training programs supported under the extension portion of our budget.
        We also are proposing a $2 million increase for our parallel
    extension Food Safety Program funded under Smith-Lever 3(d) as part of
    the Food Safety Initiative. Currently, food safety extension activities
    address a wide variety of food safety and quality issues nationwide.
    The funding increase for these activities will be used to further
    enhance food safety education programs with outcomes focused on pre-
    harvest education; Hazard Analysis and Critical Control Point (HACCP)
    and other Quality Assurance programs; compliance education; state food
    handler certification programs; increased use of recommended safe food
    handling practices by industry and consumers; and rapid exchange of
    food safety information.
        The funding proposed for these two programs will help provide the
    critical link between food safety research and education by supporting
    joint priority planning and programming, and increased
    multidisciplinary collaboration and participation among researchers and
    educators. These activities will directly promote two of the REE
    Mission Area Goals: a safe and secure food and fiber system; and a
    healthy, well-nourished population.
                             pest control programs
        The Integrated Pest Management (IPM) program is another example of
    the substantial progress we have made in integrating parallel research
    and extension programs. The research activities supported with IPM
    funds will develop new pest management tools to address identified
    critical pest problems in crop production and will focus on
    implementing ecologically-based pest management tactics. The extension
    activities supported with IPM funds will accelerate the transfer of
    proven pest management technologies from the researchers to farmers,
    crop consultants, ranchers, and other end-users to increase
    profitability while protecting human health and our environment.
        Increases are requested for Improved Pest Control funding to
    support these research programs: Pest Management Alternatives
    (formerly, Emerging Pest and Disease Issues), Integrated Pest
    Management, Expert IPM Decision Support System, Minor Crop Pest
    Management (formerly, Pesticide Clearance), and Pesticide Impact
    Assessment. Funds are included for extension activities under the IPM
    and Pesticide Impact Assessment programs. Activities supported under
    these programs directly contribute to the Department's IPM Initiative
    which calls for implementation of IPM practices on 75 percent of U.S.
    crop acreage by the year 2000. The budget includes increases totalling
    $17.3 million for these research and extension pest management and
    pesticide related programs.
        The activities supported by the CSREES Pest Control Programs will
    directly promote the following REE Mission Area goals: an agricultural
    production system that is highly competitive in the global economy; and
    greater harmony between agriculture and the environment.
                         pesticide applicator training
        We are proposing an increase of $1.5 million in fiscal year 1998 to
    initiate a redesigned Pesticide Applicator Training (PAT) Program. This
    is a unique collaborative effort between USDA and the Environmental
    Protection Agency, which is making a parallel request for funding in
    its budget for the program. The purpose is to educate users of
    restricted-use pesticides on safe and environmentally sound methods of
    pesticide application. Environmental concerns over the sale, use, and
    disposal of pesticides are key elements in teaching plans and
    educational materials developed by state extension services. This
    collaborative effort will be especially beneficial in helping the
    extension specialists reach growers and producers on pesticide safety
    and regulatory requirements. The PAT program directly promotes the REE
    Mission Area goal to achieve harmony between agriculture and the
    environment, and contributes to the goal of a safe, secure, food and
    fiber system by addressing programs to meet the mandates of the 1996
    Food Quality Protection Act.
                          national research initiative
        An increase of $35.8 million is requested for the National Research
    Initiative (NRI), USDA's major merit-reviewed competitive research
    grants program. ``Merit review'' takes into account both quality of
    science and relevance of the proposed research to key problems of
    enduring importance to agriculture, food, and the environment. The
    competitive mechanism of funding assures that limited financial
    resources are used to support only the highest quality research.
        These funds provide for fundamental and mission-linked research
    relevant to agriculture, food, and the environment. Fundamental
    research tests scientific hypotheses and provides basic knowledge that
    supports applied research and from which major conceptual breakthroughs
    are expected to occur. Mission-linked research aims at solving
    identified high-priority problems and may be either basic or applied in
    nature. The research supported by the NRI Program also may involve a
    multidisciplinary approach, or the integration of researchers from two
    or more disciplines encompassing the biological, physical, chemical, or
    social sciences.
        Research supported under the NRI program ensures our nation's
    farmers will retain their technological edge. Of particular concern is
    the need to expand the science base for the Hazard Analysis and
    Critical Control Point (HACCP) approach to reducing food-borne illness
    due to microbial pathogens. The health of the environment is also a
    major concern. Many production practices, such as the excessive use of
    pesticides, fertilizers and tillage, continue to be a major cause of
    environmental degradation. In addition, more research is needed on
    plant genetics leading to improved crops that resist pests and diseases
    and environmental stress and possess other desirable traits. Therefore,
    the increase we propose for the NRI program will expand research in
    three key areas: food safety, environmental quality, and the genetic
    enhancement of plants. The NRI Program directly promotes all of the
    five REE Mission Area goals by ensuring the highest quality of research
    is directed at increasing the knowledge base needed to effectively
    address national issues, problems, and concerns related to agriculture,
    food, and the environment.
             research, education, and economics information system
        We are requesting an increase of $600,000 for the Research,
    Education, and Economics Information System (REEIS). The REE Mission
    agencies which, in addition to CSREES, include the Agricultural
    Research Service, Economic Research Service, and National Agricultural
    Statistics Service, currently lack a comprehensive, integrated, user-
    friendly electronic program information system. The need for
    complementary and integrated databases among the four agencies was
    significantly increased as a result of the USDA reorganization several
    years ago. GPRA further emphasizes the increased accountability and
    financial management functions which can be addressed by REEIS.
        In recent years, the need for this type of system has become more
    urgent for several reasons. One, a rapid and comprehensive information
    system is needed to serve as a national reference source for
    development of new research and education projects on such diverse
    issues as increasing productivity in agriculture and processing,
    improving the safety and quality of food, and enhancing the
    sustainability of the environment and rural communities. Two, in the
    quest to get the maximum value from research dollars, Federal/State
    policy makers and administrators are requiring empirical analyses to
    account for historical, current, and future use of public funds and to
    provide a basis for redirecting funds to higher priority problems.
    Three, the GPRA has imposed reporting demands which current,
    decentralized information systems are not prepared to adequately
    satisfy. The REEIS will promote the five REE goals by providing
    current, accurate, and comprehensive information to facilitate
    evaluation analyses and policy decisions relating to the research,
    education, and economics programs within the Mission Area.
        Section 804 of the 1996 Farm Bill authorized the development of
    this type of information system, and a modest amount of funding was
    made available in the fiscal year 1997 appropriation for start-up costs
    associated with this effort. Approximately $400,000 is being used for
    planning the design and development of the REE Information System.
    CSREES has arranged for two leaders from academia to oversee
    programmatic content design and technical design of the system. A
    National Steering Committee has been established to provide advice and
    guidance throughout the development and implementation phases and a
    private sector firm specializing in public sector information systems
    will be engaged to design, develop, test, and install system software
    and hardware. The proposed increase of $600,000 for the REE Information
    System in fiscal year 1998 will allow for the implementation, operation
    and maintenance of a prototype system.
                     children, youth, and families at risk
        An increase of almost $2.15 million is requested for the Children,
    Youth, and Families at Risk (CYFAR) program, which is funded under
    Smith-Lever 3(d) and focuses on America's children, youth and families.
    Of the total increase, $446,000 will be used to bolster ongoing
    programs in this critical area. For example, each State has identified
    youth at risk as a priority, and funding from this program supports
    community collaborations, school-age child care programs, and
    strengthened science and technology programs. Of the proposed increase,
    $1.7 million will be targeted to the 1890 Institutions to provide
    opportunities to build statewide extension capacity for supporting
    community-based programs for at risk youth and families consistent with
    the 1996 Farm Bill. Specific emphasis will be placed on electronic
    connectivity to provide computers, software, Internet connections, and
    technology training for extension staff and participants. This
    targeting of funds is significant because eligibility under the Smith-
    Lever 3(d) programs has previously been limited to the 1862 land-grant
    institutions. However, the Farm Bill specifies that the 1890
    Institutions are eligible to apply for and receive directly new and
    increased funds made available after September 30, 1995, to carry out
    3(d) programs or initiatives, which would include the CYFAR Program.
    CYFAR directly promotes the REE Mission Area goal of enhanced economic
    opportunity and quality of life for Americans.
                           sustained funding support
        The State-Federal partnership in food and agricultural research,
    education, and extension has benefited both American consumers and the
    agricultural industry and merits continued strong support. The Hatch,
    McIntire-Stennis Cooperative Forestry, Smith-Lever, and Animal Health
    and Disease Research formula-based programs are proposed for funding at
    the 1997 appropriation levels. The formula funds have an impact far
    greater than the actual amount of funds provided. Each Federal dollar
    provided leverages 4 to 5 additional dollars from state, local, and
    private sources, maximizing the Federal investment in agricultural
    research, education, and extension. Also, these funds constitute a
    powerful force in bringing about inter-state cooperation and Federal-
    State collaboration in the planning and conduct of these activities.
    Sustaining formula funding strengthens the Federal investment in the
    research and extension infrastructure to respond to national priorities
    and critical needs.
        The Department continues its focus on helping limited resource
    farmers and other disadvantaged populations. Funding is maintained at
    the 1997 appropriation levels for extension formula programming at the
    1890 Institutions, the Evans-Allen research formula program, the 1890
    Capacity Building Grants Program, and the 1890 Facilities Program.
        The fiscal year 1998 Budget Request proposes continued support for
    most of those Special Grants that concentrate on problems of national
    and broad regional interest beyond the scope and resources of the
    formula-based programs. Funding is maintained at the 1997 appropriation
    level for global change, minor use animal drugs, national biological
    impact assessment program, rural development centers, water quality,
    and pesticide impact assessment. Other grant programs, such as Regional
    Aquaculture Centers and Sustainable Agriculture Research and Education,
    are also funded at the 1997 level.
        Funding is also maintained at the 1997 level for several of the
    Smith-Lever 3(d) programs, such as Rural Development, the Expanded Food
    and Nutrition Education Program, Indian Reservation Agents, and
    Sustainable Agriculture.
                           higher education programs
        Fiscal year 1998 funding for most of our Higher Education Programs
    is proposed to be sustained at the 1997 levels. These programs include
    the National Needs Graduate Fellowships Program, Higher Education
    Multicultural Scholars Program, Tribal Colleges Education Equity Grants
    Program, Tribal Colleges Endowment Fund, and the Hispanic-Serving
    Institutions Education Grants Program. We have requested a modest
    increase of $350,000 for our Institution Challenge Grants Program to
    return the program to its 1996 level and enable us to encourage more
    colleges and universities to improve the quality of their curriculum in
    a broader range of areas and attract a wider range of students to the
    food and agricultural sciences.
                             proposed eliminations
        As part of the Administration's efforts to balance the budget, the
    CSREES Budget Request proposes eliminating $42.2 million in funding for
    earmarked Special Research Grants which target specific, local
    concerns; $500,000 for Critical Agricultural Materials; $475,000 for
    Rangeland Research; $4.5 million for Farm Safety and Water Quality
    under Smith-Lever 3(d); $3.2 million under the Renewable Resources
    Extension Act; $1.167 million for Agricultural Telecommunications; $2.6
    million for Rural Health and Safety Education; and $15.4 million for
    earmarked special projects under the Federal Administration line items
    for research and extension. Generally, these programs are state
    specific and/or do not address current regional or national priorities.
    Hatch and Smith-Lever (b) and (c) formula funds are available at the
    discretion of the states to support activities meeting largely state or
    local needs. Also, in keeping with the Administration's policy of
    awarding research and construction grants through a competitive, merit-
    review process, $61.6 million for the current Research and Education
    Buildings and Facilities program earmarked for specific institutions is
    proposed for elimination in fiscal year 1998.
                            program accomplishments
        Although there are numerous examples of CSREES-funded success
    stories, below are a few examples representative of outstanding
    research, education, and extension activities where our programs have
    made a difference:
      --CSREES funding has contributed to the peach Integrated Pest
            Management (IPM) program at Rutgers University to enable
            participating peach growers in the state of New Jersey to
            reduce their use of pesticides by 75 percent. In addition,
            chemical pesticide use was totally eliminated for some pests.
            In its annual report on the IPM project supported by CSREES,
            Rutgers University projected that, if IPM practices followed by
            the growers participating in the Rutgers program were adopted
            by all peach growers in the state, pesticide expenditures would
            be reduced there by nearly $1 million annually.
      --A disease affecting the catfish industry is Winter Saprolegniosis.
            About 10 percent of catfish die each year from this disease
            which results in significant economic losses annually for the
            catfish industry. With funding from the NRI program, scientists
            at the University of Mississippi, while studying disease
            mechanisms and immunity, discovered that Winter Saprolegniosis
            can be prevented by adding formalin or diquat to the water at
            concentrations currently approved by the Food and Drug
            Administration for use in catfish ponds for other purposes.
      --NRI-supported researchers at Oregon State University have invented
            a unique method for preventing food spoilage and food-borne
            illness caused by microorganisms. They were recently issued a
            patent and are hoping to commercialize the result of their
            efforts, which involve spreading food surfaces with a protein
            called nisin that kills any bacteria that comes in contact with
            the food surfaces. The nisin molecules are so firmly attached
            to the food surfaces that they resist removal even after
            washing. It is anticipated that nisin-derived solutions will
            work on wood, aluminum, stainless steel, acrylics and possibly
            other surfaces, which may increase the potential use of this
            microorganism ``deflector'' beyond reducing food-borne
            illnesses. For example, the use of nisin may be beneficial in
            the medical world to protect patients against infections during
            some procedures, such as organ implantation.
      --One of the most debilitating diseases of pigs in recent years has
            been Porcine Reproductive and Respiratory Syndrome (PRRS). At
            one point, it affected almost every herd in every state that
            raised pigs and resulted in such significant economic losses
            that a typical 600-sow farm could lose $150,000-$180,000 per
            outbreak of PRRS. With support from the NRI Program,
            researchers at South Dakota State University, in collaboration
            with private industry and other university researchers, used
            both conventional and ``high tech'' laboratory techniques to
            develop a vaccine that is successfully used to combat the PRRS
            virus.
      --Georgia extension specialists are helping farmers increase
            productivity and profitability while enhancing the environment.
            Farmers have spread more than 42 million gallons of effluent
            from lagoons that store dairy cattle wastes on crops as
            fertilizer without surface or ground water problems. This has
            contributed to a 55 percent decrease in undesirable phosphorus
            in nearby lakes. Land-grant universities in most states are
            working on similar projects with livestock wastes.
      --Best known for their learn-by-doing philosophy of youth
            development, state 4-H programs have successfully adapted their
            curricula into school enrichment programs. A Tennessee program,
            4-H Building Esteem through Science and Technology, improved
            the science scores of participants by 29 percent on the state's
            competency test.
      --In Arizona, extension specialists developed brochures for use by
            farmers to develop pick-your-own and on-farm produce markets.
            During a single season (July to October), one Arizona county
            reported that the brochure and other promotional efforts
            brought more than 80,000 out-of-county visitors to local farms
            where they spent $1.1 million on fresh produce. This influx of
            visitors increased the income of farmers and also increased tax
            revenues which allowed county officials to improve public
            facilities for their constituents.
      --Funding provided by CSREES to the 29 1994 Land-Grant Institutions
            under the Tribal Colleges Education Equity Grant Program has
            been used to establish a Center for Integrated Rural
            Development studies at the Navajo Community College in Arizona,
            the mission of which is to design and deliver classroom,
            research and extension programs in fields of community
            development, economic development, and natural resources
            management. In addition, Little Hoop Community College in North
            Dakota is developing curricula for a program in food science to
            include food preparation, nutrition, and management.
      --Funding from the CSREES Capacity Building Grants Program, has
            enabled Alcorn State University in Mississippi to develop new
            four-year degree programs in international agribusiness and to
            develop an urban forestry program at Southern University in
            Louisiana. The Nation's first bachelor's degree program in
            regulatory science has been developed at the University of
            Arkansas at Pine Bluff.
        The successes of the agriculture and forestry research, higher
    education, and extension systems, which were created with the
    initiation of the land-grant system in 1862, have enabled U.S.
    agriculture to maintain its world-class competitive edge. This
    tripartite relationship has resulted in significant improvements in
    agricultural productivity, created new, improved, and value-added
    products from agricultural and forestry materials, found ways to
    protect our environment, improved human nutrition and health, and
    increased our capacity to respond to changes. These improvements have
    had a profound affect on our standard of living and will impact the
    lives of future generations world-wide. The degree to which our
    standard of living has been affected by these developments is reflected
    in the amount we spend on food in this country compared to other
    countries. In the U.S., we spend only 11 percent of disposable income
    on food compared to 15-20 percent in other affluent countries in Europe
    and in Japan, 35-40 percent in developing countries such as Mexico and
    Thailand, and more than 50 percent in the lowest income countries such
    as India and other southeast Asia countries.
        The fiscal year 1998 President's Budget Request for CSREES, which
    reflects the five goals of the REE Mission Area of USDA and issues of
    great importance to Agriculture, will optimize the contributions of
    university-based programs to sustain and enhance the agricultural
    systems of this Nation and worldwide.
                                     ______

                     Prepared Statement of Susan E. Offutt
        Mr. Chairman and members of the Committee, I am pleased to have the
    opportunity to present the proposed fiscal year 1998 budget for the
    Economic Research Service.
                                    mission
        The Economic Research Service provides economic and other social
    science analysis on efficiency, efficacy, and equity issues related to
    agriculture, food, the environment, and rural development to improve
    public and private decision making.
                                     budget
        Fiscal year 1997. ERS's appropriation for fiscal year 1997 of $53.1
    million was the same as the fiscal year 1996 appropriation. In response
    to this static budget level, ERS continued implementation of its
    streamlining strategy and plans to maintain staff at its current level
    of 591 full-time equivalents. ERS will continue to make full use of
    early-out and buy-out authorities. Since October 1993, the ERS staff
    has been reduced by 204 full-time equivalents In the future, ERS must
    continue to constrain staff levels to cope with cumulative budget cuts
    of $5.8 million since fiscal year 1993 and to maintain its non-salary
    program of agricultural data purchases and cooperative university
    research necessary to support its analytical program.
        Fiscal year 1998. The agency's request for fiscal year 1998 is
    $54.3 million, an increase of $1.2 million over fiscal year 1997. The
    increase consists of three parts: a $0.8 million net increase for pay
    raises; $0.3 million to increase knowledge about the costs and benefits
    of resource-conserving production practices, and $0.1 million to
    provide statistical expertise for GPRA measurement in a governmentwide
    effort to develop reliable performance information.
        In 1993 the Administration announced a goal of bringing 75 percent
    of the Nation's cropland under integrated pest management (IPM) within
    7 years. In addition, the 1996 Federal Agriculture Improvement and
    Reform Act introduced new conservation and environmental programs aimed
    at encouraging the adoption of farming practices that conserve soil and
    reduce nutrient and pesticide run-off. To determine how best to achieve
    the Department's IPM goal and to implement the most cost-effective
    conservation programs, economic analysis is needed concerning the
    factors that affect the adoption of resource-saving technologies, the
    farm-level cost of these practices, the effect of these practices on
    output, prices, and the farm input market, and the environmental
    consequences of practice adoption.
        The ERS request to increase knowledge about the costs and benefits
    of resource conserving production practices would be used, in part, to
    improve ongoing USDA data collection efforts on a wide range of farming
    practices, including livestock waste management, crop nutrient and
    pesticide management, and irrigation management. The data component of
    the request ($100,000), would be directed toward: (1) expanding the
    number of commodities surveyed in the current program to include
    specialty crops and livestock; or (2) assuring that appropriate
    economic data are collected along with agronomic information; or (3)
    linking practice adoption and economic data to natural resource
    characteristics. The choice among these emphases will depend on an
    assessment of the adequacy of existing data collection as well as the
    requirements of the Department's initiative. Using an expanded
    database, the proposed analysis component of the request ($181,000)
    would be used to examine the practices farmers adopt, the cost of
    adoption, the effect of these practices on the performance of the farm
    sector, and the effectiveness of practice adoption in meeting
    conservation and environmental goals. Related analysis would focus on
    variation in adoption rates and costs of adoption across farm size and
    type of farming operation.
        A key component of the Government Performance and Results Act
    (GPRA) is the mandate to assess performance relative to annually
    established output and outcome goals. As the GPRA deadlines quickly
    approach, agencies across the Federal Government are working to develop
    performance measures and indicators. In this process, agencies are
    finding that developing meaningful and useful measures and indicators
    can be very difficult, and developing measures that can be compared
    across agencies is even more difficult. This initiative is designed to
    provide statistical support to Federal agencies across the Government
    to address these challenges. Under the initiative, eight Federal
    Statistical agencies will participate in a three-part effort to:
    develop or refine sampling schemes to support valid performance
    measurement; develop standardized questions and satisfaction scales for
    common element of Federal services; and add 10 Federal agencies that
    provide public services to the national American Customer Satisfaction
    Index. This initiative would provide funds totaling $125,000 for the
    Economic Research Service to cooperate with other Government agencies
    in a $1.6 million effort to improve statistical expertise for GPRA
    measurement. ERS would receive $100,000 to share primary responsibility
    with the Bureau of Transportation Statistics and the Energy Information
    Agency in clarifying and providing guidance on performance measurement
    issues related to GPRA performance measurement. ERS would also use an
    additional $25,000 to provide guidance on development of questions for
    standard survey instruments. ERS' special expertise would be applied in
    providing perspective and advice on bridging customer satisfaction
    measurement with measuring success in meeting basic goals for the
    program.
                     customers, partners, and stakeholders
        The ultimate beneficiaries of ERS's program are the American people
    whose well-being is improved by informed public and private
    decisionmaking leading to more effective resource allocation. ERS
    shapes its program and products principally to serve key decision
    makers who routinely make or influence public policy and program
    decisions. This clientele includes White House and USDA policy
    officials and program administrators/managers, the U.S. Congress, other
    Federal agencies and State and local government officials, and domestic
    and international environmental, consumer, and other public groups,
    including farm and industry groups interested in public policy issues.
        ERS carries out its economic analysis and research in five
    divisions and an Office of Energy and New Uses. ERS depends heavily on
    working relationships with other organizations and individuals to
    accomplish its mission. Key partners include: the National Agricultural
    Statistics Service (NASS) for primary data collection; universities for
    research collaboration; the media as disseminators of ERS analyses; and
    other government agencies and departments for data information and
    services.
        ERS shares five general goals with its fellow agencies in the
    Research, Education, and Economics mission area: a highly competitive
    agricultural production system, a safe and secure food supply, a
    healthy and well nourished population, harmony between agriculture and
    the environment, and enhanced economic opportunity and quality of life
    for all Americans. These goals are fully consistent with the U.S.
    Department of Agriculture mission.
       a highly competitive agricultural production system in the global
                                    economy
        ERS helps the U.S. food and agriculture sector effectively adapt to
    changing market structure and post-GATT and post-NAFTA trade conditions
    by providing analyses on the linkage between domestic and global food
    and commodity markets and the implications of alternative domestic
    policies and programs on competitiveness. ERS economists analyze
    factors that drive change in the structure and performance of domestic
    and global food and agriculture markets; provide economic assessments
    of competitiveness and efficiency in the food industry; analyze how
    global environmental change, international environmental treaties and
    agreements, and agriculture-related trade restrictions affect U.S.
    agricultural production, exports and imports; and provide economic
    analyses that help identify competitive and environmentally sound new
    crops and uses. Looking ahead, ERS will consider how the potential for
    increased commodity price and farm income variability affects market
    performance and interacts with Federal policies and programs. These
    analyses will include short- and long-term projections of U.S. and
    world agricultural production, consumption, and trade. In addition, ERS
    will continue preparation for the 1999 World Trade Organization mini-
    round (expected to focus on agriculture) by analyzing the economic
    effects of Uruguay Round policy disciplines; assessing the economic
    effects of state trading and tariff-rate quota allocations; and
    assessing regional trade initiatives. In this latter category, ERS
    experts will take a more in-depth look at China's evolving role in
    world agricultural markets. ERS will conduct research on the changing
    structure (for example, vertical integration, concentration, and
    contracting) of the food marketing chain and will also analyze the
    effectiveness and use of alternative marketing strategies and risk
    management tools in mitigating farm income risk, including tools
    available from both private and public sector providers.
        ERS has initiated work on case studies to support priority-setting
    for research on ways to use agricultural products, crop residues, and
    co-products from agricultural processing plants as potential feedstocks
    in the production of new products with enhanced value. These studies
    will provide estimates of market potential, job opportunities, and the
    income effects of new products and involve collaborative efforts
    between ERS economists and Agricultural Research Service scientists, as
    well as analysts from other Government agencies and the private sector.
    More generally, ERS analyses can help guide and evaluate resource
    allocation and management of public sector agricultural research, a key
    to maintaining increases in productivity that underlie a strong
    competitive position for U.S. farmers. ERS economists track and
    endeavor to understand the determinants of public and private spending
    on agricultural R&D; evaluate the returns from those expenditures; and
    consider the most effective roles for public and private sector
    research entities.
                    a safe and secure food production system
        ERS focuses on improving the efficiency and effectiveness of public
    policies and programs designed to protect consumers from unsafe food by
    analyzing benefits of safer food and the costs of food safety policies;
    efficient and cost-effective approaches to promote food safety; and how
    agricultural production and processing practices affect food safety,
    resource quality, and farm workers' safety. Plans are to focus on
    policy alternatives for reducing the risks of food borne illness. ERS
    will conduct empirical research to quantify the value placed by
    consumers on reduction of health risks in food and drinking water
    supplies. In collaboration with USDA's Food Safety and Inspection
    Service, the Food and Drug Administration, and the Centers for Disease
    Control, an interdisciplinary effort is underway to evaluate the
    benefits and costs of using Hazard Analysis and Critical Control Point
    (HACCP) approaches to improve food safety, with a special emphasis on
    reducing health risks from Salmonella enteriditis in eggs and egg
    products. Research continues to refine estimates of the human medical
    costs and farm productivity losses associated with microbial pathogens
    in meat and poultry.
        Understanding how food prices are determined is increasingly
    important in responding to domestic and international market events and
    opportunities that promote the security of the U.S. food supply. As the
    farm share of the food dollar declines, accurate retail price forecasts
    depend more heavily on understanding the marketing system beyond the
    farmgate. ERS is undertaking a systematic examination of the factors
    that help set retail prices, including an assessment of the roles of
    the transportation, processing, manufacturing, wholesaling and
    retailing sectors, the impact of imports and exports, and linkages to
    the total economy.
                    a healthy and well-nourished population
        ERS helps identify efficient and effective public policies that
    promote consumers' access to a wide variety of high-quality foods at
    affordable prices. ERS economists analyze factors affecting dietary
    changes; assess impacts of nutrition education and the implications for
    the individual, society and agriculture; and provide economic
    evaluations of food nutrition and assistance programs. The Agency plans
    to study the implications for producers and consumers of movement
    towards adoption of the dietary guidelines; the trends and determinants
    of American's eating habits; evolution of food product trade; and the
    determinants of food prices. Analysis of nutrition education efforts
    will consider what kinds of information motivate changes in consumer
    behavior, the food cost of healthy diets, the influence of food
    assistance programs on nutrition, and the implications of healthy diets
    for the structure of the food system. And, because trade in high valued
    agricultural products, including processed food, now exceeds the value
    of bulk commodity flows, ERS will spend more time to break down the
    components of these trade flows, understand relationships to
    international investment and strategic behavior of U.S. food firms; and
    investigate the implications for U.S. consumers of a globalized food
    marketplace.
                   harmony in agriculture and the environment
        In this area, ERS analysis helps support development of Federal
    farm, natural resource, and rural policies and programs that promote
    long-term sustainability goals, improved agricultural competitiveness,
    and economic growth. This effort requires analyses on the profitability
    and environmental effects of alternative production management systems
    and on the cost effectiveness and equity, of public sector conservation
    policies and programs. ERS analysts focus on evaluating the benefits
    and costs of agricultural and environmental policies and programs in
    order to assess the relationship between improvements in environmental
    quality and increases in agricultural competitiveness. In this vein,
    ERS provides economic analyses on the linkages between biodiversity and
    sustainability issues and agricultural performance, competitiveness,
    and structure.
        In the coming year, plans of work emphasize energy-related resource
    issues, sustainability, water quality and conservation programs,
    integrated pest management, and chemical use and risk reduction. In the
    energy and environment area, the ERS Office of Energy and New Uses
    provides departmental leadership, oversight, coordination, and
    evaluation for energy and energy-related policies and programs
    affecting agriculture and rural America. Its research program will
    focus on energy markets and, in particular, fuel markets that affect
    agriculture. ERS staff will be working jointly with analysts from the
    Department of Energy and the Environmental Protection Agency in
    developing a risk assessment and cost-benefit analysis of the use fuel
    oxygenates, including fuel ethanol. ERS will examine the potential use
    of vegetable oils, animal fats, and recycled grease as an alternative
    fuel (biodiesel) for diesel engines and consider the potential effects
    on farm prices, income, and food expenditures. This effort includes
    work with DOE studying the life cycle of biodiesel fuels to provide
    information on environmental impacts and total energy use. In an
    attempt to refine understanding of the components of a sustainable
    agricultural production system, ERS will build on the outcome of a 1996
    agency-sponsored workshop on sustainable agriculture. The Agency's work
    seeks to identify whether and what kind of economic trade-offs might be
    associated with a sustainable path of development and to support
    decisionmaking on public sector actions that would promote
    sustainability and profitability of U.S. agriculture. In relation to
    water quality and conservation programs, the goal is to evaluate and
    synthesize analyses that can inform effective management of public
    sector environmental quality initiatives. The output will include three
    key reports: a synthesis assessing the successes and failures of the
    past 20 years of USDA conservation programs; a comprehensive economic
    assessment of Federal water quality programs affecting farming; and a
    report on the growing use of partial interests in use rights (such as
    easements) as an alternative public/private conservation tool.
        ERS will continue to play its long-standing role in helping
    understand chemical use in agriculture and identifying opportunities to
    reduce consequent human and environmental health risks. The ERS
    research program on the economics of IPM will publish the proceedings
    of the Third National Integrated Pest Management Symposium Workshop--
    ``Designing Integrated Pest Management Programs: Putting Customers
    First and Learning What Works.'' The proceedings of last winter's
    conference will synthesize current understanding of IPM adoption, the
    barriers to IPM adoption, and the costs and benefits of IPM. This
    information can be used directly by the Department in designing
    programs to meet the IPM 2000 goal of adopting IPM practices on 75
    percent of the Nation's cropland by the year 2000. The product of the
    Agency's work on chemical use and risk reduction will be a
    comprehensive report on chemical use in agriculture. The report will
    document patterns of chemical use by crop and region, the economics
    driving changes in chemical formulation of pesticides and nutrients,
    the economics of pest and nutrient management strategies, and the costs
    and benefits of alternative policies designed to reduce the risk
    associated with chemical use in agriculture. ERS will also release an
    updated edition of ``Agricultural Resources and Environmental
    Indicators,'' a comprehensive handbook containing data and analysis on
    the trends and issues pertinent to agricultural land and water use, the
    application of manufactured inputs and technology, farm productivity,
    and public policies affecting resource use.
        enhanced economic opportunity and quality of life for americans
        The ERS contribution to improving opportunity and quality of life
    in the U.S. is based on analysis that identifies how investment,
    employment opportunities and job training, and demographics affect
    rural America's capacity to prosper in the global marketplace. ERS
    economists analyze rural financial markets and how the availability of
    credit, particularly Federal credit, spending, taxes, and regulations
    influence rural economic development. An assessment of the availability
    of credit for agriculture, industry, and households in rural areas,
    recently completed under a 1996 Act mandate, will be extended to assess
    the competitiveness of rural credit markets. ERS also analyzes the
    changing size and characteristics of the rural and farm populations and
    the implications of these changes in human capital, including skill
    development, on the performance of rural economies. In addition, ERS
    studies the economic structure and performance of non-farm economic
    activities in rural areas. One of the areas identified for special
    attention this coming year concerns the fairly widespread rebound in
    population growth in non-metropolitan counties. The relevant analysis
    will involve monitoring rural earnings and labor market trends with
    emphasis on regional and other disaggregations in order to provide
    insight into the determinants of variation in trends among non-metro
    counties. Such work should yield a better understanding of the factors
    that promote rural vitality and the opportunities for effective public
    sector intervention.
        Because the effects of changes in welfare programs may vary between
    rural and urban residents due to differences in labor markets and other
    aspects of a regional economy's structure, ERS social scientists will
    track implementation of recent program changes to understand any
    differential impacts. In particular, ERS analysis can help anticipate
    changes in participation across assistance programs, including those
    for which USDA has primary responsibility, in rural housing and in
    food. Another opportunity for understanding whether rural America faces
    unique circumstances will come with analysis of a recently-completed
    survey of the rural manufacturing sector.
        ERS continues to monitor the financial situation of the farm
    sector, establishing farm business organization and performance
    benchmarks. This task includes study of the financial position of
    farmers who employ technological advances and innovative risk
    management strategies in their businesses, compared with the financial
    position of farmers who use more traditional approaches. Previous work
    on the use of production and marketing contracts by farmers will be
    extended to identify contractors by class to better define the role of
    non-farm businesses in the industrialization of farms. Analyses of
    financial performance will also measure the comparability of returns
    between farm and non-farm small businesses and assess the financial
    viability of commercial and non-commercial size farm operations.
    Complementary to its work on black and other minority farmers, ERS will
    develop a profile of female farm operators in 1997 to give support to
    an important but largely unreported segment of agriculture. This effort
    will also contribute to the Administration's initiatives supporting the
    goals of the U.N. Beijing Women's Conference.
                                closing remarks
        I appreciate the support that his Committee has given ERS in the
    past and look forward to continue working with you and your staff to
    ensure that ERS makes the most effective and appropriate use of the
    public resources. Thank you.
                                     ______

                      Prepared Statement of Donald M. Bay
        Mr. Chairman and members of the Committee, I appreciate the
    opportunity to submit this statement for this Committee to cover the
    fiscal year 1998 budget request for the National Agricultural
    Statistics Service (NASS). This Service was created in 1862 to provide
    useful, timely, and unbiased statistics and other information about the
    Nation's food and agricultural industry.
        The structure of farming and of the agricultural industry has
    changed dramatically since the initial crop reports were issued over
    130 years ago. However, the need for accurate, timely, and impartial
    statistical information on the Nation's agriculture has become even
    more important as the Nation has moved from subsistence agriculture to
    a highly industrialized agricultural industry producing food and fiber
    for the world market. The crop, livestock, and other estimates
    developed and published throughout the year, in cooperation with State
    Departments of Agriculture, contribute significantly to the information
    available on American agriculture. The State-Federal cooperative
    relationship, which began nearly 80 years ago, eliminates duplication
    and provides State input, while maintaining national consistency in
    surveys conducted throughout the United States.
        The agricultural statistics program provides information critical
    to the entire food and fiber system which totals over 14 percent of the
    gross domestic product and employs more than one out of every six
    employees in the United States. The basic supply information provided
    by NASS is of interest to producers, handlers, processors, wholesalers
    and retailers of agricultural commodities.
        The Nation's food industry affects the U.S. balance of trade, the
    nutritional well-being of our citizens and people around the world, and
    the quality of our environment. NASS estimates play an important role
    in supporting this industry. Today, NASS spends about \1/25\ of a cent
    per dollar of sales of raw agricultural commodities to provide the
    basic impartial and unbiased statistics that underpin the United States
    and world commodity markets. NASS works to ensure the quality and
    integrity of its surveys in order to provide timely and accurate
    agricultural statistics. These statistics are essential because they
    help provide a level playing field for all engaged in the food and
    fiber system and reduce market risk.
        The collection of public statistics on agriculture preceded
    Government commodity programs and was designed to assure
    competitiveness in commodity markets. Therefore, a reduction in
    spending on Government commodity programs is not expected to reduce the
    need for agricultural statistics, and may actually lead to a greater
    demand for accurate information as producers take their production
    signals entirely from the market. Empirical evidence suggests that
    increased information improves the efficiency of competitive markets. A
    lack of information or inaccurate information can cause producers to
    underproduce or overproduce, misuse storage, or miss foreign or
    domestic market opportunities. As producers' abilities to process and
    analyze data increase, so does the demand for accurate and timely
    agricultural information. In addition, the increase in agricultural
    product differentiation and market complexity has made many commodities
    much more heterogeneous. This, in turn, has led to an increased need
    for more detailed information. For example, a vast amount of U.S.
    barley is sold on the basis of variety. Therefore, having data on just
    total barley production is no longer sufficient to support the domestic
    and growing international market for the sale of specific varieties of
    barley.
        NASS statistical reports are not only used by the food and fiber
    industry to assess the supply and demand of agricultural commodities,
    but they are also used by farm organizations and government officials
    in analysis of agricultural policy, foreign trade, conservation
    programs, agricultural research programs, environmental programs, rural
    development, and many other activities. NASS data are examined very
    closely by farmers, agribusinesses, food industry analysts, economists,
    investors, as well as Federal policy makers and analysts, as decisions
    are made that affect the Nation's economy.
        All reports issued by NASS's Agricultural Statistics Board are made
    available to the public at previously announced release times to ensure
    that everyone is given equal access to the information. NASS has been a
    leader among Federal agencies in providing electronic access to
    information. All of NASS's national statistical reports and data
    products, including graphics, are available on the Internet, as well as
    in the popular book, ``1995-96 Agricultural Statistics.''
        In fiscal year 1997, NASS received funding for the first time to
    conduct the 1997 Census of Agriculture, By consolidating the existing
    NASS survey activities with the Census of Agriculture, the two
    agricultural statistics programs will be merged and the resources and
    experience pooled from the two agencies, The transfer of the
    responsibility for the Census of Agriculture to USDA streamlines
    Federal agricultural data collection activities, improving efficiency
    and the quality of data provided. The Census of Agriculture is
    conducted every 5 years and the next one will be taken in 1998 for the
    1997 calendar year.
        Statistical research is conducted to improve methods and techniques
    used in collecting and processing agricultural data. This research is
    directed toward providing higher quality survey data with less burden
    to respondents, producing more accurate and timely estimates to data
    users, and increasing the efficiency of the entire survey process. For
    example, NASS has been a leader in the research and development of
    satellite imagery to improve agricultural statistics. The NASS
    statistical research program strives to improve methods and techniques
    for obtaining agricultural statistics with an acceptable level of
    accuracy. The growing diversity and specialization of the Nation's farm
    operations have greatly complicated procedures for producing accurate
    agricultural statistics. Development of sophisticated sampling and
    survey methodology, along with intensive use of telephone and face-to-
    face contacts and computer technology enable NASS to keep pace with an
    increasingly complex agricultural industry.
        NASS performs a number of statistical services for other Federal,
    State, and producer organizations on a cost-reimbursable basis. In
    addition, NASS has an expanding international program to provide
    technical assistance to a number of countries.
    major activities of the national agricultural statistics service (nass)
        The primary activity of NASS is to conduct surveys which include
    the collection, summarization, analysis, and publication of reliable
    agricultural forecasts and estimates. Farmers, ranchers, and
    agribusinesses voluntarily respond to a series of nationwide surveys
    about their crops, livestock, prices, and other agricultural activities
    each year. Periodic surveys are conducted during the growing season to
    measure the impact weather has on crop production. Frequent surveys are
    also needed on food products that are perishable. Many crop surveys are
    supplemented by actual field observations in which various plant counts
    and measurements are made. Administrative data from other State and
    USDA agencies, as well as data on imports and exports, are thoroughly
    analyzed and utilized as appropriate. NASS prepares estimates for over
    120 crops and 45 livestock items which are published annually in almost
    400 separate reports.
        Agricultural reports issued by NASS include: number of farms and
    land in farms; acreage, yield, and production of grains, hay, oilseeds,
    cotton, tobacco, major fruits and vegetables, floriculture, and
    selected specialty crops; stocks of grains; inventories and production
    of hogs, cattle, sheep and wool, goats, catfish, trout, poultry, eggs,
    and dairy products; prices received by farmers for products; prices
    paid by farmers for inputs and services; cold storage supplies;
    agricultural labor and wage rates; agricultural chemical usage;
    cultural farming practices; and other data related to the agricultural
    economy.
        The Census of Agriculture provides national, State, and county data
    for the U.S. on the agricultural economy every five years, including:
    number of farms, land use, production expenses, farm product values,
    value of land and buildings, farm size and characteristics of farm
    operators, market value of agricultural production sold, acreage of
    major crops, inventory of livestock and poultry, and farm irrigation
    practices. The Census of Agriculture is the only source for this
    information on a local level which is extremely important to the
    agricultural community. Detailed information at the county level help
    agricultural organizations, suppliers, handlers, processors, and
    wholesalers and retailers better plan their operations. Important
    demographic information supplied by the Census of Agriculture also
    provides a very valuable data base for developing public policy for
    rural areas.
        The NASS agricultural statistics program is conducted through 45
    field offices servicing all 50 States. Nearly two-thirds of the
    Agency's staff and resources are located in the field. All State
    offices operate under cooperative funding and 25 are collocated with
    State Departments of Agriculture or land-grant universities. This joint
    State-Federal program helps meet State and national data needs while
    minimizing overall costs, eliminating duplication of effort, and
    reducing the reporting burden on farm and ranch operators. NASS's State
    Statistical Offices issue approximately 9,000 reports each year.
        NASS has developed a broad environmental statistics program under
    the Department's water quality and food safety programs. Until 1991,
    there was a complete void in the availability of reliable pesticide
    usage data. This became evident during the Alar apple situation. In
    cooperation with other USDA agencies, the Environmental Protection
    Agency (EPA), and the Food and Drug Administration (FDA), NASS has
    implemented comprehensive chemical usage surveys that collect data on
    selected crops in selected States. Beginning in fiscal year 1997, NASS
    began survey programs to acquire more information on Integrated Pest
    Management (IPM), additional farm pesticide uses, and post-harvest
    application of pesticides and other chemicals applied to commodities
    after leaving the farm. These programs will result in significant new
    chemical use data, which will be important additions to the existing
    chemical use data base. These surveys also collect detailed economic
    and farming practice information for the purpose of determining the use
    of IPM practices as well as to analyze the profitability of different
    levels of chemical use.
        Our farms and ranches manage half the land mass in the United
    States, underscoring the value of complete and accurate statistics on
    chemical use and farming practices to effectively address public
    concerns about the environmental effects of agricultural production.
    Annual surveys are used to assess the current level of IPM adoption by
    growers and in turn support research and educational efforts to assist
    farmers in adoption of improved pest management practices.
        NASS conducts a number of surveys and provides consulting services
    for many USDA agencies and other Federal, State, and private agencies
    or organizations on a cost-reimbursable basis. Consulting services
    include assistance with survey methodology, questionnaire and sample
    design, information resource management, and statistical analysis. NASS
    has been very active in assisting USDA agencies in programs that
    monitor nutrition, food safety, environmental quality, and customer
    satisfaction. In cooperation with State Departments of Agriculture,
    land-grant universities, and industry groups, NASS conducted 152
    special surveys covering a wide range of issues such as farm injury,
    nursery and horticulture, turfgrass, soybean cyst nematodes, farm
    finance, fruits and nuts, popcorn, animal predator loss, and ostriches
    and other exotics.
        NASS provides technical assistance and training to improve
    agricultural survey programs in other countries in cooperation with
    other Government agencies on a cost-reimbursable basis. NASS's
    international programs focus on both developing countries, such as
    those in Asia, Africa, the Middle East, and Central and South America,
    as well as emerging democracies in Eastern Europe. Accurate information
    is essential in these countries for the orderly marketing of farm
    products. NASS works directly with countries undergoing the transition
    from centrally planned to market economies by assisting them in
    applying modern statistical methodology, including sample survey
    techniques. Short-term assignments supported work in Albania, Bulgaria,
    China, Colombia, Ethiopia, India, Kazakstan, Morocco, Nicaragua,
    Poland, Romania, Russia, and the Ukraine.
        NASS annually seeks input on improvements and priorities from the
    public through: regional data user meetings with representatives from
    agribusinesses and commodity groups, special briefings for agricultural
    leaders during the release of major reports, and through numerous
    individual contacts. The Agency has made many adjustments to its
    agricultural statistics program, published reports, and electronic
    access capabilities as a result of these activities to better meet the
    statistical needs of its customers.
                             fiscal year 1998 plans
        The fiscal year 1998 budget request is for $119,877,000. This is a
    net increase of $19,656,000 over fiscal year 1997.
        The budget request includes an increase of $18,500,000 to fund the
    1997 Census of Agriculture over the $17,500,000 that was appropriated
    for fiscal year 1997, for a total of $36,000,000. Fiscal year 1998 is
    the fourth and peak year of the six year funding cycle for the Census
    of Agriculture. This is the year that the questionnaires are prepared,
    labeled, mailed, and the data are collected, put into machine readable
    format, edited, tabulated, and reviewed.
        The transfer of the responsibility for the Census of Agriculture to
    NASS consolidates the activities of the Census of Agriculture with the
    current agricultural survey program administered by NASS. By merging
    these two programs, efficiencies will be attained in building a
    complete list of farm and ranch operators and reducing the reporting
    burden on agricultural producers. The Census of Agriculture will
    benefit from the local knowledge base that the NASS field office
    infrastructure will contribute. In addition, this distributed
    infrastructure will make it possible to review and summarize the
    results of the Census of Agriculture in a more timely fashion, and will
    reduce the reporting burden of agricultural producers who will now be
    asked to report basic farm data to a single Federal agency.
        NASS is realizing a decrease of $1,000,000 and 3 staff years for
    list frame development and maintenance, as a result of efficiencies
    gained in assuming responsibility for the Census of Agriculture. NASS
    list frame development and maintenance costs will be reduced due to
    efficiencies gained from NASS conducting the Census of Agriculture.
    With NASS now responsible for the Census of Agriculture, list
    development and maintenance costs can be reduced as progress is made
    towards consolidating the two separate name and address lists of
    farmers and ranchers.
        This fiscal year 1998 budget request also includes an increase of
    $640,000 for increased data collection costs, which is to cover higher
    costs for survey interviewers who are employed under a cooperative
    agreement with the National Association of State Departments of
    Agriculture and whose salary increases are not covered by Federal pay
    cost increases. The data collected by these interviewers form the
    foundation of the NASS survey and Census of Agriculture program.
        The fiscal year 1998 budget request includes an increase of
    $540,000 for Government and Performance and Results Act (GPRA)
    measurement, which is NASS's portion of an initiative to provide
    statistical support by eight agencies to other Federal agencies across
    government in the development of meaningful performance measures and
    indicators.
        An increase of $976,000 is requested to cover pay costs, which
    consists of $310,000 for the annualization of the fiscal year 1997 pay
    raise and $666,000 for the estimated fiscal year 1998 pay raise. NASS
    is absorbing almost half of the combined anticipated pay raise in
    fiscal year 1998 and the annualization of the fiscal year 1997 pay
    raise.
                                     ______

                              Biographical Sketch
                  catherine ellen o'connor woteki, ph.d. r.d.
        In June, 1996, the Secretary of Agriculture appointed Dr. Catherine
    Woteki as the Acting Under Secretary for Research, Education, and
    Economics. In this capacity, Dr. Woteki is responsible for the
    management of four agencies: the Agricultural Research Service, the
    Cooperative State Research, Education, and Extension Service; the
    Economic Research Service; and the National Agricultural Statistics
    Service. She leads the Administration's implementation of the 1996 farm
    bill's provisions on research and education that include establishing a
    new 30-member Advisory Board, implementing a competitive grants program
    under the Fund for Rural America, and establishing a Research
    Facilities Strategic Planning Task Force to review agriculture research
    facilities and recommend a 10-year plan for modernization,
    construction, consolidation, and closings.
        Dr. Woteki joined the U.S. Department of Agriculture in January,
    1996 as the Deputy Under Secretary for Research, Education, and
    Economics. She led the development of a mission area strategic plan by
    which the four REE agencies' program and budget planning is being
    brought into a more disciplined, integrated program. Prior to joining
    USDA, she was Deputy to the Associate Director for Science in the White
    House Office of Science and Technology Policy (1994-95), and Director
    of the Food and Nutrition Board, Institute of Medicine, National
    Academy of Sciences (1990-94).
        Dr. Woteki was born in Fort Leavenworth, Kansas, on October 7,
    1947. A biology and chemistry major at Mary Washington College in
    Fredericksburg, Virginia, she pursued graduate studies in human
    nutrition at Virginia Polytechnic Institute and State University. For
    two years, she performed clinical research in the Department of
    Medicine of the University of Texas Medical School at San Antonio. She
    was appointed assistant professor in the Department of Nutrition and
    Food Science at Drexel University in Philadelphia in 1975. In July
    1977, she joined the Congressional Office of Technology Assessment as
    Nutrition Project Director. From 1980 to 1983, she worked for the U.S.
    Department of Agriculture in two capacities: as leader of the Food and
    Diet Appraisal Research Group in the Consumer Nutrition Center, and as
    Acting Associate Administrator of the Human Nutrition Information
    Service. Dr. Woteki was Deputy Director of the Division of Health
    Examination Statistics, National Center for Health Statistics, U.S.
    Department of Health and Human Services from 1983 to 1990.
        Dr. Woteki's scholarly interests include nutritional epidemiology,
    food and nutrition policy and nutrition monitoring. Dr. Woteki is the
    co-editor of ``Eat for Life: The Food and Nutrition Board's Guide to
    Reducing Your Risk of Chronic Disease,'' a book selected by the Book of
    the Month Club. Dr. Woteki has received the Elijah White Award of the
    National Center for Health Statistics, the Special Recognition Award
    from the U.S. Public Health Service, and the Staff Achievement Award of
    the Institute of Medicine. She was selected as the outstanding alumna
    of the College of Human Resources, Virginia Polytechnic Institute and
    State University, in 1987. She and her husband, Tom, reside in
    Washington, DC.

                       Decrease in Overall Budget Request

        Senator Cochran. Dr. Woteki, I notice your comments on page
    4 of your statement describe in general the decrease of $49
    million overall in the budget request for this mission area
    under your jurisdiction.
        Are all of the cuts that the administration proposes in the
    CSREES portion of the budget? You mention ARS getting some
    cuts. There is also a comment on page 5 that says the budget
    reflects an adjustment of priorities leading to an increase of
    $10 million in research and a commensurate decrease in
    buildings and facilities improvement funds, so the only area of
    the budget it appears to me that comes in for substantial cuts
    is the CSREES portion of the budget. Is that correct?
        Dr. Woteki. The biggest cuts are in buildings and
    facilities grants within CSREES, which is approximately $60
    million.
        We have made some adjustments within ARS of priorities that
    have permitted us to put some additional funding into high-
    priority research areas, and that also have led to decisions
    about closures on four facilities sites that would represent
    substantial savings to be put back into the research
    priorities, so those are the major changes that we have made.
        Senator Cochran. With respect to the supplemental, I
    appreciate your comments on the House action which would reduce
    by $20 million the Fund for Rural America to offset some of the
    additional spending in the bill.
        Did you notice also, and do you have a reaction to the
    inclusion in that bill of the Supplemental Nutrition Program
    for Women, Infants, and Children as eligible for funding
    through the Fund for Rural America?
        Dr. Woteki. Yes.
        Senator Cochran. What is your reaction to that?
        Dr. Woteki. Well, it is certainly a great expansion beyond
    what I read as being the intent for the Fund for Rural America
    to allow or permit funding of the WIC program directly from
    that fund. I think it dilutes the original intent of it.
        Senator Cochran. We will be taking that up very soon in our
    committee and having your comments about that will be helpful
    to us.
        I am going to yield to my colleagues for any questions they
    might have, and I will resume my questioning of the witnesses
    later.
        Senator Burns.

                     Children, Youth, and Families at Risk

        Senator Burns. I have just one question, doctor. Tell me
    about the children and families at risk program. Who can
    explain that program to me?
        Dr. Woteki. I am going to ask that Dr. Robinson, who is
    Administrator of CSREES, provide you with some background about
    the program.
        Senator Burns. You guys have got so many letters and
    figures down there I do not know what they all stand for.
        I had breakfast at the Pentagon this morning and got lost
    three times before I got out of there. I think the Agriculture
    Department is getting about the same.
        Dr. Robinson. It is that time. Even with the acronym for
    the name of this agency one can get lost in it. I have been
    there for a year and still can.
        Perhaps I could respond generally to your question about
    the purpose of the Children, Youth, and Families at Risk
    Program. That program has been funded for a number of years,
    and the increase of $2.1 million proposed for fiscal year 1998
    increases it above the 1995 level.
        Senator Burns. What is that level?
        Dr. Robinson. The 1995 level was $10 million. It is $11.7
    million, but of that $1.7 million is targeted for 1890
    institutions.
        The reason for that is as follows. Up until the 1996
    reauthorization of the research, extension, and education
    title, 1890's were not eligible for funds under this funding
    line for children, youth, and families at risk, and it was felt
    that a lot of these institutions deal specifically with those
    problems at risk in the rural communities.
        Senator Burns. Give me an example.
        Dr. Robinson. It deals with things like making sure that
    there are programs through 4-H or through other youth activity
    programs to support youth, to educate youth, to provide
    alternatives to youth to the kinds of problems that they are
    involving themselves in.
        It also involves in many cases joint work with the
    Department of Justice or with the Department of Health and
    Human Services programs in local communities to try to deal
    with youth crime, youth pregnancies, to try to deal with the
    whole array of problems that young people are facing now, and
    it is one of the places where actually there are partnerships
    that are developing between rural leadership and extension and
    the Children, Youth, and Families at Risk Program, and programs
    that are also in local communities, or State programs through
    Justice or Health and Human Services.
        But it is addressed very much to the at-risk elements
    people face in growing up either in rural areas or small towns.
        Senator Burns. It just sounds like to me we have got quite
    a lot of redundancy here. I mean, you are trying to do the same
    thing as Health and Human Services are doing.
        Dr. Robinson. Actually, we are trying very hard to make
    sure that we have complementary programs that are reaching
    beyond the programs that Health and Human Services have and
    reaching both groups of people and groups of problems that
    their programs do not reach.
        That is one of the reasons to try to form partnerships with
    Health and Human Services, because a lot of the youth problems
    in many of the rural areas were not being addressed by existing
    programs, and that was the reason for instituting this line to
    begin with, and I do not recall the date that it was put into
    effect, but it has been in effect for several years.
        Senator Burns. I am pretty familiar with WIC and what it
    does because I have got county government experience, but it is
    little programs like this that, say, take $8 or $9 million
    here, or $8 or $9 million there, and pretty soon we have eaten
    up a budget, and basically it is make-work for the people in
    the Department rather than any good that they are doing for
    youth or families or anything else because of the redundancy
    involved because everybody is tripping over everybody else out
    there trying to show that they have compassion and we do not
    get anything done.
        So there might be some redundancy there. That is the reason
    I asked you what the program does specifically. I have never
    run into this.
        I remember when I was a county commissioner--of course, a
    lot of water has gone down the crick, except to Grand Forks. It
    is not going down the crick too quick there, but I just think
    there is some redundancy here of one Department with another.
        Dr. Robinson. Perhaps I can answer a couple of the
    questions you posed. My colleague just told me that this
    program has been funded since 1991, and the figure in 1997 is
    $9.5 million.
        Two other programs that might be of interest to you are
    after school care and 4-H Club work and some summer fun
    experiences for children who do not understand farming
    activities, so it is a rather diverse program, and it is really
    geared to the needs of the local area where extension is
    located, not to a national program that says do these five
    things, but rather, what are the needs that are locally
    identified by local constituencies that are not being served,
    Senator, by the other programs, and once those are identified
    to try to address the small amount of resources nationwide
    specifically to those locally identified issues.
        Senator Burns. Who administers it at the local level?
        Dr. Robinson. It is administered through the State
    extension services and through the local county agents.
        Senator Burns. OK. That is all the questions I have.
        Thank you very much, Mr. Chairman.
        Senator Cochran. Senator Bumpers.
        Senator Bumpers. Thank you, Mr. Chairman.
        Dr. Horn--maybe I should ask you, Secretary Woteki, you
    state in your statement that ARS is moving ahead with a
    strategic planning task force mandated by the 1996 farm bill to
    determine which, if any, ARS facilities should be closed, and
    yet in your budget you propose to close four facilities. Why
    would you propose that before your task force study is
    completed?

                         Strategic Planning Task Force

        Dr. Woteki. Well, as I indicated in my opening statement,
    Senator, we have also had to make some very hard decisions
    based on program priorities.
        We have taken as a principle that we are not proposing
    major new construction either within ARS or facilities to be
    placed on university campuses, except for those that have been
    very high priority within ARS, and that those three facilities
    that are included in our budget request represent very
    longstanding high-priority construction projects within the
    ARS.
        My sense, though, is that given we are in a very tight
    budget climate at this point in time, given that we do have to
    be responsive to shifting priorities and shifting needs from
    the agricultural sector, and given that we do not have
    expectations of major new increases in funding in agriculture
    research, we have to make some very hard programmatic decisions
    based on the quality of the research that is being done as well
    as its relevancy to those current needs.
        Based on those decisions, and a quality review and program
    review that was done in the Agricultural Research Service, we
    came to the conclusion that it was appropriate at this time to
    recommend closure of two work sites and two laboratories.
        Now, this task force that was required in the farm bill
    last year, and for which the Secretary has just recently
    announced the membership, is tasked with making a strategic
    plan with a 10-year time horizon on it.
        They have 2 years in which to do their work, and they will
    have their first meeting, in fact, next month to actually begin
    their work. But given, again, the very tight budget situation,
    our sense is that we are going to have to continue to make some
    decisions based on the merits of the work that is being done in
    ARS's facilities, and we cannot suspend all of those decisions
    for 2 years while we wait for the task force to complete its
    work.
        Senator Bumpers. Mr. Chairman, I ask unanimous consent that
    before I forget it I be permitted to submit a few written
    questions on behalf of Senator Dorgan, who is not a member of
    the subcommittee, but is a member of the full committee.
        Senator Cochran. Without objection, it is so ordered.
        Senator Bumpers. Dr. Horn, you know, since the memory of
    man runneth not, we have been in these fights about competitive
    research grants as opposed to the grants that Senator Cochran
    and I like. I would just like to reiterate my thinking about
    that by reviewing some of the past history.
        For example, when you look at the increase in aquaculture
    farming in this country, double from 300-and-something million
    pounds a year to over 700 million pounds a year since 1980, and
    the rice germplasm center in Stuttgart is almost finished--and
    in that connection I had to fight like a saber-toothed tiger to
    get the rice germplasm center put in Stuttgart, AR, where about
    43 percent of the rice in this country is grown, because it was
    going to go to Idaho, which did not have one single rice plant,
    simply because they had another germplasm center out there.
        Now, I know that in this day of rapid communications maybe
    it does not make a lot of difference where it is put, but to
    put a rice germplasm center in a place in Idaho which does not
    grow any rice at all, as opposed to putting it in a perfectly
    legitimate place where 43 percent of the Nation's rice crop is
    grown made no sense.
        And I think about the poultry center of excellence, which
    will become and is becoming one of the greatest scientific
    centers on increased production, safety, and everything of
    poultry--I will not belabor the point, but Dr. Horn was just
    down at Boonville, AR, at the Dale Bumpers Small Farm Research
    Center and saw for himself the kind of really magnificent work
    that research center is doing.
        So let me just say, Dr. Horn,I do not know which side of
    this issue or whether you are on either side or not, but would
    you comment on that?

            Appropriate Mechanism for Funding Agricultural Research

        Dr. Horn. I am not sure I exactly have the issue, but I
    think if the issue relates to the portfolio of funding
    mechanisms, I am firmly on the side of a mixture. We do have
    some requirements for rapid responses to emergencies, and
    directed research, merit reviewed research programs that I
    think can be and have been just as good as any other kind.
        On the other hand, I do think there is a need to attract
    the larger science community to do some cutting edge work on
    fundamental research programs that can feed into agriculture
    and help us in the long run.
        I also think that we have benefited from the opportunity to
    specifically address questions in specific parts of the country
    where the work is most appropriate through the use of special
    grants over the years, and so I think my answer to that
    question would be, we need a mix of funding mechanisms, and
    each has proven very, very valuable to us.
        Senator Bumpers. As far as I am concerned that is a good
    answer. I could not agree with you more. There are perhaps some
    research projects that necessarily have to go on a competitive
    basis because there is some really giant research institution
    that could do it. We all admit they could probably do it
    better. They are equipped to do it better.
        But when you think about Mississippi and Arkansas, and
    Mississippi is considerably bigger than we are in aquaculture,
    but when you look at the unbelievable increase in production
    which has occurred because of research--it has occurred some
    because of the expansion of farming itself, but a lot of it has
    occurred--if you look at the per acre yield, you will find it
    is up about fourfold in the last 20 years, all of that by
    research, and when you consider the fact that we are still
    tenth in the world in seafood production, and it is still the
    only thing that even holds out--we are still a net importer of
    fish and aquaculture products.
        It contributes I do not know how many billion, a few
    billion dollars to the deficit every year, and here Senator
    Cochran and I are just busting to close that gap, and we think
    a lot of it can be closed by good research, so I just wanted to
    get that on the record and say that we will continue to fight
    for legitimate projects that could go to our respective States.
    After all, this Nation is supposed to serve everybody, not just
    a few prestigious institutions.
        Dr. Woteki.

             Reauthorization of the Research title of the Farm Bill

        Dr. Woteki. Senator, you have actually touched on some very
    fundamental issues with respect to the way that agricultural
    research is funded in this country and how we make our
    decisions about siting of different facilities.
        As you are well aware, the research title was reauthorized
    last year in the farm bill for only 2 years, and that both the
    Senate and the House Agriculture Committees will be taking up
    this year reauthorizing legislation for the research programs
    within the Department.
        Senator Lugar posed to us some very, very interesting
    questions about what would be the most appropriate mechanisms
    for funding agricultural research now and for the future. In
    response to those questions, the Secretary sent a letter back
    to the Senator which I would be happy to share with you that
    kind of lays out a number of principles that we believe should
    be the basis for the discussion on the research title
    reauthorization. It touches on many of these same issues, and
    we would be happy to share that letter with you as well.
        Senator Bumpers. I would appreciate that.
        [The information follows:]
                            Letter From Dan Glickman
                             Department of Agriculture,
                                       Office of the Secretary,
                                        Washington, DC, March 12, 1997.
    Hon. Richard Lugar,
    U.S. Senate, Senate Committee on Agriculture, Nutrition, and Forestry,
            Russell Senate Office Building, Washington, DC.
        Dear Mr. Chairman: I am writing in response to your letter of
    January 10, 1997. This letter responds to both your letter to me and
    Dr. Catherine E. Woteki, Acting Under Secretary, Research, Education
    and Economics. We appreciate your commitment to the future of the
    agricultural knowledge system, which is comprised of research,
    education, and extension programs. We welcome the opportunity to
    discuss the future of these programs within the Department of
    Agriculture (USDA) and with our partners, and we look forward to
    working with you and members of the Senate Agriculture, Nutrition, and
    Forestry Committee in preparation for reauthorization of these programs
    in 1997.
        Federally funded agricultural research, education, and extension
    are conducted in pursuit of national goals, such as world food
    security, better health, wise use of natural resources, and greater
    economic security for agricultural producers. Attaining these goals is
    challenging given deregulated domestic and foreign markets and economic
    projections that world food demand will double in the next 30 years.
    Innovation in the agricultural sector to meet our national goals
    depends in part upon Federal investment in research, technology
    transfer, and the education of future scientists and producers.
    Although the Federal contribution is 25 percent of national
    agricultural research and development (R&D) expenditures, we believe
    that it plays a critical role.
        The questions posed in your letter recognize these challenges and
    provide a thought-provoking starting point for our discussion about the
    future. This letter provides the Administration's fundamental
    principles guiding our thinking as we address these issues critical to
    success of the agricultural sector in the next century. We look forward
    to continued dialogue with the Committee and plan to provide a detailed
    legislative proposal to you later this spring.
    1. USDA and the Research, Education and Economics mission area \1\
            within it invest in creating and strengthening the research and
            educational capacity essential to meeting national goals for
            the food and agricultural system.
    ---------------------------------------------------------------------------
        \1\ The Research, Education, and Economics mission area is
    comprised of four agencies: the Agricultural Research Service, the
    Cooperative State Research, Education, and Extension Service, the
    Economic Research Service, and the National Agricultural Statistics
    Service.
    ---------------------------------------------------------------------------
        Scientific knowledge is necessary for helping us achieve our broad
    national goals of improved health, environment, prosperity, national
    security, and quality of life. Equally important are educational
    institutions and government programs, such as Extension, that promote
    the dissemination of knowledge and technologies. Accelerating the
    development of technologies is critical to sustaining our nation's
    long-term economic growth and for increasing agricultural productivity
    while reducing its environmental impact.
        Past investment in the research, education, and extension system is
    broadly believed to be responsible for providing substantial economic
    advantages to American producers and consumers and simultaneously
    contributing to food safety and improved health. While agricultural
    production employs less than 2 percent of the population, the food and
    agricultural sectors account for 16 percent of jobs. Agricultural
    exports are a significant player in decreasing the nation's trade
    deficit. This contribution depends on our constant attention to new
    challenges that emerge in the form of new pests and diseases that
    threaten our production capacity, of new organisms or more virulent
    strains of organisms that challenge our food safety system, and of new
    competitors around the globe who vie for the markets upon which the
    prosperity of farmers, ranchers, rural Americans, and all those who
    participate in the agricultural sector depends.
        The Research, Education, and Economics (REE) mission area is
    focusing our research, education, and extension efforts toward
    attaining 5 general goals for the nation's food and agricultural
    system. They are:
        (1) An agricultural system that is highly competitive in the global
    economy,
        (2) A safe and secure food and fiber system,
        (3) A healthy, well-nourished population,
        (4) Greater harmony between agriculture and the environment, and
        (5) Enhanced economic opportunity and quality of life for
    Americans.
        These goals were derived from purposes of agricultural research
    defined by Congress in the 1990 FACT Act and the 1996 Farm Bill as well
    as from input from numerous listening sessions and consultations with
    stakeholders, including our REE Advisory Committee.
    2. The programs of the REE mission are dedicated to maintaining world
            leadership and excellence in agricultural science and
            education.
        Scientists working at the leading edge in the food and agricultural
    sciences are essential to maintain and improve our competitive position
    for U.S. agriculture. U.S. scientists must continue to make a
    significant share of scientific advances and to capitalize on new
    discoveries that are made abroad. By maintaining a tradition of
    scientific excellence, the nation will be better positioned to educate
    the scientific and technical work force required by our economy. To
    sustain U.S. leadership in the world and strengthen participation in
    collaborative scientific and educational endeavors, we must increase
    our level of interaction with colleagues in other countries.
        World leadership is also maintained by funding the best scientific
    endeavors and the best people to conduct research, education, and
    extension activities. As a result, the Administration supports
    increasing the proportion of the portfolio of Federal agricultural
    research that is awarded by merit review with peer evaluation. This
    support is evidenced in the President's budget proposal for the
    Department of Agriculture, which calls for significant increases in
    appropriations for the National Research Initiative and other
    competitively awarded grant programs. The Administration also supports
    and encourages integrated problem solving, as demonstrated by our
    design of the Fund for Rural America competitive grant program. The
    challenges of today and the future are more complex than those we have
    solved in the past and require multi-functional, multi-disciplinary,
    multi-institutional approaches to problems. As a result, the research,
    education, and extension system must build on proven successes and
    adapt to future challenges. Well educated scientists and citizens are
    the well spring of new ideas and new solutions to challenging problems.
    America will need a scientifically literate society to face the
    challenges of the 21st Century. Higher education programs of diverse
    institutions as well as nonformal education provided by Extension are
    critical to achieving this literacy.
        We will sustain this excellence only by engaging the talents of our
    diverse population. A responsive research, education, and extension
    system is comprised of people with a variety of experiences and
    perspectives, providing the necessary insight for problem solving. We
    must improve our educational and extension systems to give children and
    adults a greater understanding and appreciation of the food and
    agricultural sciences, thereby better informing their decisions and
    understanding.
    3. The Federal government has a distinct role to play in partnership
            with state and local governments and the private sector.
        Federal investment in research, education, and extension is
    necessary despite significant state and private sector investments.
    Economically, while state funded research benefits that state's
    producers and consumers, some portion ``spills over'' to consumers and
    producers in other states. If a state considers only the benefits of
    its research to its own producers and consumers, it would tend to
    invest less than would be optimal from a national perspective. This is
    similar to the case of a private firm under investing in research
    because it cannot capture all the returns, such as research on food
    safety, diet, health, and the environment, where private or state
    investments are low but social payoffs are high. In addition, states
    will tend to favor applied research and technology development at the
    expense of more basic or pre-technology research, since the former is
    likely to have more direct state benefit.
        A second unique role for the Federal government is that of
    providing in-house scientific expertise, which is essential for
    national and international leadership and coordination in agricultural
    science and education. The effectiveness of the State system depends on
    regional and interregional coordination and linkages provided through
    national program leadership in USDA.
        Consistent with the Administration's philosophy that state, local,
    and tribal governments have strong roles in governance, the
    Administration values an active federal-state-local partnership in
    setting research, education, and extension priorities, in conducting
    the work, and in evaluating the results. The Administration supports
    efforts such as:
      --stronger integration with the broader science community (to the
            benefit of applications and advances in food and agricultural
            sciences);
      --increasing responsiveness to the needs of today's and tomorrow's
            constituents;
      --institutional arrangements that enhance efficiencies and reduce
            duplication within the national system, as well as effectively
            address regional and multi-state issues.
        The Administration also values public sector-private sector
    partnerships as another means of leveraging scarce federal dollars.
    USDA currently focuses on two tools to bridge between public research
    and private economic opportunity. First, the 1986 Technology Transfer
    Act permits Federal laboratories to enter into Cooperative Research and
    Development Agreements (CRADA's) with universities, private companies,
    non-Federal government entities, and others. CRADA activity at USDA has
    increased rapidly since the program was first instituted in 1987.
    Between 1987 and the present, USDA has entered into over 650 CRADA's
    with private firms. Second, the Small Business Innovation Research
    Program, established in 1982, has been implemented at 11 Federal
    departments including USDA. In 1996, the USDA program will exceed $10
    million. Awards are made for initial exploration as well as
    precommercialization of research findings applicable to solving
    agricultural problems, including rural development.
        Effectively meeting national goals requires a system of customer
    input, evaluation, and assessment. To ensure responsiveness to the
    public in meeting these goals, the Administration supports broad
    stakeholder access to priority setting processes and transparency in
    those processes. Two mechanisms currently used by the REE mission area
    are advisory bodies and the Government Performance and Results Act
    (GPRA).
        Input from advisory bodies should always inform Federal government
    action, whether formally provided by the recently appointed National
    Agricultural Research, Extension, Education, and Economics Advisory
    Board (Advisory Board) or through informal interactions with
    stakeholders at the national, state and local level. Since being
    authorized, the Advisory Board has had one meeting and will have its
    second meeting this month. The Advisory Board has provided the
    Secretary of Agriculture with advice on implementation of the Fund for
    Rural America, the composition of the Strategic Planning Task Force to
    review research facilities, and is considering recommendations on REE
    strategic plans and the reauthorization of the research title of the
    1996 Farm Bill. We expect that the Advisory Board, over time, will more
    clearly define its role and, as Congress intended, will become an
    effective clearing house for numerous other advisory systems from the
    national, State and local levels.
        Second, the Advisory Board will also be an integral part of the
    process of program review related to the implementation of the
    Government Performance and Results Act (GPRA). In response to GPRA, the
    REE mission area and agencies have developed a set of draft strategic
    plans, on which we look forward to consulting with you and the
    Committee, and we are in the process of developing performance plans.
    In the development of performance plans for research, education, and
    extension activities, we are considering adopting a combination of
    quantitative and qualitative measures. These techniques will be used to
    assess the quality, relevance, and timeliness of our research and
    education efforts. Adapted to the research, education, and extension
    context, we believe GPRA will serve us well, allowing us not only to
    conduct programs more effectively but also to be able to more
    accurately describe the value of those programs to society.
    4. Wise strategy for public investment supports a diversified portfolio
            offending sources and mechanisms as well as diverse
            institutions performing research, education and extension.
        The diverse portfolio consists of multiple funding sources and
    funding mechanisms as well as a diversity of institutions and
    performers. Our portfolio currently contains extramural funding in the
    form of formula funds, special grants, and competitive grants in
    addition to intramural funding. The Administration also recognizes that
    diversity among the institutions performing research, education, and
    extension is critical to ensuring that national goals are effectively
    met. A diversity of performers fosters creativity and innovation. It
    increases the number of perspectives on a problem, enriches competition
    among proposals, and induces competition to support the best work among
    Sunders, both public and private. Diverse funding alternatives give
    original ideas a better chance to find support than a more centralized
    system. As a result, a diverse system enhances quality of output and
    strengthens national capacity to respond to new opportunities and
    changing national needs.
        The Administration supports USDA's mix of extramural programs in
    research, education, and extension, and is a proponent that formula or
    base program awards should allow and support maximum flexibility for
    states to use resources where they have the greatest ability to solve
    problems. The Administration also supports a strong Federal role in
    leveraging resources, and recent program efforts have emphasized multi-
    State, multi-institutional collaborations. Strengthening current
    mechanisms, such as the regional research program, which requires 25
    percent of Hatch funds be used for multi-State efforts, and proposed
    mechanisms, such as set-asides for cross institutional extension,
    support this effort. Accountability to shared regional and national
    goals is also critical to this effort. As has been consistent for many
    years, the Administration does not support state-specific or commodity-
    specific special grants. The Administration does support mechanisms for
    multi-state research projects addressing problems of national or
    regional importance, such as water quality and integrated pest
    management. Wherever appropriate, the Administration supports
    nonfederal matching requirements to encourage maximum leverage of
    federal dollars.
        The Administration also supports a balanced portfolio of intramural
    and extramural research. USDA relies on the REE agencies to provide the
    science base to fulfill its mission, and we have a historical
    commitment to strengthening university-based research and higher
    education. We look to the intramural agencies--the Agricultural
    Research Service (ARS), the Economic Research Service (ERS), and the
    National Agricultural Statistics Service (NASS)--as the primary
    performers of mission-oriented, problem-solving research and for the
    generation of statistical data important to program and policy
    decisions. The university-based scientists supported by CSREES produce
    a mixture of basic, applied, and developmental research that is key to
    American agriculture's future. Simultaneously, it disseminates new
    knowledge and new technology, and it trains the next generation of
    scientists and engineers.
        Determining what constitutes an appropriate balance depends on the
    ultimate goals desired from the Federal investment. In past years, when
    budgets could be expected to grow every year, the question of
    appropriate balance between the intramural and extramural parts of the
    portfolio was not a major issue. With the prospect that the
    agricultural research budget will remain flat for the foreseeable
    future, it is of growing significance. The Administration has already
    expressed its preference for increases in university-based,
    competitive, merit-reviewed research to ensure that the Nation receives
    the highest quality return on its investment while maximizing the ties
    between research and higher education. The President's budget requests
    have consistently reflected this position. At present, we have little
    in the way of program evaluation to guide an assessment of the optimal
    proportions of extramural and intramural effort, but we look to GPRA as
    a way to introduce greater rigor into this much-needed analysis.
        Intramural research conducted by the ARS addresses critical
    national issues requiring long-term commitments and specialized
    facilities, supports the research needs of action and regulatory
    agencies, and provides research required to support national or
    international policies and to meet international standards and
    certifications. This research is subject to an internal peer review
    process, which is currently under review. ARS research provides a
    critical resource base so USDA can rapidly respond to new problems and
    emergencies as they arise and supports long-term, high-risk research,
    in which the private sector is not likely to invest.
        Federal laboratories contribute to our science and technology base
    in support of national goals and are an important part of our national
    science investment and infrastructure. It is a resource that must be
    continually renewed and renovated. Given the government-wide
    constraints on discretionary program funding and the priority this
    Administration places on strengthening support for research funding,
    careful consideration of the design of an infrastructure and its
    renewal is critical. We expect the Strategic Planning Task Force
    authorized in the 1996 Farm Bill to put forward significant
    recommendations regarding the best and most efficient use of future
    Federal investments in public agricultural research facilities.
        Federal funds are currently distributed to the 1862, 1890, 1994,
    and Hispanic-serving institutions. In September 1996, President Clinton
    announced a Presidential Review Directive (PRD) to examine university-
    government partnerships. In cooperation with the National Association
    of State Universities and Land Grant Colleges (NASULGC), REE has begun
    to evaluate these partnerships. This will be a wide-ranging review,
    which we anticipate will be completed by late Fall 1997, containing
    recommendations that may be implemented using existing administrative
    authority. We will keep the Committee informed of our progress.
        Mr. Chairman, Federal investment in research, education, and
    extension for the achievement of national goals has never been more
    critical to the success of the agricultural sector. While our system
    has served us well, clearly it is time to assess current programs,
    policies, and funding mechanisms to ensure those national goals are
    effectively met. The appendix accompanying this letter provides you
    with salient facts about the Nation's agriculture research and
    development, education and extension system. We expect to communicate
    to you our specific proposals for administrative and legislative change
    at the earliest opportunity. We look forward to the coming important
    debate about the future of the research, education, and extension
    system, and we look forward to working with you and members of the
    committee to strengthen the capacity of the research, education, and
    extension system.
                Sincerely
                                                  Dan Glickman,
                                                             Secretary.
                                     ______

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                                     ______

                           Letter from Senator Lugar
                                           U.S. Senate,
             Committee on Agriculture, Nutrition, and Forestry,
                                      Washington, DC, January 10, 1997.
    Hon. Dan Glickman,
    Secretary, U.S. Department of Agriculture,
    Washington, DC.
        Dear Secretary Glickman: Research is vital to the future of
    agriculture. As you know, agricultural research, extension and
    education programs must be reauthorized by Congress in 1997. In
    preparation for review of the current programs and structure, I have
    prepared a list of questions for consideration. These questions will
    serve as the basis for a thorough and thoughtful review of the current
    research system structure, funding mechanisms, coordination, priority
    setting, and accountability. It is my hope that these questions will be
    given serious consideration. Your answers and views will be helpful as
    we formulate legislation to reauthorize these important programs.
        I will appreciate your review of these questions and would value
    your answers to as many as you feel able to address. I would appreciate
    hearing back from you by March 14. Please feel free to share these
    questions with others who have an interest in agricultural research,
    extension and education. I look forward to hearing from you soon.
                Sincerely,
                                              Richard G. Lugar,
                                                              Chairman.
                                     ______

                 Agricultural Research, Extension and Education
              Questions for Consideration for 1997 Reauthorization
                           research system structure
        If the U.S. agricultural research, education, and extension system
    was created today, how would it be structured to maximize the social
    rate of return on federal funds committed to the system? How would such
    a system compare to the current system, which traces its roots back to
    the Morrill Act of 1862?
        USDA's research budget for in-house research is more than twice the
    average for all government agencies. What type of research should be
    conducted in-house by ARS and what research can be done as well and
    more cost effectively by nonfederal institutions?
        Is there a need for a college of agriculture in every state or
    should there be a greater effort to regionalize agricultural research
    (such as develop regional centers of excellence that link researchers
    from various states to work on research of regional importance)? What
    would be the impact of such a change on states with smaller colleges of
    agriculture that may end up closing or losing resources?
        How should the more than 100 ARS laboratories be consolidated to
    increase efficiencies, reduce duplication with land grant research, and
    maintain the ``critical mass'' of scientists and equipment needed to
    ensure quality science?
        Should limited federal funds be spent to construct research
    facilities at and for land grant and other universities?
        How should our research system structure and delivery be changed to
    be prepared to meet the challenges of the agriculture sector in the
    next century?
                         funding mechanisms and issues
        In federal funding of agricultural research, what would be the
    ideal allocation of funds for basic and applied research? What has
    historically been the allocation and what is it today?
        Federally funded agricultural research is allocated among
    intramural funds, formula funds, competitive grants, and special
    grants. Are these the most effective methods of allocating funds? If
    not, what is a more effective method? If they are, what is the proper
    balance between intramural funds, formula funds, competitive grants,
    and special grants?
        Should receipt by land grant universities of federally-funded
    agricultural research and extension funds be contingent on their
    ability to demonstrate that a wide variety of stakeholders have
    dedicated to public goods in which the private sector is unlikely to
    invest?
        What percentage of ag research funding is attributable to non-
    competitive funding sources, including special grants? What is the
    corresponding percentage for other major federal research entities
    including NIH, NSF, NASA, etc.? If there are significant differences,
    why do they exist?
        The U.S. Department of Agriculture (USDA) differs from other
    federal agencies that support science in that the majority of
    agricultural research--more than 60 percent--is done in-house, by the
    Agriculture Research Service (ARS). (Other major federal research
    agencies, such as the National Institutes of Health and National
    Science Foundation, award more than 80 percent of their research funds
    competitively to scientists at a wide range of extramural
    laboratories.) What would be the costs and benefits of initiating a
    transition to a more NIH-like approach (with competitive grants as the
    main delivery system of federal funding) to federal agricultural
    research? Would this approach provide greater public return on the
    investment?
        There is widespread support for increasing the percentage of
    federal agricultural research funding that is awarded competitively, as
    well as increasing the amount of dollars available for such grants.
    Assuming continued fiscal constraints, the options for meeting this
    demand are 1) to use savings stemming from changes in mandatory
    spending programs; 2) to redirect a portion of formula funds and
    special research grants to the current competitive grants program; or
    3) to redirect a portion of ARS funding to this purpose. What would be
    the costs and benefits of implementing any one or a combination of
    these approaches?
        Should the formulas by which food and agricultural research and
    extension funds are allocated within the land grant system be revised
    to better reflect changing state demographics and the increasingly
    diverse food and agricultural research community? Are these formulas
    appropriate for the research and extension needs of the 1990's and
    beyond? Would a regionally based (rather than state) formula approach
    better serve or provide a greater return to agriculture? What impact
    would changes in these formulas have on land grant universities?
        How do smaller universities fare in the competitive grant process?
    Is it appropriate for the federal government to ``set aside'' a portion
    of the grant for these smaller universities?
                            extension service issues
        In the absence of federal funds for the Extension Service, would
    states and localities continue to provide the service? Could the
    federal funding role be replaced with a memorandum of agreement elicit
    increased state or private funding for agricultural research?
                   coordination and priority setting process
        Are there overlapping missions and duplication of effort between
    federally conducted research and research conducted by universities and
    the private sector? Is there duplication with research funded through
    research and promotion programs (check-offs)? How can the mission and
    focus of USDA's and land grant universities' agricultural research
    program be more clearly defined to better complement one another and
    avoid unnecessary duplication?
        Since the private sector accounts for the preponderance of total
    agricultural research spending, what processes exist to ensure that
    public research does not unnecessarily duplicate efforts already
    underway among private researchers? If no or few processes exist, is it
    desirable to develop them? If so, how could they be reconciled with the
    need to protect confidential business information?
        What is the best process to use to set priorities for research,
    extension and education? Should additional guidance be given to the
    newly authorized National Agricultural Research, Extension, Education
    and Economics Board regarding how it is to function? What priority
    setting process should be used to ensure that recommendations reflect
    the needs of those who benefit from and utilize agricultural research
    conducted by or funded by the federal government? Is it important to
    evaluate whether priorities have been followed when research funds have
    been awarded?
                                 accountability
        What is the American public getting for its $1.8 billion annual
    investment in agricultural research? I For example, how much funding
    goes to scientists versus administration and facilities, how many USDA
    and land grant universities are doing research in similar areas, and
    how many prestigious scientific awards for agricultural research go to
    USDA, university and private sector scientists respectively.) What is
    the best criteria to Judge whether the federal government is getting
    the most for its agricultural research dollars?
        With growing accountability in government (for example, GPRA), how
    should federally-funded agricultural research results be measured and
    their impacts evaluated? Is there a body of science that can be used to
    measure research results and impacts? If so, is it currently being
    used?

                      Children's Hospital Nutrition Center

        Senator Bumpers. When I first came here Bill Proxmire was
    the keeper of research money, and he came down 180 degrees. I
    voted against him every time I got a chance, because he always
    wanted everything to go on a competitive basis, which meant MIT
    and Harvard, and Stanford, and Cal Tech, and places like that,
    and other places who are capable of doing an awful lot of
    research never got considered because they did not have
    prestige and certainly they did not have the reputation some of
    these others did.
        As I say, the proof is in the pudding. If you go look at
    some of these research centers that some of us on this
    committee have fought to get for our States you will find they
    are doing really excellent work.
        Which brings me, Dr. Horn, to the nutrition center at
    Children's Hospital. I understand you visited that, is that
    correct?
        Dr. Horn. I have been to that center and the other several
    times, including the one that I am sorry to say has got a
    basement full of water this week at Grand Forks, ND.
        Senator Bumpers. There are six of those in the country.
        Dr. Horn. That is correct. That is a very important program
    for us. You will note in the President's budget request that we
    have a human nutrition initiative which, although it does not
    say it, is intended to make stronger the linkage between
    agriculture and human nutrition.
        A good bit of the research that would be done under the
    auspices of that increase is to identify phytoactive compounds
    in foods that, in fact, can promote health and prevent disease.
        USDA, of course, has the mandate to do nutrition work on
    behalf of healthy Americans as opposed to sick ones, and our
    intent is to develop a program that will prevent illness
    through this initiative.
        The time is right. There are new technologies available to
    us that allow us, we think, to make some major breakthroughs in
    health care and prevention, and we are hopeful that this will
    be a real shot in the arm for those six centers.
        Senator Bumpers. Incidentally, Dr. Horn, I want to come
    back to nutrition in just a moment, but did you know that the
    rice-growing States are now producing more and more rice for
    Japan? It is a species developed by the Japanese, but we are
    growing it, and growing it very successfully, and we are
    exporting it to Japan. Are you familiar with that?
        Dr. Horn. Yes; I am. In fact, one of the great achievements
    of the Department is to open up that market. And although I
    would say that U.S. long grain rice has always been world class
    standard, this rice that we are growing for Japan is a major
    addition for our international trade.
        Senator Bumpers. Our farmers love it because they get more
    for it than they do on the domestic market.
        Dr. Horn. Yes, they do.
        Senator Bumpers. Back to nutrition. Mr. Chairman, I will
    yield. I just want to make this point. For those of us who have
    had chest pains in our life and still go for stress tests, the
    question is always first are you working out? Answer, yes. And
    what is your dietary habits, and so we go through that.
        Now, that is an adult question, and I am talking about
    really the pediatric nutrition center at Children's Hospital in
    Little Rock, but I can tell you that so many of the health
    problems in this country, an unbelievable number of the amount
    of health costs in this country is directly related to poor
    nutrition.
        I watched--you know, I have watched the Children's Hospital
    and Medical Center wrestle with these nutrition problems for a
    long time, and we have done quite a bit of research, but we
    still really--I consider that to almost be in its infancy,
    because we still do not really know--we know fat is bad for
    you, but we do not know how much of it, where the threshold
    changes, and when it comes to infants, you know, you saw the
    conference over at the White House the other day where the
    first 3 years of a child's life is absolutely critical to the
    very life of that child, and a large part of that deals with
    nutrition.
        Now, we learned a long time ago that a good protein diet
    during the fetal period as well as during the neonatal period--
    we learned a long time ago that protein builds brain cells, and
    if you do not have a decent protein diet for both the fetus and
    the infant, that child's brain is not going to develop right.
    That is the reason we started the WIC Program, to make sure
    that poor pregnant women get a decent diet, get a good protein
    diet.
        And I must say, we had all these people come and testify
    the other day for another subcommittee on appropriations. Rob
    Reiner, who has a program of his own--but in any event a couple
    of Governors and a psychiatrist from Houston, Baylor University
    Hospital there, and they were all honed in on this research
    which has determined, and as far as I know--I didn't know this
    was new. I thought this was old information, how critical the
    first 3 years of an infant's life is.
        But it goes to a lot of things. It goes to how much
    attention they get, how tenderly they are handled, a whole host
    of things, their environment, but at the top of the list is
    nutrition, what kind of diet they get, so, I think these
    pediatric nutrition centers serve a great purpose, and I am
    convinced we are just in the infancy of deciding what we really
    need to be doing now.
        I might say--this has nothing to do with agriculture, but I
    asked those people the other day, if you know that, then the
    next question is, what are we doing here in Congress? First of
    all you have to have a decent home for that child's first 3
    years. Second, you have to have decent health care for that
    child's first 3 years, and you have to have devoted, caring
    parents.
        I have said many times that talking about family values is
    a wonderful thing. I do not like for people to lecture me on
    family values. I have got the greatest family anybody could
    have. That is why I do not like for people to tell me about
    family values. I know that.
        But I can tell you one thing, there are a lot of children
    in this country that would be better off anywhere than where
    they are, so to say that does not conflict with family values.
    Some people ought to be taken out of the environment they live
    in, and as I say, that has nothing to do with agriculture.
        Coming back, it is a whole host of things that make a
    healthy, bright child, and to say that it all happens in the
    first 3 years is one thing, but the really basic question is,
    How do you determine how that child is going to get all that
    tender loving care during the first 3 years? I chose my parents
    well. A lot of people do not.
        Do you have any comments on what I just said, or did I say
    it all? [Laughter.]
        Dr. Woteki. I think definitely we would agree with you that
    the first 3 years of life are extremely important for children
    and that nutrition plays a very critical role both in a
    successful pregnancy, a healthy baby at birth, and in that
    child's development.
        I mentioned in my opening statement the fact that we have
    been involved with some strategic planning over the last year
    and a half to respond to the Government Performance and Results
    Act, and as part of that we have identified some major goals
    for our research program.
        One of them is a healthy, well-nourished population. That
    planning activity has given us a lot more insight into how we
    can transfer the findings of research from places like the
    Children's Hospital in Arkansas and our research center in
    Houston, which also focuses on the nutritional needs of women
    during pregnancy and of their children in their most formative
    years, very quickly to the public, and to educators who are
    working with the public.
        We have, on a trial basis, had an extension educator
    located at the Human Nutrition Research Center in Houston, and
    that person has taken the primary responsibility for taking
    those research results and getting them out quickly to the
    extension community so that they can be helping parents such as
    you have just described, and also so that that information can
    be folded into some of our other education programs like the
    Expanded Food and Nutrition Education Program, which provides
    information on good nutrition and how to make food purchases on
    a limited budget to families that are of limited means.
        So, this reorganization that has occurred within the
    Department within the last couple of years that created this
    organization that sits before you, research, education, and
    economics, gives us the opportunity to move the research
    results into the applications much quicker and address some of
    your concerns about healthy mothers, healthy babies, and
    maximizing their growth.
        Senator Bumpers. You are asking for a $6 million increase
    in that program. I applaud that. It ought to be a lot more than
    that, but Senator Cochran has the responsibility of making the
    money fit here, and the committee has additional
    responsibility.
        Mr. Chairman, that is the end of my story.
        Senator Cochran. Thank you very much, Senator.
        Dr. Woteki, I have a number of questions on various
    subjects that I am going to submit, one of which involves this
    integrated pest management.
        I am going to ask some specific questions to Dr. Horn and
    his staff on that subject, but I know that one of the goals of
    the integrated pest management initiative is to bring much of
    the Nation's farmland under integrated pest management
    practices by the year 2000.
        Can you give us a status report as to what has been
    accomplished in that regard to date, and what the additional
    funds you are requesting for 1998 for this project will
    achieve?

                           Integrated Pest Management

        Dr. Woteki. Yes, Senator; I can. I am fumbling here. I had
    put aside some special notes which I cannot seem to put my
    hands on immediately with respect to IPM, but we do within our
    budget request have an increase for IPM that involves actually
    three different agencies within this area, the Agricultural
    Research Service, CSREES, as well as the Economic Research
    Service.
        You are correct in identifying that the Department has a
    goal of bringing 75 percent of crop acreage under IPM practices
    by the year 2000, and the initiative that is included in our
    budget this year addresses not only research in support of
    meeting that objective, but also extension education programs,
    as well as monitoring programs or surveys, essentially, to
    monitor our progress toward meeting those goals.
        I would like to start with ARS, since your question was
    immediately addressed toward ARS, but as far as IPM activities
    go there are two other agencies within the mission area that
    are also included within this initiative.
        So, Dr. Knipling, would you like to address the ARS part?
        Dr. Knipling. Well, Mr. Chairman, IPM is, of course, a very
    important part of the ARS program. It literally touches just
    about everything we do at most of our laboratories.
        Our proposal for 1998 does call for a $4 million increase
    in this area, and that is on top of about an $18.5 million
    program at the present time.
        Specifically for next year we want to emphasize the
    areawide pest management program. That is, to try to pull
    together many of the things we have learned in past programs
    and to actually apply it on an areawide basis, perhaps in
    almost a validation demonstration mode, working with the
    growers, the extension people, and many other parties, private
    industry as well.
        Senator Cochran. Where will you undertake this research?
        Dr. Knipling. Funding for this program is slated to be
    allocated on a competitive basis that we will manage.
        Senator Cochran. Are you spending money in this way in this
    fiscal year?
        Dr. Knipling. We have that program underway now.
        Senator Cochran. Where is the research being undertaken
    now?
        Dr. Knipling. Three programs are underway now, one in the
    Pacific Northwest oriented toward codling moth in apples and in
    pears, in the upper Midwest on the corn rootworm, and in the
    Midsouth on cotton insects. Those are the three main programs
    currently in place.
        Senator Cochran. Where is the research being undertaken?
        Dr. Knipling. In the Pacific Northwest it is based out of
    our Wapato, WA, laboratory. In the upper Midwest, there are
    several locations, with Brookings, SD, administering the
    program and then in the Midsouth, the program is based out of
    Stoneville, MS.
        Senator Cochran. Can you give us for the record what the
    exact projects are and where they are being undertaken?
        Dr. Knipling. Yes; we can provide that for the record.
        Senator Cochran. And where the money, the $4 million for
    IPM research will be spent next year under your program?
        Dr. Knipling. Yes; we can provide that for the record.
        [The information follows:]
                              Areawide IPM Program
        Of the $4 million requested, $1 million will be used for Areawide
    IPM and pilot test programs; $2 million will be used for augmentation
    biocontrol and biologically-based IPM in field, horticultural and
    vegetable crops; and $1 million will be used for host-plant resistance
    and related pest management strategies.
        The current location of the ARS Areawide IPM test sites are as
    follows:
    1. Southern Insect Management Research Laboratory, Stoneville,
            Mississippi
        Cotton Bollworm/Corn Earworm/Tobacco Budworm Research Sites:
        --Washington County, Leland/Stoneville, MS
    2. Fruit and Vegetable Insects Research Laboratory, Wapato, Washington
        Codling Moth Research Sites:
        --Progressive Flat, Obanogan, WA
        --Brewster Flat, Brewster, WA
        --Manson, WA
        --West Wapato, WA
        --Lake Osoyoos, Oroville, WA
        --West Parker Heights, WA
        --Howard Flat, Chelan, WA
        --Ukiah, CA
        --Randall Island, CA
        --Medford, OR
    3. Crop and Entomology Research Laboratory, Brookings, South Dakota
        Corn Rootworm Research Sites:
        --North Central IL/IN (on the border) in Eastern Iroquois County,
                IL (near Sheldon); and Western Benton County, IN (near
                Sheldon, IL)
        --Northeastern IA, Jackson County, Preston, IA
        --North Central KS, Republic County, KS (near Scandia)
        --Southeastern SD, Brookings County, Brookings, SD
                       Areawide Pest Management Projects
    1. Research Project on Cotton Bollworm/Corn Earworm:
      --Control Strategies for Heliothis/Helicoverpa SPP. and Other Field
            Crop Insects in Cotton Agroecosystem, Stoneville, MS
    2. Research Projects on Codling Moth:
      --Areawide Pest Management of Corn Rootworm in Maize Production
            Systems conducted at Progressive Flat, Okanogan, WA; West
            Wapato, WA; Lake Osoyoos, Oroville, WA; and West Parker
            Heights, WA
      --Codling Moth Areawide Management Project, Brewster Flat, Brewster
            Heights, WA; Hanson, WA
      --Areawide Codling Moth Pilot Test Project, Howard Flat, Chelan, WA
      --Codling Moth Areawide Management Project, Mendocino County, Ukiah,
            CA
      --Areawide Management of Codling Moth Using Mating Disruption, The
            Randall Island Project, Randall Island, CA
      --Areawide Suppression Program for Codling Moth in Oregon, Medford,
            OR
    3. Research Projects on Corn Rootworm:
      --Development of a Corn Rootworm Areawide Management Program, North
            Central IL/IN (on the border) in Eastern Iroquois County, IL
            (near Sheldon); and Western Benton County, IN (near Sheldon,
            IL)
      --Development of a Corn Rootworm Areawide Management Program in Iowa,
            Northeastern IA, Jackson County, Preston, IA
      --Development of a Corn Rootworm Areawide Management Program in
            Kansas, North Central KS, Republic County, KS (near Scandia)
      --Areawide Pest Management of Corn Rootworm in Maize Production
            Systems, Southeastern SD, Brookings County, Brookings, SD
              Integrated and Areawide Pest Management--$4,000,000
        Areawide IPM and Pilot Test Programs--$1,000,000.--Headquarters.
        Augmentative and Biologically-based IPM in Field, Horticultural and
    Vegetable Crops--$2,000,000.--Stoneville, MS, Orlando, FL, Beltsville,
    MD, Gainesville, FL, and Weslaco, TX.
        Host-Plant Resistance and Pest Management Strategies--$1,000,000.--
    Stoneville, MS, Ames, IA, and Raleigh, NC.

                         Chemical/Nonchemical Research

        Senator Cochran. Is there any way for you to break down
    your chemical and nonchemical research components that fall
    within the general area of integrated pest management?
        Dr. Knipling. Yes; we have that data. The vast majority is
    actually oriented toward nonchemical research, employing
    biological control and genetic mechanisms. Certainly when we
    get into the integrated pest management arena, that implicitly
    embodies all types of approaches in some combination. So, we
    probably could not discretely break out the pesticide part of
    IPM, but we can for other parts of our pest control program.
        [The information follows:]

                 ARS Chemical/Nonchemical Pest Control Research

        Of the $134 million ARS spends on pest control research in
    fiscal year 1997, $106,799,000 is devoted to non-chemical pest
    control and $27,437,000 is devoted to chemical pest control.
    The $134 million total can also be subdivided into other
    categories: $53,770,000 is allocated to biocontrol, $18,544,000
    to integrated pest management, and $61,922,000 to other pest
    control programs.
        ARS research on non-chemical means of pest management
    includes fundamental studies of the taxonomy, biology, ecology,
    physiology, pathology, metabolism, and nutrition of pests and
    host plants and animals; as well as development of non-chemical
    means through natural enemies such as predators, parasites, and
    pathogens of pests, pest resistance, sterile insect technology,
    naturally-derived attractants and repellents, and cultural and
    physical control practices.
        ARS research on chemical means of pest management deals
    with technologies and systems to reduce chemical pesticides and
    improve upon the timing, safety, and efficiency of their use in
    concert with environmental and economic goals. ARS does not
    devote any resources to the development of new chemical
    pesticides, but does evaluate new ones developed by industry
    and other cooperators. More specifically, our efforts on
    chemical means is largely directed at improving pesticide use
    patterns, including development of safer, more effective ways
    to use chemical pesticides in pest management schemes by
    timing, formulations, and modes of application; improved
    detection and measurements of pesticides and metabolites; and
    ways to eliminate or minimize chemical residues.

                          National Research Initiative

        Senator Cochran. Dr. Woteki, the National Research
    Initiative is another major goal for research, and it is, I
    understand, going to get under your budget an increase of $36
    million, a 38-percent increase from this current year level of
    funding if we approve the request. We understand from your
    statement that the research is primarily in three areas, food
    safety, genetic enhancement of plants, and environmental
    quality.
        Could you tell us anything about the results that the
    national research initiative has produced in terms of direct,
    quantitative benefits or anecdotal successes to date?
        Dr. Woteki. Well, I am going to call on Dr. Bob Robinson to
    give you some anecdotal evidence of success for the National
    Research Initiative, but before I ask him to do that I want to
    indicate to you that we are intending to do a review of the NRI
    to essentially assess its performance over the first 6 years or
    so of its life. It seems like it is an appropriate time to
    begin such a review.
        The current chief scientist for the National Research
    Initiative, Dr. Ron Phillips, is actually the person who
    recommended that it is appropriate to do such a review at this
    point in time, and those of us in leadership within the mission
    area and who sit on the NRI's board very heartily endorse that
    idea.
        He has as well collected some information about the NRI and
    the specific achievements of research that is funded under it,
    and is planning to make that more generally available so in the
    near future you need to be looking for some information we will
    be providing to you on a rather routine basis about the NRI's
    accomplishments.
        Having said that, I would like to ask Dr. Robinson to
    highlight some specifics for you.
        Dr. Robinson. Thank you, Dr. Woteki. The question that you
    have posed really has very many nice things to report, and I am
    certainly not going to be able to get them all here. What I
    would like to do perhaps, Senator, is to give you a few and
    then send you a brief which has a rather significant array.
        Senator Cochran. That would be helpful.
        [The information follows:]

     Cooperative State Research, Education, and Extension Service National
                      Research Initiative Accomplishments

        In the summer of 1996, about 400,000 of Bt corn was grown
    in the U.S. Bt corn has a bacterial gene incorporated into the
    corn genome that produces a toxin extremely effective against
    the European Corn Borer. Estimates are that 3.4 million acres
    will be grown in 1997. Although this product is viewed as
    developed by industry, public research laid the groundwork for
    its development. The National Research Initiative (NRI) has
    funded considerable work on Bacillus thurengiensis (1) for
    determining the way Bt toxin destroys its insect host so that
    the most effective Bt genes can be incorporated into the
    engineered plant, and (2) for understanding the biochemical and
    ecological basis of insect resistance to Bt so that resistance
    problems can be avoided or delayed with the engineered crop.
    Other NRI funding has allowed the molecular genetic mapping of
    corn leading to efficient means for crossing the transgene into
    various elite lines, documentation of the genetic behavior of
    tissue cultures facilitating the regeneration of corn plants
    with the Bt gene, etc.
        The safe handling of food has been enhanced through NRI
    funded projects. One of the outcomes is the isolation of
    protein--invisible when applied to food preparation surfaces
    such as cutting boards--that binds firmly to the surface but
    does not allow harmful bacteria to bind. If they do bind, the
    protein kills the cells. This product is called Nisin,
    developed by researchers at Oregon State University. The
    medical field is considering Nisin's value in treating
    mechanical devises used in medicine.
        The Spider Lamb Syndrome--SLS--is a congenital skeletal
    defect controlled by a single recessive gene. Lambs that carry
    the gene in heterozygous condition--carriers--are perfectly
    normal--but matings between two carriers produce defective
    lambs in about 25 percent of the progeny. Knowing that breeding
    stock carries this gene reduces their value by about 70
    percent. The gene is becoming more and more prevalent in the
    Sulfolk and Hampshire breeds. In 1994, the NRI published a
    ``Research Highlights'' publication page indicating that
    research had been funded to discover a marker gene that might
    allow farmers to know when a ewe or ram carried the gene. In
    the ensuing years, a maker was found that would allow the
    identification of such carriers with 92 percent accuracy. Using
    the chromosome map position of this marker gene in sheep as a
    guide, Utah State University researchers looked for the marker
    on the human molecular genetic map. At about the same distance
    from this marker gene as found between it and the SLS trait in
    sheep, the researchers noticed that a human trait had been
    mapped that also influenced skeletal development. Using the
    human gene as a probe onto the DNA from progeny segregating for
    the SLS, the researchers found that this gene was 100 percent
    associated with the trait. By this series of discoveries, we
    now have available not only a perfect molecular genetic tag to
    know when a lamb is a carrier, but the exact gene causing the
    biochemical defect is now known.
        Several wild species of tomatoes produce seemingly
    worthless small--\1/2\-inch diameter--green fruit. It is not
    surprising to find that these wild tomato species furnish genes
    for cold tolerance, virus resistance, insect resistance and
    increased solids. What is surprising is that a Cornell
    University researcher, through NRI funding, found that these
    green tomatoes possess genes that will make our normal red
    tomato even redder. The researcher has found that the use of
    the molecular genetic map of tomato, also developed in part
    through NRI funding, allowed him to detect genes in the green
    wild tomato that have an effect directly opposite to what one
    would expect. The researcher also found that these tiny fruited
    tomatoes have genes that will increase yield in our normally
    cultivated types.
        Researchers at Purdue University have developed a system to
    use corn grits--ground corn kernels--to take the water out of
    ethanol produced from corn, a system now used to process 750
    million gallons of ethanol per year at a significant cost
    savings over other methods. Through NRI support, the technology
    is being extended to new applications. For example, modified
    grits are being examined as a replacement for expensive
    inorganic desiccants in pressure swing dryers to provide dry
    air or other gases for use in paint spraying, ozone generation,
    and pressurization of power and communication cables. In
    addition, corn grits are being examined as a low-cost, natural
    desiccant for air conditioners based evaporative cooling; in
    this application, the grits can help displace ozone-depleting
    chlorofluorocarbons and tap into a $26 billion global market.

                           Soybean Nematode Research

        Dr. Robinson. Let me begin with one that I have used before
    which I find absolutely intriguing from the point of view of
    using fundamental science for a really basic problem, the
    really basic problem being nematodes with soybeans. The
    fundamental question is, How does it happen? How does the
    nematode actually destroy the soybean's productivity?
        Scientists from North Carolina State University have
    discovered, it does it by exuding an enzyme which triggers a
    genetic trigger inside the soybean plant that says divert food
    to the nematode, and with some manipulation and fundamental
    biological science, scientists at North Carolina State
    University have been able to change that coding structure in a
    way that the plant now ignores the enzyme's messages to the
    genetic structure, and the nematode starves--very basic science
    applied to a very real problem.
        We actually find that when we can go across the country and
    really look at developments all the way around, improving crop
    yield and disease resistance--for example, many plants have
    evolved very sophisticated systems to prevent inbreeding and
    promote outcrosses.
        One mechanism is self-incompatibility, a genetic barrier to
    self-fertilization. For example, pollen of one genotype is not
    able to fertilize the ovule of the same genotype. In many
    plants this is controlled by a protein which rejects its own
    pollen.
        Senator Cochran. A protein?
        Dr. Robinson. A protein. Using the petunia, a very simple
    plant, scientists at Penn State University were able to use an
    approach in which they turned that protein around and actually,
    then, by turning the protein around they prevent the petunia
    from rejecting its own pollen and allow a cross, and what this
    is able to do in the future in terms of productive agricultural
    crops opens a wide array of possibilities.

                                  New Vaccines

        NRI funds have supported the development of new vaccines
    that deal with the viral diseases of pigs, for example.
    According to the National Pork Producers Council the porcine
    reproductive and respiratory syndrome is the most important
    animal health problem facing pigs, and researchers at South
    Dakota University, using funds from the NRI, have identified
    and characterized the agent that causes this very significant
    disease, and the work subsequently led to the development of
    the first vaccine, which is currently used by swine producers
    throughout the United States.
        Similarly, tests have been developed to save new chicks.
    Researchers at Ohio State, Mississippi State, and Purdue
    University have developed tests that quickly and accurately
    detect a highly contagious viral infection of new chicks in
    order to prevent tremendous losses.

                              Aquaculture Research

        From your State, saving catfish, one of the worst diseases
    affecting the catfish industry is a winter disease that I
    cannot even pronounce, but basically----
        Senator Burns. Give it a shot.
        Dr. Robinson. Saprolegniosis. About 10 percent of catfish
    die from this disease each year, and it creates enormous
    economic losses, between $20 and $40 million in the catfish
    industry alone, and until recently there was no treatment for
    the disease, until a discovery was made as a result of research
    funded again under the NRI program, and scientists at the
    University of Mississippi, while studying the disease
    mechanisms and immunity, discovered that it could be prevented
    by adding formula or diquat to the water at concentrations
    presently approved already by the Food and Drug Administration
    in the catfish ponds.
        These are just a few of the examples, and one of the
    reasons I picked the ones that I did is it addresses a question
    that Senator Bumpers asked earlier, and that is, do just the
    large prestigious universities, or do all universities
    participate, and I picked an array of them, because a number of
    universities participate in the NRI.
        Senator Cochran. I did have a chance to visit Mississippi
    State University and see firsthand some of the research being
    done on catfish diseases, and was impressed with the hard work
    and the commitment of the scientists there and their prospects
    for success, and saw photographs of just what you were talking
    about, whole catfish ponds almost just full of dead fish, and
    so it is a devastating problem to the industry.
        This has become one of the largest single employers in the
    State of Mississippi. It is a big, big industry now, and
    somebody told me the other day that if you buy a filet of farm-
    raised catfish in a supermarket, the probability is that it
    came from Mississippi, that it was produced, processed, and
    marketed from there. Eighty-five percent of the total fish
    being sold--this includes value-added catfish products--are
    coming from the State of Mississippi now, so it has had a very
    big economic impact in our State.
        The potential for other kinds of aquaculture, too, we are
    seeing developed. The so-called cold water aquaculture, I am
    now finding out--Senator Byrd has explained that to me
    recently--has great prospects as well.
        There is another facility I visited recently, too, I wanted
    to ask you about--the National Center for the Development of
    Natural Products which is in Oxford, MS. To support the ARS
    scientists at the facility, does your budget request additional
    funding?
        Funds also are still needed to complete that facility, and
    I was worried about the comments that were made about cutting
    out some of these funds in the President's budget.
        I hope the committee will approve funds for completion of
    that facility as well as provide additional support for the
    research program so these scientists will be able to carry out
    their mission. I note that funding is included in the budget
    request to support the ARS natural products research program at
    the Center, so I hope we can work out maybe getting your
    support too for providing the additional resources I just
    indicated are needed for fiscal year 1998.
        Dr. Woteki. Certainly, Senator, as part of the approach we
    are taking to facilities, given that this review is going to be
    ongoing for the next 2 years, projects that are in construction
    at this point in time will be completed.
        Senator Cochran. The funding request which you have
    submitted also talks about the Government Performance and
    Results Act, and I remember from my service on the Governmental
    Affairs Committee the development of that legislation, and I
    know that you are conducting work to develop strategic plans.
    You have had regional listening sessions on the plans, and you
    are drafting a performance plan at the Department to implement
    this act.
        My question is can you tell us, or maybe submit for our
    record, what funding has been necessary and the number of
    staff-years which have been utilized by the agencies under your
    jurisdiction for this fiscal year for activities related to the
    implementation of the Government Performance and Results Act?
    Since no funding is specifically provided for these activities,
    I am curious about where the money is coming from, which
    activities are supporting the funding and staff for this
    project. You may know that.
        Dr. Woteki. Actually, Senator, I do not off the top of my
    head, and I doubt that any of my colleagues do, either. But we
    would be happy to submit for the record information on the
    number of staff-years that we are currently using and funding
    out of this year that is going in support of our strategic
    planning activities.
        Senator Cochran. Thank you for that.
        [The information follows:]

                               GPRA-Related Costs

        The Government Performance and Results Act (GPRA) related
    activities in which the REE agencies have been engaged is built
    on a sound foundation of previous program planning. And much of
    the REE mission area GPRA-related activity would have taken
    place, perhaps in a somewhat different form, even in the
    absence of GPRA, making it difficult to estimate the marginal
    costs resulting from the passage of GPRA. For example, ARS's
    current plan, ``The 6 Year implementation Plan 1992 to 1998,''
    is nearing expiration. With or without GPRA, ARS would be
    devoting resources to develop a new plan covering the next 5 or
    6 fiscal years. The REE agencies activities focused
    specifically on meeting GPRA requirements include management
    training on GPRA and results-oriented planning and management
    approaches, preparation of strategic plans and performance
    plans, and extensive consultation with partners and
    stakeholders. The costs associated with these activities
    include staff time, travel expenses, expenses associated with
    training and stakeholder meetings and some training costs. In
    fiscal year 1997 the agencies estimate they will spend
    approximately $750,000 in GPRA-related activities. Staff years
    devoted to GPRA activities are estimated to be approximately 7
    for the four REE agencies.

        Dr. Woteki. I might indicate to you, though sir, that my
    sense is that it has been a very positive experience for all of
    the agencies in helping to more clearly delineate what the
    future directions are for our research programs, how they
    interrelate with our commitments for extension education and
    higher education, and more general information provision to the
    public and to those who rely very much on our research programs
    for their livelihoods and their businesses.
        It has also helped us to identify the complementarity among
    the programs. We touched on that issue a bit through the other
    questions that have been asked this morning.
        So my general sense is that whatever expenditures have been
    put into this planning activity are going to have a long-term
    payoff.
        Senator Cochran. Thank you.

                  ARS Small Fruits Laboratory, Poplarville, MS

        One other parochial question I am going to ask is about a
    facility that ARS maintains at Poplarville, MS, another
    laboratory which I have visited in the past. I know it is doing
    research important to the blueberry industry. It is the only
    small fruit research station in the South, I am told, that is
    involved in this kind of research. Reports I get from those in
    the industry and from State officials who have an interest in
    agriculture activity in our State is that this is important to
    the future of many small farm industries, small landowners who
    raise blueberries, blackberries, strawberries, muscadine
    grapes, vegetables, and other horticulture crops. These
    producers all benefit from the research done at this facility.
    So I am putting in a plug for the facility. I hope it is not on
    anybody's list to close. I do not know that it is, but I hope
    it is not.
        I am curious to know for the record what the funding and
    staffing is that is proposed for 1998, and the work that is
    being done there. I would like to just have a special report to
    bring me up to date on what is occurring there. You may know
    that off the top of your head.
        Dr. Knipling. Well, I can give you a very quick overview.
    We consider that as one of our very important locations. It is
    a small activity, and different from a lot of ARS activities.
    We are not addressing a particular problem, but we are trying
    to exploit an economic opportunity. And as you pointed out, it
    has had, over the past 10 years, impact on creating new
    opportunities, new businesses, and so forth.
        We have three scientists there, a total staff of about 14.
    There are no proposed changes for next year. We would continue
    that activity.
        In addition to blueberries, they are also working on other
    small fruits, strawberries and grapes. The program is capable
    of doing more. That facility at one point housed a larger
    number of scientists. It was originally started for tung oil
    research, but that industry, of course, went with the hurricane
    back in the 1970's, I believe.
        Senator Cochran. I am told that that is coming back.
        Dr. Knipling. Yes; we have heard that, too. There has been
    some interest in our Poplarville activity to get back in that
    research. We still maintain some germplasm of the old tung oil
    plantings there.

                             Polymer Science Center

        Senator Cochran. And I will tell you why. There is an
    investment that CSREES made in the Polymer Science Center at
    the University of Southern Mississippi a few years ago, and in
    the development of polymers, which you scientists know all
    about. Chemists know all about it anyway. They have developed a
    new use for this tung oil that used to be produced and
    virtually disappeared as a commercial crop or product in our
    State, but now we understand that it is being encouraged by
    some of the new products that have been developed as a result
    of research at that University of Southern Mississippi Polymer
    Science Center.
        You may have something on that, Dr. Robinson. I do not
    know.
        Dr. Robinson. I am aware of it, but I do not have anything
    specific on it. I will be glad to do a review and get you
    something.
        Senator Cochran. That is fine. I remember that from a
    recent visit to that facility too.
        Well, I would appreciate having that report, and if there
    is any additional information the committee ought to have in
    support of funding for the facility and the staffing of it at
    current levels or whatever you think appropriate levels are. It
    would be good for us to have that.
        Dr. Robinson. We will provide that for the record, some of
    the information I gave you, plus a little bit more.
        [The information follows:]

             ARS Small Fruits Research Laboratory, Poplarville, MS

        Local and regional growers/interests groups have indicated
    strong support for expansion of the current ARS Poplarville
    research program on blueberries to include research on other
    small fruits, vegetables, ornamentals, and new products from
    tung oil. In order to fully implement new programs in these
    areas ARS would need to add four new research scientist
    positions supported by $1.2 million annually. The current
    allocation to this laboratory totals $784,700 which provide
    support for four research scientists.

     Cooperative State Research, Education, and Extension Service Polymer
                                 Science Center

        The University of Southern Mississippi's Department of
    Polymer Sciences is one of the top two polymer science programs
    in America and focuses research on utilizing agricultural
    materials as feedstocks for new and/or potentially valuable
    polymer industry products that replace or substitute for those
    traditionally derived from petroleum. The Polymer Sciences
    group maintains long-term, high-level interest and expertise in
    agriculture and, through its significant industrial ties,
    pursues development and commercialization of products such as
    foams, adhesives, coatings, elastomers, and high performance
    thin films.
        The Polymer Sciences group is specifically developing new,
    advanced uses for tung oil, a drying oil used in many coatings
    such as enamels and varnishes. In particular, tung oil
    derivatives and polymers have many potential applications in
    the coatings industry. For example, siliconized tung oil, when
    used as an additive, provides property enhancements to latex or
    water borne coatings. Property enhancements can include:
    improved gloss, improved water resistance, gloss retention,
    corrosion resistance, better adhesion, and reduced foaming.
    Working with a national coatings firm, the Polymer Sciences
    group is confident that this product will become commercially
    available.
        As the commercial viability of new tung oil products has
    become more opportune, there are also efforts in Mississippi to
    reestablish tung tree agroforestry. Private companies
    specializing in vegetable oil products and farmers are starting
    tung tree plantations and intend to harvest the nuts and
    extract the oil for use by the coatings industry.
        The Polymer Sciences group also works to develop many other
    industrial products from plant materials. They are completing
    characterization of Chinese melon oil, an oil known to be
    similar to tung oil. They have been developing novel
    applications of castor and lesquerella oils for structural
    foams of interest to the military. In cooperation with a
    private company, they have explored incorporation of
    bioactivity from guayule resin in antifoulant paints.

                    Special Grants for Independent Research

        Senator Cochran. I know there are other facilities around
    the country, some of which are listed for suggested closing.
    Dr. Woteki mentioned that. We will review all those requests
    very carefully.
        One thing I also hope that we will review too are special
    grants that we have made for independent research in a number
    of different areas. I know in the economic research area, Mr.
    White may want to comment on this, we do have some special
    grants that are made. I know of one particular fairly
    substantial grant for economic research outside the Economic
    Research Service. My question to you is do you review or use in
    any way or find helpful research that is being done by any
    grant recipients that you know about in developing economic
    analysis under your mission?
        Mr. White. Yes, Senator; we do collaborate with
    universities that get special grants--Iowa State University,
    University of Missouri. We find that research helpful.
        We feel that it is important that we have a role in
    reviewing requests for grant funding of this type so that we
    can help to ensure that we do not get duplication of
    responsibilities assigned to the grant-receiving agencies and
    ERS. But we think it can be very productive and very
    complementary to have this kind of funding complement our in-
    house research.
        Senator Cochran. Thank you.

                              Aquaculture Research

        I have questions about aquaculture research, too. Senator
    Bumpers made a point that is very important, about the
    significance of aquaculture research, and I have a number of
    questions which I will submit. I know, Dr. Horn, you came to
    Mississippi, to the facility there, to help at the
    groundbreaking, to celebrate the development of the National
    Warmwater Aquaculture Research Center at Stoneville, MS. That
    was a great day, and we understand that work on that facility
    is proceeding on schedule. Is that your information, and do you
    continue to support the efforts and the research that will be
    undertaken there?
        Dr. Horn. That is correct. In fact, I must admit that
    aquaculture is one of the most rapidly growing interests in our
    research, education, and economics mission area. The USDA is
    the leader in aquaculture by any account, and the big picture
    includes much more than warmwater or even freshwater
    aquaculture. We are beginning to look at the effects of
    agriculture on watersheds, on estuaries, and on saltwater fish,
    as well. We have the Oceanic Institute in Hawaii dealing with
    shrimp. The Stoneville facility is central to our program and
    extremely important to our activities, particularly, of course,
    to catfish disease, genetics, and production research.
        Senator Cochran. Thank you very much.
        We have systems research units in Pine Bluff, AR, and in
    New Orleans. I have not visited that facility. I ran into
    somebody from the Department of Agriculture that used to be up
    here in one of these jobs who is now down in the New Orleans
    facility. And he invited me to come down and look at that, and
    I think I will.
        The Southern Regional Research Center, it is called, in New
    Orleans.
        Dr. Horn. Yes; it may be of interest to you, this is a case
    where we have brought some of our very fundamental science to
    bear on a specific problem, and in this case we are using a
    variety of sophisticated equipment, physicists, and chemists,
    to look at the nature of off-flavor in catfish. And if this
    research can deal with both the off-flavor in fish and the
    algae that seemingly cause it, then the results will be
    applicable to the catfish industry.

               Assessing the Contribution of Fundamental Research

        Senator Cochran. There may be additional questions along
    this line dealing with this subject that we will submit for
    further amplification.
        I am also interested in the performance goals. The ARS
    talks about long-term benefits to agriculture and American
    citizens as performance goals. I made a talk not too long ago
    down at Georgia Tech, or at a facility next door to the campus.
    It was a regional collection of industry, government, academia,
    talking about how we do a better job of allocating resources
    for research. And I think they wanted me there to persuade me
    to do what you all are asking us to do in your budget request,
    and that is to let you decide where the research dollars are
    spent rather than our making those decisions. But I do not
    think we are going to change the mix. We have an interesting
    mix now that I think works pretty well.
        But the point is in this competition between basic research
    and applied research or goal-driven research, it is really
    impossible to quantify the practical benefits of basic
    research. I think Dr. Robinson did a good job of pointing out
    practical benefits from basic research in agriculture,
    nematodes and soybeans and other items of evidence, but there
    are no indicators as to how the agency could determine the
    contribution from its research. Is it realistic to even expect
    that?
        I know I asked at the Natural Products Center. I said, can
    you tell me something that you have accomplished? That is a
    tough question to ask any scientist who is doing basic
    research, what have you accomplished? Well, I have come to
    work. I have gotten here on time every day for the whole year.
        How is a question like that answered, or should we even ask
    that question? If we do not ask that question, what question do
    we ask of the basic research scientists, and why do we spend
    money on it?
        Dr. Woteki.
        Dr. Woteki. Senator, we have been asking ourselves how do
    we tell you the story of what the investment in the fundamental
    research buys for this country. And we think we have some
    indicators that can be used to tell that story.
        If you are going to be evaluating fundamental or basic
    research on an annual basis, I think that the main criteria
    that is going to have to be used for the work that is done
    within a relatively short period of time, like a year, is the
    quality of the science. And in that, we have got mechanisms of
    peer review where experts come in, look at the program, and say
    this is a quality program or this is an area in which there are
    other units, other centers, other investigators that we feel
    are doing better work. So that kind of merit review by peers is
    going to be something that we are going to use not only for the
    selection of grant proposals under competitive grants programs
    for the future, but we are also going to increasingly build
    into our intramural research programs.
        We also have got economic means for doing evaluations of a
    portfolio of research that look at the return on the investment
    that is made. But that takes a longer period of time in which
    to do that type of evaluation. We are planning, under GPRA, to
    continue to do that type of economic analysis, but it is not
    going to tell you every year how this program is going to do.
    It has to be done over a 5- or 10-year period of time.
        The other way that I think that we can tell the story about
    what the benefit of an investment in basic research has been is
    by essentially tracing a story, to start with a fundamental
    discovery like the nematode example that Dr. Robinson cited
    earlier, funded out of the NRI and trace how that is
    incorporated into agricultural programs and practices.
        As part of our annual reporting to the Congress under GPRA,
    we are going to choose some of those success stories that
    illustrate how investment in some very basic research does have
    a long-term payoff. They do not perhaps have a direct payoff.
    They may have gone down some blind alleys and some side
    streets; however, they tell how the investments have paid off
    in some practical applications.
        Assessing fundamental research under GPRA is perhaps the
    hardest task that any Government organization has to do. It is
    a problem not only facing us within agriculture research, but
    the other science agencies are facing the same kind of problem.
    And we have been consulting with each other as we have gone
    about developing the metrics that we are going to be using, and
    we are all, I think, going to be putting forward some
    variations on these same kind of criteria that I have described
    that we are considering.

                             Fund for Rural America

        Senator Cochran. The Fund for Rural America was mentioned
    by you in terms of the reduction in funding in the supplemental
    that the House has approved. The farm bill authorized $100
    million for this fiscal year. You mentioned in your statement
    that you are allocating $46 million of that for research,
    education, and extension activities. I am interested in the
    research programs that will be funded by those dollars.
        You have got $33 million earmarked for competitive
    research, and I assume that you are inviting or have invited
    requests for proposals to be submitted, or you have received
    proposals for funding. It would be interesting to know what
    research you have approved and where it is being done and what
    the research is that is being done under this new program.
    Could you submit that for the record for us? Or if you know,
    you can tell us.
        Dr. Woteki. What we can provide to you at this point is the
    request for proposals that went out.
        Senator Cochran. So we have not done anything with it yet.
        Dr. Woteki. We have at this point received over 400
    proposals for center grants, and we are expecting proposals--
    the due date is the 28th, next week--for the project proposals.
    So those center proposals and project proposals will then be
    reviewed by peer panels; they will be ranked; and the decisions
    upon awards will be made. It is going to take several months
    till we get to that point. Then we would be happy to share with
    you the portfolio of activities.
        We will also be involving our Advisory Board in reviewing
    the relevance of that portfolio of activities to the original
    intent of the fund for rural America. So we could share with
    you at this point the overall framework for the program, but it
    will be several months until we can get you the list of
    approved projects.

                            Sustainable Agriculture

        Senator Cochran. I am told that the current year's funding
    level for sustainable agriculture programs is $8 million. Do
    you know how that money is being spent?
        Dr. Woteki. I would like to ask Dr. Robinson to respond to
    that. I think he also had a comment he wanted to make on the
    fund for rural America question that you posed.
        Senator Cochran. OK. Dr. Robinson.
        Dr. Robinson. Thank you, Senator Cochran.

                             Fund for Rural America

        The Fund for Rural America RFP, which is out and the
    proposals are due back in the last of this month, did have
    three major areas in it that I thought might address to some
    extent your question. Proposals were solicited under three
    broad areas. One is international competitiveness,
    profitability, and efficiency. So there are a whole array of
    proposals that could come from an extension point of view, a
    research point of view, some combination of those, and problem-
    solving approaches were encouraged under the fund.
        The second broad area is environmental stewardship, which
    covers the broad array of activities that interface between
    agricultural production and the environment in the natural
    resource base.
        The third broad array of proposals were under the heading
    of rural community enhancement, which covered a number of
    activities dealing with rural economic development and social
    development that are part of the overall purpose of the fund.
    But they do address and repeat Dr. Woteki's point, which is
    something that the fund very specifically has as part of its
    mechanisms, a review for relevance by the National Advisory
    Board, and that is one of the additional elements, I think,
    that is involved with the proposition of trying to assess the
    benefits from investments in research. In addition to having
    peer review to ensure good science, it is a way to ensure that
    the scientists are considering what the industries or interest
    groups think are some of the most significant problems.

                            Sustainable Agriculture

        With regard to the sustainable agricultural research
    program, these projects or this program is actually conducted
    through regional sustainability consortia. These consortia of
    universities consider both scientists and producers when
    reviewed proposals that are submitted for funding under the
    sustainable agriculture program. Funds are competitively
    awarded as well as allocation to various regions for projects
    in sustainable agriculture research and education.
        But one of the interesting and I think innovative factors
    in this particular program, and it is in part also harking back
    to the IPM question you asked earlier, and the distribution of
    some of the competitive funds, is that farmers or producers are
    participating in the early panels to look at the relevance of
    the proposals that are being submitted for funding for
    sustainable agriculture.
        Just as an example of some of the output, a project in New
    York has helped farmers use rotations to boost corn profits by
    $30 to $115 an acre, while at the same time protecting the
    environment. And we have, from each of these regions, and I
    will be most happy to provide your office a copy of an annual
    report of the types of projects, the types of investments of
    these funds, and the results of those projects.

                               Rangeland Research

        Senator Cochran. I appreciate that very much.
        There is another area, and this is going to get Senator
    Burns' attention, I think. But I noticed that the funding for
    rangeland research is proposed to be terminated or sharply
    reduced in this budget request. This concerns me because this
    is one of the biggest industries in the country. We were
    talking about how the aquaculture industry is growing. Well,
    beef cattle and related industries, dairy as well, are huge in
    terms of total dollar volume in our economy. I wonder why we
    see these proposals to cut back this area of research. Do we
    already know all we need to know about grasses and nutritional
    values and the economics of range management?
        Dr. Robinson. No, sir; we do not know all we need to know
    in those areas. In keeping with the effort to increase the
    budget in some areas that were believed critical, and still
    maintain a budget that did not show so much exposure for
    deficit reduction purposes, the President's budget contains
    both some increases and some decreases. Rangeland research was
    one of the areas that could be part of the National Research
    Initiative, under the environmental component of the national
    research initiative, as well as under the plant component. In
    addition, the formula funds that are allocated to universities
    can also be allocated to rangeland research.
        So it is certainly not a matter of suggesting that we know
    all that we should in those areas, but rather it is a matter of
    trying to set some priorities.
        Senator Cochran. In the Economic Research Service area, I
    notice that there are some increases. I had that part of the
    original statement identified, but I do not see it now. Did I
    read that right, there is an increase in total number of
    researchers? How is the money being spent?
        Mr. White. There are three components, to the increase. One
    part would cover approximately 50 percent of the increase in
    salary costs to the agency for the year. The second component
    has to do with our participation in a joint effort involving
    eight of the statistical agencies of the Federal Government in
    coming up with better measures of contribution of our programs
    to the outcomes that we are seeking. And the third component
    has to do with improving our data and our ability to analyze
    that data on the practices adopted on farms. So it would help
    us to understand better adoption of IPM and other kinds of
    practices, not only the rate at which they are being adopted,
    but also why are farmers adopting some practices and not
    others. We will be looking at profitability as well as
    demographic and other factors that might affect the adoption of
    these practices.
        Senator Cochran. I have been told that we have made some
    very impressive new discoveries in the use of satellite imaging
    or aerial photography and measuring in new and innovative ways
    the need for the application of pesticides or herbicides in
    production agriculture. You can isolate different areas in a
    plot of land that you may have planted to soybeans, for
    example, and identify that only a small portion of that may
    require an application of chemical sprays or whatever is being
    used. Is this something that is being advertised or extended to
    those who are in production agriculture, either through the
    Extension Service or the Economic Research Service, by data and
    reports, and how could this affect the profitability of a
    farmer's operation if he or she is able to utilize these new
    technologies? Dr. Woteki.

                             Precision Agriculture

        Dr. Woteki. Senator, I might start this off. There are many
    applications of remote sensing in agriculture. There is a lot
    of enthusiasm about what is called precision agriculture, and
    we have an active research program ongoing within the
    Agricultural Research Service that specifically focuses on
    remote sensing applications in production agriculture. There
    are some successes to talk about, and Dr. Knipling can identify
    those.
        We also support university-based researchers, both through
    the formula funds and through the competitive grants programs,
    and Dr. Robinson can point out some of the successes in that
    area.
        We also, within the National Agricultural Statistics
    Service, have been relying increasingly on satellite-generated
    images as the basis for the statistical sampling that NASS
    undertakes in its surveys. So we have a third application in
    that area, and among those, which one would you like to start
    with for more information?
        Senator Cochran. Well, I am familiar with the work that is
    being done. I am just interested, from an economic standpoint,
    in whether the USDA agencies are involved in that too.
        Mr. White. Thank you.
        We have done some preliminary analysis of precision
    agriculture. One of the difficulties that we have in analyzing
    precision agriculture is that it is a very microapplication of
    remote sensing. It really improves the ability to get correct
    applications of nutrients in very small geographic areas.
    Therefore, it is the kind of analysis that has to be done on
    parts of a field, and it is very difficult to generalize to the
    overall profitability of the program. But we are following that
    trend, and we will undertake research activities to look at the
    aggregate implications of precision agriculture when data are
    available.
        Senator Cochran. That is one of the reasons for my
    question. These things sometimes look good, sound good; they
    are exciting; they do great in a presentation when you put up
    charts to talk about everything. Then, you find out it costs
    five times as much to generate these charts and everything as
    it does the money that you save in utilizing the research or
    trying to put it to some practical use. That is why I asked the
    economics guy, because I think that is what you all are for, is
    it not? In part, you try to help production agriculture figure
    out ways to translate economic theory into practical uses. Or
    am I missing something?
        Mr. White. You are absolutely right, Senator.

                             Census of Agriculture

        Senator Cochran. There is another question I wanted to ask,
    too. You mentioned the National Agricultural Statistics
    Service, and I wanted Mr. Bay to know that I was not going to
    leave him out. I am going to ask him something.
        I am curious to know about the new undertaking that has
    been shifted from the Department of Commerce to the Department
    of Agriculture to conduct the census of agriculture. There has
    been the suggestion that legislation may be needed to clarify
    the authorities of the Department of Agriculture to proceed in
    this area. Is that really necessary, or is that just something
    that the lawyers tell you you would like to have if you could?
    Can we get along without having legislative changes?
        You have asked for some additional money to do this. If we
    do not get the legislative changes, can we take the money back?
    [Laughter.]
        Mr. Bay. Mr. Chairman, thank you. I guess I would like to
    answer the last part of that question first. No. [Laughter.]
        If we want to have the census of Agriculture conducted, we
    would need the resources to do that.
        The first part of the question was regarding the
    legislation. The legislation is needed, and it is not to
    satisfy just what the lawyers say we have to have. We do have
    to have the authority in the Department of Agriculture. It is
    just a matter of shifting the authority that is now in the
    Department of Commerce Census Bureau to Agriculture, which is
    the same legislation that authorized it in the Department of
    Commerce, and that gives us the authority to collect the data.
        It is on a mandatory basis, and without that legislation we
    do not have that authority. And if you do not have that
    authority, the costs for doing the census go sky high on a
    voluntary basis, and the coverage of the census is not as good,
    and therefore the quality of the data is compromised.
        We had to go ahead and print the questionnaires, and we
    have printed them on the assumption that we would have the
    authority. So we really need the authority of the legislation.
        Senator Cochran. Thank you very much.
        Senator Burns, and then Senator Gorton.
        Senator Burns. I have got a couple. Refresh my memory. Why
    did the Commerce Department want to move the census part over
    to the Agriculture Department?
        Mr. Bay. Well, the Census Bureau went through strategic
    planning, like we all are, and agriculture was one of the lower
    priority items in their prioritizing of programs. And the
    Department of Agriculture was supportive of the continuation of
    the census of agriculture, and therefore it seemed appropriate
    that since we had the interest in it that it should be
    transferred to the Department of Agriculture.
        Also, there is a savings you will notice in my budget for
    fiscal year 1998 of $1 million because of the duplication that
    existed between what the Department of Commerce did and what
    the Department of Agriculture did in the way of surveying
    farmers, and there was a feeling that this was an opportunity
    to bring together two programs that overlapped.
        Senator Burns. Well, the money that the Commerce Department
    used to spend on agriculture, did it come with the program?
        Mr. Bay. That is a committee problem. [Laughter.]
        Senator Burns. It sounds like one of yours, too, is getting
    the money. You know, it always just unravels my mind whenever
    we say the Commerce Department had such a low priority on
    agriculture. It is the largest contributor to the GDP in this
    country, and they say they represent the commerce of this
    country. And I just find that very, very strange, and I agree
    with what they did and I think you ought to be doing it.
        I just have an overall--I am excited about the range
    management, too, and range research. I will tell you right now
    that I do not disagree with the science and the research that
    we do in agriculture, and maybe you do not get enough money. I
    will argue with you sometimes on priorities, but not the
    necessity of it. And right now I am saying that we have got
    some areas that we have to do a lot more work.
        I have a daughter that told me the other night in a
    conversation, says you can talk about all this other stuff that
    we do on nutrition. If you want to tell your story about
    research, look at the American people and compare them to any
    other people in the world. They live longer, buy better food,
    more nutritional--that is the result of agriculture research.
    You cannot get specific about it, but just look at us. We live
    longer than anybody else in the world.
        Now, the medical community can only claim a very small part
    for the increase of longevity and our lifetime in this country
    since World War II. Did you know that? Do you know what the
    rest of it is contributed to? How we handle our water. More
    life-threatening and life-shortening diseases are waterborne
    than any other way.
        Dr. Woteki. Well, it is actually three factors, Mr. Burns.
    One is sanitation, as you pointed out; one is a health-
    promoting, easily accessible, affordable food supply; the third
    component is the decrease in childhood deaths through better
    prenatal and immediate postnatal care, and vaccination of
    children. That is the health component that has helped.
        Senator Burns. But that has not had any impact like it has
    on how we handle our water, ground water.
        Now, I think Dr. Horn and some of this thing, we have got
    to take a look at nonpoint-source solution and agriculture's
    role in that. That will require research as far as irrigated
    farming, everything that we do in the handling of our water. I
    think that is our most important challenge that is in front of
    us. We can talk about all this other stuff, and I understand
    that when I came to town I wanted more dollars to control
    noxious weeds. I found out in this town that you cannot go to
    the gray poupon and white wine parties and talk about weeds
    because pretty soon you are standing there talking all by
    yourself, because they are not a high priority in this town, is
    weeds.
        But to us in agriculture who understand agriculture they
    are damned important. So what I am saying is that you folks
    should be congratulated on the science that you have done, that
    you are doing. Maybe we are going to have to change our focus a
    little more, because water is pretty important, how we handle
    it, to Senator Cochran's State and aquaculture, because that
    all goes hand in hand. It is the very basic of things that we
    do.
        And I also want to remind you that we do well in garnering
    Nobel Prizes for science, both in agriculture and over in other
    areas, too. But somebody else gets our market. So that tells me
    we had better be doing some research on how to sell the darn
    stuff. We had better get a better trader whenever we go in
    dickering for these international agreements on trade. We had
    better have a better cow trader up there than we have had in
    the last 10 or 15 years, because I will tell you, they have
    dickered away all of our market out there, and that is where we
    had better get sharp.
        So do not be afraid to say, whenever somebody asks you on
    our research, do not be afraid to say let us just look at
    America and compare it to any other nation in the world, and I
    think you have got a great story to tell, and I know you can
    tell it.
        So congratulations, and before it is all over I will have
    some questions I want to submit, and before it is all over I
    want to talk very seriously about our priorities where we
    should be doing most of our research.
        And thank you very much for coming today. I was very much
    interested in your questions.
        Senator Cochran. Thank you, Senator.
        Senator Gorton.
        Senator Gorton. Thank you, Mr. Chairman.
        I have for you, Dr. Woteki, and perhaps for Dr. Knipling, a
    couple of rather parochial questions. We were startled, to say
    the least, to see that the President's budget was going to
    close down a more than 40-year history of cooperative research
    with Washington State University at Pullman, and I would like
    to hear your justification for doing so. Excuse me, not
    Pullman, but Prosser.

                          Proposed Closure of Prosser

        Dr. Woteki. Yes; you threw me for a loop there for a minute
    because I expected you to say Prosser.
        We have had a very difficult budget year this year and had
    to make some very difficult decisions about priorities. Within
    the Agricultural Research Service, as you know, there are over
    100 research laboratories, and there are multiple projects
    within those laboratories.
        When we were planning our 1998 budget request we had a
    number of new initiatives. They involve either emerging
    problems or major new areas of research that we wanted to
    accommodate and be able to address within the Agricultural
    Research Service, things like food safety, emerging diseases
    that affect both crops and livestock. Within ARS we also wanted
    to be able to address some of the grazinglands research issues
    that Senator Burns has been asking about, as well as integrated
    pest management biocontrols and human nutrition research as
    major new emphases or increasing emphases within ARS.
        We had a process that we used to rank all of the projects
    within the Agricultural Research Service that related to their
    relevance to the mission and the priorities of the agency, the
    capacity of the agency to continue that research, and the
    overall impact, the effect on American agriculture. The senior
    staff within the Agricultural Research Service reviewed all of
    the projects against those criteria, and then ranked them. On
    the basis of that ranking the lowest ranked projects were
    identified as being ones for either major reduction or
    elimination, and then based on that project ranking we looked
    at which facilities had most of their projects ranking in this
    lowest quartile.
        In that ranking there were 71 projects that were found to
    be in that lowest tier, and on the basis, then, of that
    programmatic and quality, essentially, review, we made the
    decision to close the Prosser facility.
        Senator Gorton. And the Mandan facility falls into the same
    category?
        Dr. Woteki. And the Mandan facility, as well.
        Senator Gorton. Are those rankings and the facts and
    judgments that went into them available to the committee?
        Dr. Woteki. We can make available to you information about
    the process that was used, as well as the overall rankings.
        Senator Gorton. I would greatly appreciate your doing so.
    We understand that those projects that you propose to transfer
    both the Washington State University and to Idaho, that the
    facilities to which you propose to transfer them have no room
    for the people or for the projects without a capital investment
    in new facilities. Was that considered?
        Dr. Woteki. I am not aware of that discussion. I am going
    to ask Dr. Knipling to respond.
        Dr. Knipling. The Prosser laboratory has seven research
    projects. Three of those are proposed for retention, while four
    are proposed for termination. One of the projects proposed for
    retention is really part of our minor uses pesticide evaluation
    activity, which would come back to headquarters for
    reallocation to other locations where we do that type of work.
        The two projects that you are probably speaking of is the
    potato project which is proposed to go to Aberdeen, ID. This is
    not an issue of space. We do recognize, however, in retrospect
    that there was an oversight. Some of that work is dealing with
    potato virus-free certification. We are going to have to decide
    on an alternative location, probably Corvallis, OR, where we
    have a similar activity, or perhaps in the State of Washington
    at our Yakima laboratory. So it is not a matter of space at
    Aberdeen, but rather this virus-free certification issue.
        The pea and lentil project at Prosser is scheduled to be
    moved intact as it is now to Pullman, where we have similar
    work. That was one of our original objectives, to consolidate
    similar work so as to get more of a critical mass of scientists
    working on the problem. We are aware that there are some space
    limitations there at the university. We are exploring several
    options which would not involve significant capital investment,
    such as utilizing some temporary space or perhaps even a rental
    space from a private source.
        We really do not consider that as an overwhelming
    limitation to the movement of the pea and lentil project to
    Pullman.
        Senator Gorton. Thank you. Thank you both for your answers.
    I would appreciate as much background information on the way in
    which these priority determinations have been made as you have
    available so that I and we can determine whether or not we
    agree.
        Thank you, Mr. Chairman.
        Senator Cochran. Thank you, Senator.
        [The information follows:]
                           Project Evaluation Process
        All research projects in the ARS portfolio were evaluated by the
    Agency's senior management team using the ARS Project Evaluation Guide.
    A copy of the Guide is available. There are three primary factors in
    the evaluation process. These are: I Relevance, II Capacity, III
    Impact. A careful analysis of the Federal role is also conducted.
    Relevance deals with the nature, scope, and characteristics of a
    project. Capacity deals with the resource capability and capacity of a
    project to meet the stated objectives. Impact is concerned with the
    changes that have or are anticipated to occur as a result of the impact
    of ARS research on the scientific community, the Nation's economy,
    society, and on policy issues of the Nation. Possible scores for each
    of the three factors range from a low of 2 to a high of 14 in 2-point
    increments, so that the maximum consensus score possible for any one
    project would be 14 x 3 or 42.
        The purpose of these ratings was to develop an initial grouping of
    projects for further consideration. Those projects that fell into the
    lower quartile were the ones that were further scrutinized. These
    ratings represented the first step in the overall decisionmaking
    process to guide further discussions of the ARS senior management team,
    and therefore were not retained. In reconstructing the process, I
    recall the consensus scores for all the Agency's projects evaluated as
    part of the fiscal year 1998 budget process ranged from a low of 6 to a
    high of 38. Over 90 percent of the Agency's projects received scores in
    excess of 22. All of the 71 projects proposed for termination and
    reallocation in the fiscal year 1998 budget scored in the range of 6 to
    22. In regard specifically to the Prosser location, the four projects
    proposed for termination scored in the range of 16 to 20. Because
    termination of those projects would jeopardize the capacity of the
    remaining three projects to support the Prosser facility, the decision
    was made to move the remaining projects to other locations.
    Specifically, the pea and lentil project will be relocated to the
    Pullman location and the potato project will likely be relocated to
    Aberdeen, Idaho or Corvallis, Oregon.
        We are aware that there are no ``good'' ways to close ARS
    laboratories. However, it is important to note that earlier attempts to
    close facilities resulted in the identification of resources as cost
    savings and resulted in the loss of funds to the Agency. Under the
    current budget, funds are retained by the Agency and redirected to high
    priority research. In many instances, ARS utilizes the same scientists
    to carry out the newly proposed research at other nearby facilities.

                              Submitted Questions

        Senator Cochran. I appreciate very much the attendance and
    cooperation of all of our witnesses, and for your testimony.
    Additional questions will be submitted in writing, and we hope
    you will be able to respond to them in a timely fashion.
        [The following questions were not asked at the hearing, but
    were submitted to the Department for response subsequent to the
    hearing:]
                         Agricultural Research Service
                     Questions Submitted by Senator Cochran
                               location closures
        Question. Please update the status of ARS laboratories closed in
    fiscal year 1995 and fiscal year 1996? Have these locations been turned
    over to GSA for disposal? Describe the disposition of these facilities.
        Answer. Of the ten (10) ARS locations closed in fiscal year 1995,
    all disposal actions have been completed at eight (8) of these sites.
    These eight locations and the new owners of the land and buildings,
    where appropriate, are as follows: Delaware, OH, buildings transferred
    to USDA, Forest Service; Fairbanks, AK, (No federally owned land or
    buildings involved); Georgetown, DE, buildings transferred to the
    Department of Education for use by the University of Delaware;
    Lewisburg, TN, land and buildings transferred to the University of
    Tennessee; Lexington, KY, (No Federally-owned land or buildings
    involved); Oxford, NC, land and buildings transferred to USDA, Animal
    and Plant Health Inspection Services; Suffolk, VA, buildings
    transferred to the Department of Education for use by Virginia
    Polytechnic Institute and State University; Rotterdam the Netherlands
    (No federally owned land or buildings involved).
        The land and facilities at Pasadena, CA, have been reported to GSA
    for disposal. The facilities at Savannah, GA, will be reported upon
    completion of environmental cleanup activities.
        In fiscal year 1996, the facilities at three ARS locations were
    identified for transfer to non-federal entities. The land and buildings
    at two (2) locations have been reported to GSA for disposition. In
    fiscal year 1997, Houma, LA, will be transferred to the American Sugar
    Cane League Foundation and Brawley, CA, will be transferred to Imperial
    County, CA. The transfer of the facilities at Brownwood, TX, is on hold
    pending continuing negotiations with Texas A&M.
        Question. What is the status of the closures at Bozeman, Montana
    and Durant, Oklahoma?
        Answer. Bozeman, Montana-Research programs and personnel have been
    transferred to Sidney, Montana. All ARS-owned buildings, with the
    exception of three greenhouses, were offered to the University of
    Montana. The greenhouses are being used by USDA, Forest Service through
    September 20, 1997, then will be demolished by ARS. Durant, Oklahoma,
    research programs and personnel have been transferred to El Reno,
    Oklahoma. Completion of the real property disposal is pending
    resolution of environmental issues.
                               location closures
        Question. What criteria was used to decide closure of ARS locations
    at Mandan, North Dakota and Prosser, Washington?
        Answer. The criteria imposed included relevance, capacity, and
    impact. A careful analysis of the Federal role was also conducted.
    Relevance deals with the nature, scope, and characteristics of research
    projects being carried out. Capacity deals with the resource capability
    and capacity of the laboratory to meet the stated objective(s). Impact
    is concerned with the change(s) that have or are anticipated to occur
    as a result of the impact of ARS research on the scientific community,
    the Nation's economy, on society, and on policy issues of the Nation.
        Question. How many people and scientists would be impacted by the
    closure of Prosser, Washington; Mandan, North Dakota; Orono, Maine; and
    Brawley, California? What are the operating costs for these
    laboratories?
        Answer. The number of people and scientists impacted by closures
    and the operating costs for these laboratories are provided below.

    ------------------------------------------------------------------------
                                            Number of--         Fiscal year
            Location/worksite*        ----------------------- 1997 operating
                                         People   Scientists       costs
    ------------------------------------------------------------------------
    Prosser, Washington..............     \1\ 37           8  \1\ $2,721,500
    Mandan, North Dakota.............     \2\ 38           9   \2\ 2,886,300
    Orono, Maine*....................          6           1         135,500
    Brawley, California*.............          8           1         321,000
    ------------------------------------------------------------------------
    \1\ Includes 4 scientists and $1,284,800 proposed for redirection as
      follows: Pullman, WA 2 scientists/$550,000; Headquarters $88,600; and
      Aberdeen, ID 2 scientists/$646,200.
    \2\ Includes 2 scientists and $551,100 proposed for redirection to Miles
      City, MT.

                    requested increases for fiscal year 1998
        Question. ARS is proposing to finance most of its proposed
    increases through reductions of current research. Did the Agency
    recommend this approach or was this a department or OMB decision?
        Answer. Decisions on reductions/termination of all projects are
    based on agency assessments and recommendations that are subsequently
    reviewed at the Department level and at OMB. The decisions on funding
    levels and targets were made at the Department and OMB levels in
    response to the need to balance competing agriculture priorities for
    limited resources and to identify savings from existing resources as a
    means of carrying out increased research needs to address high priority
    emerging research issues.
        Question. Provide for the record, agency, department and OMB
    recommendations for the 1998 budget.
        Answer. The ARS budget recommendations for the 1998 budget will be
    provided for the record.

                                         FISCAL YEAR 1998 APPROPRIATION HISTORY
    ----------------------------------------------------------------------------------------------------------------
                                                                          Agency        Department      President's
                                  Item                                   estimate        estimate         budget
    ----------------------------------------------------------------------------------------------------------------
    Base Level \1\..................................................    $728,853,000    $716,826,000    $716,797,000

                            PROGRAM INCREASES

    Animal Sciences.................................................      15,000,000       3,800,000  ..............
    Food Safety.....................................................      10,000,000       5,000,000       4,114,000
    Emerging Diseases/Exotic Pests..................................      15,000,000       9,374,000       5,000,000
    Grazinglands....................................................      11,000,000       1,700,000       1,000,000
    Genetic Resources...............................................       6,000,000       3,900,000       2,000,000
    IPM/Biocontrol                                                        15,000,000       5,700,000       4,000,000
    NAL.............................................................       4,000,000       2,000,000  ..............
    Aquaculture.....................................................       8,000,000  ..............  ..............
    Floral/Nursery Crops............................................       2,000,000  ..............  ..............
    Lower Delta Initiative..........................................       4,000,000  ..............  ..............
    Everglades Initiative...........................................  ..............  ..............       2,000,000
    Human Nutrition.................................................  ..............  ..............      12,000,000
                                                                     -----------------------------------------------
          Subtotal, Program Increases...............................      90,000,000      31,474,000      30,114,000
                                                                     ===============================================
                             OTHER INCREASES

    Pay Costs (3 percent)...........................................      17,021,000       6,409,000       6,409,000
    Increased Operating Costs.......................................       8,314,000  ..............  ..............
    Increased CSRS Costs (1.51 percent).............................       2,767,000  ..............  ..............
                                                                     -----------------------------------------------
          Subtotal, Other Increases.................................      28,102,000       6,409,000       6,409,000
                                                                     ===============================================
                                DECREASES

    General Reductions/Termination of Less-Critical Projects/Admin.
     O/H............................................................  ..............      -8,023,000     -23,023,000
    Streamline Reductions in Staff-Years............................      -3,553,000      -3,500,000      -3,500,000
                                                                     -----------------------------------------------
          Subtotal, Decreases.......................................      -3,553,000     -11,523,000     -26,523,000
                                                                     -----------------------------------------------
          Total.....................................................     114,549,000      26,360,000      10,000,000
                                                                     ===============================================
          Total, ARS................................................     843,402,000     743,186,000     726,797,000
                                                                     ===============================================
                        Buildings and Facilities

    Beltsville Agricultural Research Center, Beltsville, MD
     (Modernization)................................................      20,000,000       3,200,000       3,200,000
    ARS Regional Research Centers:
        Philadelphia, PA............................................       5,200,000       5,200,000       5,200,000
        New Orleans, LA.............................................       1,100,000       1,100,000       1,100,000
        Peoria, IL..................................................       8,000,000       8,000,000       8,000,000
                                                                     -----------------------------------------------
          (Modernization)...........................................      14,300,000      14,300,000      14,300,000
    Plum Island Animal Disease Center, Greenport, NY (Modernization)       8,400,000       5,000,000       5,000,000
    U.S. Horticultural Crops and Water Management Research
     Laboratory, Parlier, CA (Construction).........................      23,400,000      23,400,000      23,400,000
    Western Human Nutrition Research Center, Davis, CA (Planning/
     Design)........................................................       3,200,000       3,200,000  ..............
    National Agricultural Library, Beltsville, MD (Modernization)...       6,000,000       6,000,000       6,000,000
    European Biological Control Laboratory, Montpellier, France
     (Construction).................................................       3,800,000       3,400,000       3,400,000
    Subtropical Agricultural Research Laboratory, Weslaco, TX
     (Modernization)................................................       4,600,000  ..............  ..............
    U.S. Grain Marketing and Research Laboratory, Manhattan, KS
     (Modernization)................................................       2,250,000  ..............  ..............
    Quarantine Facility, Ft. Lauderdale, FL (Construction)..........  ..............  ..............       4,000,000
    Entomological Laboratories, Gainesville, FL (Construction)......       6,200,000  ..............  ..............
    U.S. Vegetable Laboratory, Charleston, SC (Planning/Design/
     Construction)..................................................       7,630,000  ..............  ..............
    National Coldwater Aquaculture Research Center, Leetown, WV
     (Construction).................................................       4,000,000  ..............  ..............
    National Animal Disease Center, Ames, IA (Modernization)........       8,400,000  ..............  ..............
    Southeast Poultry Research Laboratory, Athens, GA (Construction)       5,100,000  ..............  ..............
    Plant and Natural Resources Laboratory, Maricopa, AZ (Planning
     and Design)....................................................       5,500,000  ..............  ..............
    North Central Soil Conservation Research Laboratory, Morris, MN
     (Construction).................................................       3,800,000  ..............  ..............
    Rearing and Genetics Laboratory, Waimanalo and Tropical Fruits
     and Vegetables Laboratory, Hilo, HI (Planning/Design)..........       1,750,000  ..............  ..............
    Plant Physiology and Genetics Research Laboratory, Urbana, IL
     (Planning/Design/Construction).................................       1,800,000  ..............  ..............
    Avian Disease and Oncology Laboratory, East Lansing, MI (Design)       1,900,000  ..............  ..............
    Sugar Beet, Bean and Cereal Research Laboratory, East Lansing,
     MI (Planning/Design/Construction)..............................         870,000  ..............  ..............
    Insect Rearing Facility, Stoneville, MS (Planning/Design).......       1,000,000  ..............  ..............
    Energy Audits of ARS Facilities (Planning)......................       2,000,000  ..............  ..............
    Inventory of CFC Chillers (Planning)............................       2,000,000  ..............  ..............
    Seismic Studies of ARS Facilities (Planning)....................       1,000,000  ..............  ..............
                                                                     -----------------------------------------------
          Total.....................................................     138,900,000      58,500,000      59,300,000
    ----------------------------------------------------------------------------------------------------------------
    \1\ For the agency estimate, the base was the fiscal year 1997 President's budget. For Department Estimate, the
      base was the fiscal year 1997 Appropriations, and for the President's budget, the base was adjusted fiscal
      year 1997 appropriations.

        Question. Provide for each of the requested increases, how and
    where the new funding will be allotted.
        Answer. The new funding proposed will be allotted as follows:
                 emerging diseases and exotic pests--$5,000,000
    Emerging Plant Diseases--$2,500,000
        Frederick, $900,000.--Develop improved techniques for karnal bunt
    pathogen detection, identification, and characterization; develop
    methods to decontaminate infested commodities, equipment, and handling
    facilities; and characterize factor affecting host-pathogen
    interactions.
        Aberdeen, $300,000.--Develop system for evaluating germplasm for
    resistance to karnal bunt, and establish program for systematic
    screening of new and existing crop varieties for resistance.
        St. Paul, $500,000.--Characterize karnal bunt disease and wheat
    scab epidemiology and fungal ecology, including factors affecting
    disease establishment and potential points of control.
        Manhattan, $500,000.--Improve resistance of wheat varieties to
    karnal bunt by developing and utilizing genetic methods for
    incorporating disease resistance from related and unrelated species.
        Albany, $300,000.--Improve the genetic resistance of wheat
    varieties to karnal bunt by determining the number and map position of
    resistance genes; describing the regulation of resistance gene
    expression; and determining the mechanisms operating in resistant
    hosts.
    Emerging Exotic Diseases of Livestock--$1,100,000
        Ames, $500,000.--Develop diagnostic tests to detect Transmissible
    Spongiform Encephalopathies in live animals, i.e. Scrapies, Chronic
    Wasting Disease of Cervids, and Bovine Spongiform Encephalopathy-like
    Encephalopathies.
        Athens, $300,000.--Develop novel genetic vaccines and immune
    modulatory strategies to prevent outbreaks of exotic poultry diseases
    such as highly pathogenic Avian Influenza and velogenic Newcastle
    Disease.
        Greenport, $300,000.--Develop diagnostic tests and vaccines for
    emerging foreign animal diseases of livestock such as Foot and Mouth
    disease and African Swine Fever.
    Emerging Domestic and Zoonotic Diseases of Livestock--$1,400,000
        Ames, $400,000.--Develop methods to control porcine reproductive
    and respiratory syndrome (PRRS), an emerging disease problem for the
    swine industry.
        Ames, $300,000.--Develop a vaccine for a newly recognized variant
    of Bovine Viral Diarrhea.
        Ames, $400,000.--Improve diagnostic tests for the detection of
    Johne's disease and investigate the role of genetic resistance in this
    disease which has recently been suggested to be associated with Crohn's
    disease in human beings.
        Beltsville, $300,000.--Identify animal reservoirs, life-cycle, and
    intervention methods for newly recognized microsporidial protozoan
    parasites (Cryptosporidium and Cyclospora) both animals and people.
               integrated and areawide pest management-$4,000,000
    Area-wide IPM and Pilot-test Programs--$1,000,000
        Headquarters, $1,000,000.--Conduct scale-up pest management pilot
    tests in support of the ARS Area-wide program and the USDA IPM
    Initiative.
    Augmentative and Biologically-based IPM in Field, Horticultural and
            Vegetable Crops--$2,000,000
        Stoneville, $600,000.--Develop mechanical and process engineering
    procedures for diet handling and mass propagation of insect and weed
    natural enemies, with emphasis on pests such as boll weevil, Heliothis,
    and leafy spurge.
        Orlando, $600,000.--Develop biological control and other
    biorational technologies for control of silverleaf whitefly, Egyptian
    mealybug, Thrips palmi, brown citrus aphid, and other emerging pests of
    horticultural and nursery crops in the Southeast U.S.
        Beltsville, $300,000.--Develop semiochemical-based IPM suppression
    systems for Colorado potato beetle and other insect pests of field and
    vegetable crops.
        Gainesville, $250,000.--Improve diets for mass rearing of parasites
    and predators for augmentation biological control of the diamondback
    moth, sweetpotato whitefly, and other vegetable pests.
        Weslaco, $250,000.--Develop IPM technologies for control of aphids,
    beet armyworm, and other secondary pests that limit cotton production
    during boll weevil suppression and eradication programs.
    Host-Plant Resistance and Pest Management Strategies--$1,000,000
        Stoneville, $400,000.--Develop and evaluate management strategies
    for resistance of corn earworm and tobacco budworm to Bt in cotton, and
    to new transgenic crop resistance factors that may be introduced.
        Ames, $300,000.--Develop integrated management strategies for
    control of corn insect pests, emphasizing management of resistance of
    the European corn borer to Bt and to new transgenic crop resistance
    factors that may be introduced.
        Raleigh, $300,000.--Develop host-plant resistance strategies for
    the management of pathogens in southeastern small grain production
    systems.
         grazinglands thrust, utilization and conservation--$1,000,000
    Systems to Optimize Production & Resource Improvement--$1,000,000
        El Reno, $400,000.--Determine impact of pasture design and grazing
    animals on quality of water emerging from watersheds, and develop
    pasture management systems that will optimize water quality and
    productivity in the semi-arid U.S.
        Las Cruces, $300,000.--Develop low-input technology for seeding
    native grasses and shrubs on rangelands and riparian areas after
    control of introduced weeds.
        University Park, $300,000.--Determine impact of pasture design and
    grazing animals and grazing animals on quality of water emerging from
    watersheds and develop pasture management systems that will optimize
    water quality and productivity in the humid U.S.
              food safety--preharvest and postharvest--$4,114,000
    Food Safety--Preharvest--$1,614,000
        Ames, $300,000.--Monitor Salmonella isolates from cattle and swine
    for S. Typhinurium DT104 and characterize the epidemiology,
    transmission and nature of antibiotic resistance of the organism.
        Clay Center, $500,000.--Correlate production practices for cattle
    and swine with post processing contamination of food products.
        College Station, $500,000.--Develop competitive colonization
    systems, as have been successfully accomplished for broilers, to
    prevent Salmonella and E. Coli 0157:H7 in swine and cattle.
        Athens, $314,000.--Delineate the dynamics of campylobactor
    transmission in production in order to identify control points and
    strategies to limit contamination in poultry.
    Food Safety--Postharvest--$2,500,000
        Wyndmoor, $400,000.--Develop quantitative data on food pathogen
    inactivation and survival needed to evaluate adequacy of processing and
    process controls in the production of meat and poultry products and
    validate risk assessment.
        Wyndmoor, $300,000.--Develop pasteurization requirements for the
    thermal destruction of Listeria monocytogenes, Salmonella spp., and
    other pathogens in commercially produced egg product blends containing
    non-egg products.
        Beltsville, $300,000.--Develop advanced inspection methods
    utilizing machine vision and electronic databases to increase the
    thoroughness and rapidity of individual carcass inspection.
        Athens, $600,000.--Develop the necessary detection and enumeration
    methods and delineate the dynamics of pathogen transmission in order to
    identify control points and strategies to prevent spread of
    campylobactor in poultry.
        Wyndmoor, $300,000.--Evaluate and optimize various intervention
    technologies for use solely, and in combination, to reduce pathogens in
    food products of plant origin while retaining their fresh appearance
    and high consumer acceptance.
        Albany, $300,000.--Evaluate and optimize various intervention
    technologies for use solely, and in combination, to reduce pathogens in
    food products of plant origin while retaining their fresh appearance
    and high consumer acceptance.
        Pullman, $300,000.--Prevent production of vomitoxin (DON) in wheat
    and barley by developing control strategies utilizing bioengineering to
    enhance natural resistance in crops.
                         genetic resources--$2,000,000
    Preservation of Plant and Microbial Genetic Resources--$2,000,000
        Ft. Collins, $500,000.--Preservation and methodologies for plant
    germplasm.
        Beltsville, $400,000.--Research in quarantine, databases, and
    ecogeographic studies of plants.
        Fresno/Parlier, $400,000.--Regeneration of plant germplasm for the
    National Plant Germplasm System (NPGS).
        Ft. Collins, $500,000.--Preservation of base collection of
    microbial germplasm.
        Hilo, $50,000.--Support for Clonal Repository.
        Riverside, $50,000.--Support for Clonal Repository.
        Davis, $50,000.--Support for Clonal Repository.
        Corvallis, $50,000.--Support for Clonal Repository.
                          human nutrition--$12,000,000
    Survey--$6,000,000
        Headquarters, $6,000,000.--Survey with EPA, DHHS on food
    consumption patterns of infants and children.
    Dietary Research--$6,000,000
        Beltsville, $1,000,000.--Support Human Nutrition Initiative.
        Boston, $1,000,000.--Support Human Nutrition Initiative.
        San Francisco, $1,000,000.--Support Human Nutrition Initiative.
        Grand Forks, $1,000,000.--Support Human Nutrition Initiative.
        Houston, $1,000,000.--Support Human Nutrition Initiative.
        Little Rock, $1,000,000.--Support Human Nutrition Initiative.
                south florida ecosystem restoration--$2,000,000
    Sustainable Agricultural Production Systems of Sugarcane and Other
            Crops in South Florida--$1,000,000
        Canal Point, FL, $1,000,000.--Identify sugarcane germplasm aimed at
    improving sugarcane tolerance to high water tables and determine
    agronomic practices that control soil subsidence without reducing
    yield; evaluate water quality and quantity effects from producing
    sugarcane and other crops under high water table conditions; and
    develop hydrologic models that evaluate the operation of agricultural
    water management control systems in south Florida.
    Biological Control of Melaleuca and Other Exotic Plant Species of
            Consequences to Agriculture and the Everglades--$1,000,000
        Ft. Lauderdale, $1,000,000.--Accelerate research to identify
    biological agents that control melaleuca and other exotic plant
    species.
                            human nutrition research
        The largest increase proposed is for Human Nutrition research. Half
    the money is to fund a survey of food consumption by infants and
    children to be used by EPA to assess dietary exposures and the other
    half to support research at ARS' six nutrition centers.
        Question. Is the survey of food consumption mandated by law?
        Answer. The Food Quality Protection Act of 1996 (FQPA) requires the
    Environmental Protection Agency (EPA) to set regulations on the limits
    of safe exposure of children to pesticide residues in food based on
    statistically valid estimates of dietary intakes as obtained from
    nutrition surveys conducted by the Department of Agriculture and the
    Department of Health and Human Services. The Department of Agriculture,
    through the Agricultural Research Service, conducts the Continuing
    Survey of Food Intakes by Individuals (CSFII) that collects dietary
    information from respondents of all ages. The current CSFII covers the
    period 1994 to 1996 and contains data on dietary intakes of
    approximately 5,700 children. The EPA estimates that data from
    approximately 10,000 children are needed to predict a safe exposure
    limit. Thus, a supplemental survey consisting only of children is
    required to meet the requirements of the EPA in response to the FQPA.
        Question. Isn't this the same survey that the Congress eliminated
    funding for a few years ago because the cost per participant was
    excessive?
        Answer. Prior to the passage of the FQPA, previous requests for a
    dietary survey of children by the former Human Nutrition Information
    Service, in response to issues raised by the National Academy of
    Science in a report raising concerns about pesticide residues in the
    food of children, were not funded by Congress. The difference between
    those requests and the current one is the requested survey is a
    supplemental survey that provides the EPA with a statistically valid
    number of children in each age group when the data are combined with
    the funded 1994-1996 Continuing Survey of Food Intakes by Individuals
    (CSFII) that was just completed.
        Question. What is the justification for increasing support for ARS
    research at its six nutrition centers, particularly when it is coming
    at the expense of reducing existing agriculture production research?
        Answer. The Human Nutrition Research Initiative is intended to
    enhance the capacity of the six USDA/ARS Human Nutrition Research
    Centers to complement ongoing research with new research approaches to:
    (1) define the relationship between diet and the risk of chronic
    disease; (2) improve resistance to acute infections and immune
    disorders by investigating the interaction between nutrition and immune
    function; (3) enhance capacity to promote changes in dietary habits by
    basic research; (4) improve the scientific basis for more effective
    Federal food assistance programs; (5) extend dietary guidance to
    nutritionally-vulnerable groups, such as children, within the U.S.; and
    (6) generate a more nutritious food supply by defining the basis for
    modifying the health promoting properties of foods and to make
    beneficial changes in the consumption of foods. The knowledge to be
    obtained from the initiative will enable ARS to better conduct research
    related to production agriculture leading to the development of
    products that meet the demands of consumers for foods that are health
    promoting and nutritious. A major area of ongoing research is product
    quality; certainly, for foods and food products, nutritional quality is
    an area of increasing emphasis. Furthermore, the much needed
    supplemental dietary intake survey of children will provide the EPA
    with information upon which sound and responsible regulations
    concerning the levels of pesticide residues in foods can be developed.
    It is essential to the agricultural producers and processors that the
    regulations to be developed are based on accurate dietary intake data
    so that the regulations protect the best interests of the consuming
    public and at the same time maintain the competitiveness of American
    agriculture.
        Question. The human nutrition increase is described as the first
    year of a multi-year initiative. What increases are contemplated in
    each year of this initiative? Do you expect these increases also to
    come at the expense of ARS' existing research programs?
        Answer. The fiscal year 1998 budget includes a $12M proposed
    increase. Follow-up increases of $6M in fiscal year 1999, $12M in
    fiscal year 2000, $12M in fiscal year 2001 and $11M in fiscal year 2002
    are needed for a total of $53M for the initiative. It is not expected
    that the increase will come at the expense of ARS's existing research
    programs but will come through increases in appropriations.
                               emerging diseases
        Question. The requested increase for emerging diseases and exotic
    pests is for both plant and animal diseases and pests. You are not
    specific as to which disease or pest you will allot these funds. Do you
    plan to use these funds as flexible or contingency basis or will you
    allot them permanently? Please explain.
        Answer. ARS plans to allot these funds permanently because
    developing adequate control measures for both plant and animal diseases
    and pests will require long-term research efforts. The plant diseases
    included are: Karnal bunt and head blight (scab) of wheat and the
    animal diseases included are: Transmissible Spongiform Encephalopathies
    including scrapie, chronic wasting disease and Bovine spongiform
    encephalopathy or BSE-type encephalopathies, Avian Influenza, and
    velogenic Newcastle disease, hog cholera, porcine reproduction and
    respiratory syndrome, Bovine Viral Diarrhea, Johne's disease, and
    cryptosporidium and cyclospora. Increased attention to these problems
    now will also serve the very important purpose to increase our
    scientific capacity and base of expertise to enable us to respond on an
    emergency basis to other crop and livestock disease problems that may
    arise in the future.
                                   germplasm
        Question. Please identify your resources committed to maintaining
    plant germplasm repositories. How much is committed to the collection
    of plant germplasm and how much is committed to evaluation of your
    germplasm?
        Answer. The estimated funding for maintaining the ARS plant
    germplasm system repositories for fiscal year 1997 is $20,057,900.
    Included in this total are: $3,951,700 for collection activities to
    include acquisition, quarantine, and taxonomy; and $16,106,200 for
    preservation activities, to include germplasm maintenance,
    characterization, documentation, storage, and distribution.
        Evaluation of germplasm is an activity conducted outside of the
    repositories by breeders and other users of germplasm. ARS commits
    $19,625,100 to evaluation activities.
        Question. What are the State resources committed to the
    repositories? Provide a listing of your germplasm repositories.
        Answer. State resources committed to the repositories include both
    direct commitments and in-kind support to Regional Plant Introduction
    Stations (RPIS) and the Interregional (IR) Potato Station. The direct
    commitments can be identified and reported more accurately as off-the-
    top funding from formula funding through the Regional Directors'
    Associations and direct contributions from the host agricultural
    experiment stations. Those resources are identified:

    ------------------------------------------------------------------------
                                                      Formula
                  Location/repository                  funds     Local funds
    ------------------------------------------------------------------------
    Griffin, GA, Southern RPIS....................     $234,800     $350,000
    Ames, IA, North Central RPIS..................      479,000      319,000
    Geneva, NY, Northeastern RPIS.................      142,000      156,000
    Pullman, WA, Western RPIS.....................      352,000      250,000
    Sturgeon Bay, WI, IR Potato Station...........      153,500      118,700
                                                   -------------------------
          Total...................................    1,371,300    1,193,700
    ------------------------------------------------------------------------

        A listing of the major ARS germplasm repositories is provided for
    the record: Davis, CA; Fresno, CA; Riverside, CA; Ft. Collins, CO;
    Washington, DC; Miami, FL; Griffin, GA; Hilo, HI; Ames, IA; Aberdeen,
    ID; Urbana, IL; Beltsville, MD; Stoneville, MS; Fargo, ND; Geneva, NY;
    Corvallis, OR; Mayaguez, PR; College Station, TX; Logan, UT; Pullman,
    WA; Madison, WI; and Headquarters.
                                   biocontrol
        Question. How much is ARS currently allocating to the biocontrol of
    pests?
        Answer. Currently, ARS spends $53,769,900 on biologically-based
    pest control technologies which includes research on host plant
    resistance, classical and augmentative biological control, pheromone
    mating disruption, sterile insect release, and other related pest
    control strategies.
        Question. What is the justification for the $3 million increase
    proposed?
        Answer. The proposed increase of $3 million for biocontrol of pests
    is part of the $4 million requested for research in support of the USDA
    Integrated Pest Management (IPM) initiative and will fund additional
    research to meet the Department's goal of having 75 percent of the crop
    acreage under IPM by the year 2000.
        Question. The testimony indicates that of the requested increase,
    $1 million is to permit ARS to conduct area-wide and pilot test
    programs on ARS-developed technology ready for large-area
    demonstrations. What area-wide and pilot test programs are planned?
        Answer. Several area-wide pest management programs have already
    been initiated by ARS in partnership with the State Agricultural
    Experiment Stations. These programs currently address the corn earworm
    in the southeast, the codling moth in the pacific west, and corn
    rootworm in the Midwest United States. Because of the high success of
    these programs thus far, ARS plans to conduct additional programs in
    fiscal year 1997 and fiscal year 1998 as a part of the USDA IPM
    initiative. A peer review panel met on April 28-29, 1997, to evaluate
    and prioritize eight area-wide proposals that were submitted to the
    agency in March of 1997. At least one of these proposals will be funded
    in fiscal year 1997, with up to two additional proposals planned for
    implementation in fiscal year 1998, if new funding is appropriated.
    Targets of the eight area-wide pest management candidate programs
    include leafy spurge, stored grain insects, corn earworm/tobacco
    budworm, Russian wheat aphid, Colorado potato beetle, boll weevil,
    silverleaf whitefly, and fruit flies.
        Question. What ARS-developed technology will be tested?
        Answer. ARS has developed a number of environmentally-friendly pest
    control technologies that will be tested against one or more of these
    pests. These technologies include traditional biological control with
    parasites, predators, and microbial agents; host-plant resistance;
    behavior-modifying chemicals, such as pheromone mating disruptors and
    attractants; sterile insect release techniques; and cultural practices.
        Question. Where will these demonstrations be carried out and what
    is the cost of each?
        Answer. A final decision as to which program and how many of these
    programs ARS will be able to implement has yet to be made. Once this
    final decision is made, then candidate sites for demonstration and the
    cost of each program will be evaluated. Generally speaking, each of the
    5-year area-wide pest management programs cost $1-2 million per year.
                              food safety research
        Question. You are again requesting an increase for food safety
    research. How much does ARS currently commit for pre- and post-harvest
    food safety research? How are you assisting FSIS?
        Answer. ARS currently commits $29,381,200 for pre-harvest and
    $20,266,100 for post-harvest food safety research related to the
    microbiological contamination of meat and poultry products, for a total
    of $49,647,300.
        The ARS is assisting the Food Safety and Inspection Service (FSIS)
    by conducting research that (1) provides screening or confirmatory
    methods for use in FSIS laboratories, such as the development of a
    screening and confirmatory method for Campylobacter jejuni, and a rapid
    and sensitive PCR molecular biology method for identification of E.
    coli 0157:H7, (2) provides information for FSIS use in making
    regulatory decisions, such as (a) the modeling of bacterial growth or
    thermal death times to help set standards for processed meat products
    and (b) the comparison of the use of sponging vs. excision and one vs.
    three carcass sites for industry process control of cow/bull and hog
    carcasses and (3) provides and/or evaluates technology which can be
    approved by FSIS for use in inspected establishments to lower
    contamination of meat and poultry, such as steam sterilization of beef
    carcasses.
        Question. Please identify the current and proposed funding for
    pathogen reduction research. Where is this research carried out? What
    is the nature of this research?
        Answer. Current funding for pathogen reduction research is
    $24,952,100. Proposed funding is $28,737,000. This research is carried
    out at Albany, CA; Ames, IA; Athens, GA; Beltsville, MD; Clay Center,
    NE; College Station, TX; Fayetteville, AR; and Wyndmoor, PA. This
    research determines the presence and numbers of specific pathogens in
    various environments both on the farm and during slaughter and
    processing; develops predictive models of bacterial growth rates and
    survival; develops specific pre-harvest and post-harvest controls for
    reducing pathogens during production and processing, such as
    competitive exclusion, vaccines, isolation rearing and new
    antimicrobial agents and processes; determines the attachment
    characteristics of various pathogens and develops more rapid methods to
    identify infected animals and animal products.
        Question. Where will the recommended increase be implemented? How
    many scientists will be recruited for this research? How will these
    funds be used?
        Answer. The recommended increase of $4.1 million will be
    implemented at Albany, CA; Ames, IA; Athens, GA; Beltsville, MD; Clay
    Center, NE; College Station, TX; Wyndmoor, PA; and Pullman, WA.
        Fifteen scientists requiring about $4 million will be recruited for
    this effort. The remainder of the funds will be used to supplement and
    accelerate existing programs.
        These funds will be used to develop: production systems to reduce
    human pathogens in food producing animals and poultry, in particular,
    Salmonella and Campylobacter; pre-/postharvest intervention strategies
    for animal and plant based products; pathogen-reducing slaughter
    processes; food pathogen risk assessment technologies; rapid pathogen
    diagnostic and detection; advanced inspection methods utilizing machine
    vision, pasteurization requirements to destroy pathogen in egg
    products; and also to characterize the antibiotic resistance of
    specific pathogens found in food producing animals.
        Question. Provide the Committee with actual obligations your Agency
    incurred in fiscal year 1996 for research on E. coli; salmonella;
    listeria and campylobacter. How many scientists were involved in this
    research?
        Answer. Twenty-six scientists were involved in this research in
    fiscal year 1996. The actual obligations ARS incurred are as follows:
                                                           Actual obligation
    E. coli.................................................      $1,226,606
    Salmonella..............................................       5,674,131
    Listeria................................................          33,435
    Campylobacter...........................................         869,069
                        integrated pest management (ipm)
        Question. ARS is requesting an increase of $4,000,000 for IPM
    research. What research is currently undertaken by ARS and by location?
    Provide funding and scientist effort.
        Answer. In support of the Department's IPM Initiative, ARS
    currently conducts pest control research which includes projects to
    develop environmentally-friendly pest control technologies that
    emphasize classical and augmentation biological control, host-plant
    resistance, behavior modifying chemicals (e.g. pheromone mating
    disruptors and attracticides), sterile insect release techniques,
    autocidal control technologies, resistance management, cultural
    practices, and other related pest control tactics. ARS scientists are
    not only working to develop these component IPM technologies but are
    also involved with State, regional and local IPM teams in a variety of
    action-oriented implementation programs that demonstrate biologically-
    based pest control in on-farm situations. In addition, ARS has taken
    the lead in demonstrating the use of area-wide IPM tactics. The
    information on the location, funding and scientist effort for
    consolidated IPM projects currently undertaken by ARS is provided for
    the record.

    ------------------------------------------------------------------------
                                                      Fiscal year 1997--
                      Location                   ---------------------------
                                                       Funds      Scientists
    ------------------------------------------------------------------------
    Fresno, CA..................................      $1,009,200         3.4
    Salinas, CA.................................         545,600         1.0
    Shaftner, CA................................         230,800         0.8
    Ft. Lauderdale, FL..........................         657,500         3.0
    Gainesville, FL.............................       1,338,400         4.8
    Miami, FL...................................         460,000         1.3
    Byron, GA...................................         123,900         0.3
    Tifton, GA..................................         865,200         2.5
    Ames, IA....................................          56,200         0.3
    West Lafayette, IN..........................          86,400         0.4
    Manhattan, KS...............................         193,800         0.8
    New Orleans, LA.............................         142,500         0.8
    Beltsville, MD..............................         169,500         0.5
    Morris, MN..................................         265,200         1.0
    Stoneville, MS..............................       2,481,800         8.0
    Columbia, MO................................          90,000         0.4
    Lincoln, NE.................................         279,900         1.3
    Ithaca, NY..................................         315,700         1.3
    Raleigh, NC.................................          48,300         0.2
    Stillwater, OK..............................         198,100         0.9
    Charleston, SC..............................         534,400         1.5
    Brookings, SD...............................       1,101,100         4.5
    College Station, TX.........................         898,500         3.7
    Kerrville, TX...............................         417,300         1.4
    Weslaco, TX.................................         691,300         1.8
    Prosser, WA.................................         144,600         0.5
    Pullmann, WA................................         213,100         1.1
    Yakima, WA..................................       2,379,200         3.4
    Headquarters................................       2,606,800  ..........
                                                 ---------------------------
          Total.................................      18,544,300        50.9
    ------------------------------------------------------------------------

        Question. How will the requested funds be implemented?
        Answer. Of the $4,000,000 requested, $1,000,000 will be used for
    area-wide IPM and pilot-test programs; $2,000,000 will be used for
    augmentation biocontrol and biologically-based IPM in field,
    horticultural and vegetable crops; and $1,000,000 will be used for
    host-plant resistance and related pest management strategies.
        Question. Please provide a breakdown of your chemical and non-
    chemical research components that fall within the general area of IPM.
        Answer. Of the overall figure of $134,236,000, $106,798,700 (80
    percent) is devoted to non-chemical research while $27,437,300 (20
    percent) is associated with research on chemical pest control
    technology. Our research related to chemical technology focuses on
    reducing chemical usages and substituting currently used chemicals with
    ones that are safer and more environmentally friendly.
                                contingency fund
        Question. You report that you spent $51,967 in 1995 for drydock,
    maintenance, marine vessel upgrade. How many vessels does ARS maintain
    to support the Plum Island operation? What is the annual cost of
    operating these vessels? What has been the cost of maintenance and
    upgrade for those vessels since 1990?
        Answer. ARS presently maintains three vessels to support the Plum
    Island Animal Disease Center. The annual operating costs for these
    vessels are $475,000 for staff and $220,000 for fuel.
        The cost of repairs and maintenance for fiscal years 1993 to 1997
    are as follows:
            Fiscal year                                              Funding
    1993..........................................................  $215,284
    1994..........................................................   329,783
    1995..........................................................   241,336
    1996..........................................................   403,334
    1997.........................................................\1\ 300,000

    \1\ Estimate.

        The contingency fund expenditure in fiscal year 1995 is included in
    the reported total cost for the year. Agency financial records are only
    maintained for five years therefore data for 1990-1991 is not
    available. In fiscal year 1992, the operations and maintenance contract
    under which the boats are operated did not provide these specific
    costs.
        Question. Contingency Fund releases were provided to Frederick,
    Maryland, for TCK Smut and Karnal Bunt. How were these funds used?
        Answer. In fiscal year 1996, $187,164 was released to Frederick,
    Maryland, and $79,592 was released to Raleigh, North Carolina, for an
    ARS/Grain Inspection, Packers, and Stockyards Administration
    cooperative study to determine how TCK spores are distributed in wheat
    shipments and how that distribution affects reliability of sampling for
    TCK smut on wheat detection. Frederick Maryland received $370,893 for
    research on karnal bunt disease and to purchase the necessary research
    equipment.
                               performance goals
        Question. The most important performance goal listed by ARS is that
    dealing with potential long-term benefits to agriculture and American
    citizens. However, you provide no indicators or how the Agency could
    determine such contributions from its research. Is this a realistic
    goal? If so, how will the Agency capture this data and identify it as
    an outcome of its research?
        Answer. ARS' mission is to conduct research to address and solve
    agricultural problems of high national priority. As the ARS Strategic
    Planning Team (SPT) worked on the task of identifying measurements for
    research outcomes and impacts, they decided to include a measure that
    addressed the Agency's central mission by identifying ways for ARS to
    capture and report on ``. . . research accomplishments with significant
    potential long-term benefits to U.S. agricultural industry and American
    society.'' The agency believes that this is a realistic objective. The
    mechanism for identifying and reporting these accomplishments will be
    an annual review by Research Leaders, the National Program Staff, and
    Area Directors in an effort to identify the research products with the
    greatest probability of making an important contribution to American
    agriculture. This process will be as objective as possible, but it is
    not always possible to immediately determine the value, application or
    longer term impact of research. ARS intends to identify and report
    accomplishments each year in the Agency's annual performance plan.
        Question. It appears that numbers of published papers and
    presentations are the only goals that ARS could express that lend
    themselves to tracking and quantifying. This is similar to tracking the
    number of assets and scientists the Agency employs--but not very
    meaningful in terms of measurable contributions. Given the effort
    involved in the GPRA program, have you concluded that this represents
    the only goals and measurements available to judge the merits of your
    agency's contributions?
        Answer. Shortly after GPRA was enacted, ARS established an agency-
    wide Work Group that sought to apply these new programmatic
    accountability principals in a research environment. To ascertain how
    other research agencies were responding to GPRA, ARS helped initiate
    and co-chair the Research Round Table, an ad hoc committee consisting
    of the major Federal research agencies. This group met monthly for 18
    months in an effort to define and resolve the issues posed in this
    question. ARS and its colleagues in REE also met with the research
    directors from the food and agricultural industry to learn how these
    issues are handled in the private sector. From these discussions, ARS
    developed a draft strategic plan that mixed broad qualitative goals and
    output measures such as the number of papers published or the number of
    new patent applications. Qualitative performance goals can be found
    under each Specific Goal and Initiative in the ARS plan. One example of
    a qualitative performance goal, taken from Specific Goal 1.2.2 ``New
    Uses and Products,'' states that ARS will ``experimentally demonstrate
    genetically improved crops with potential for successful
    introduction.'' While refereed papers and other outputs are important
    measures of productivity, quality, and substance in the scientific
    community, they do not, as you indicated in your question meaningfully
    measure the contributions of the Agency's research.
        What emerged from all these activities and the comments we received
    on our draft plans was a clearer picture of just how difficult, if not
    impossible, it is to apply metrics to research, especially basic
    research. The key points that emerged from this entire process include:
    (1) the outcomes and impacts of research are difficult to identify and
    quantify in advance, (2) the value and potential application of
    knowledge gained is not always immediately recognized and understood,
    (3) results are not always predictable, (4) there is a high percentage
    of negative determinations or findings, and (5) the unknown cannot be
    measured. After much deliberation, we have concluded that the best
    approach is to abandon the numerical measures of outputs and rely
    instead on qualitative measures in each annual performance plan
    describing what the agency expects to produce in a given fiscal year.
    This new approach is reflected in the most recent draft of the ARS
    strategic plan dated April 21, 1997.
                         selected examples of progress
        Question. Drip irrigation in the Southeast can be profitable. How
    new is this technology?
        Answer. With the development of plastics during and after World War
    II, the idea of drip irrigation became feasible. After a small
    irrigation manufacturing firm in New York began to supply the first
    drip irrigation equipment to water plants in greenhouses, researchers
    in Israel and the United States began to expand their efforts in the
    early 1960's. The first commercial-scale, demonstration study occurred
    on a grower's avocado orchard in San Diego, California, in 1969.
        Question. Isn't this technology being utilized in other regions of
    the U.S.?
        Answer. Yes. Drip irrigation is used in the Southeast, Southwest,
    and West, primarily, to irrigate vegetable, fruit, and vine crops. The
    largest usage of drip irrigation systems is in Florida and California,
    and about 4 percent of the irrigated land in the United States is
    currently being irrigated by this technology.
        Question. Explain the potential use of this technology and the
    benefit to be derived.
        Answer. Historically, the use of drip irrigation technology has
    been associated with irrigating high-value crops where soils are
    marginal, terrain is steep, and water costs are high. Potential
    benefits include reduced water use and cost, improved yields, product
    quality, salinity control, and nutrient management; and reduced
    evaporative losses and weed growth. Drip irrigation's potential use
    becomes an economics decision, balancing the above-noted benefits
    against the relatively high initial cost of the hardware, significant
    maintenance costs, and increased management requirements.
        Question. ARS scientists at Orlando, Weslaco, and Beltsville have
    utilized a parasitic wasp to control the brown citrus aphid, boll
    weevils, and whiteflies. Is the same wasp being employed in the
    research studies at three ARS locations? Explain.
        Answer. ARS scientists in Orlando, Weslaco, and Beltsville are each
    using different wasp species to respectively control the brown citrus
    aphid, boll weevils, and whiteflies. Biological control is the science
    of using natural enemies (parasites, pathogens and predators) to
    control insect pests using biological rather than chemical means.
    Beneficial parasitic wasps, are highly specialized and generally attack
    only a single or very few species of insects. This specialization makes
    them safe to use as they do not affect humans or most other nontarget
    species (including other insects) that are important to agriculture and
    the natural environment. Although this is a positive trait for
    environmental safety, it also means that research must be conducted on
    different parasitic wasps for each major insect pest. ARS scientists
    work closely together across geographic locations to identify, develop,
    implement and test new biological control technologies. Thus, the
    research at Orlando, Weslaco and Beltsville, although unique in some
    ways, employ integrated information and activities to assist one
    another in solving severe pest problems such as the brown citrus aphid,
    boll weevil and silverleaf whitefly.
        Question. What is the relationship between the scientific studies
    on the parasitic wasp on whitefly and the irrigation work on whiteflies
    in cotton at Phoenix, Arizona?
        Answer. ARS scientists at Phoenix, Arizona, have determined that
    irrigation patterns affect the attractiveness of the cotton crop to
    adult whiteflies. Water stressed plants are more attractive to these
    adults and thus receive more eggs than greener more highly irrigated
    plants. Although no direct effects have yet been measured on parasitic
    wasps, ARS scientists in Phoenix believe that the more highly irrigated
    cotton would have lower whitefly numbers and thus would be sprayed less
    with chemical insecticides. Fewer chemical insecticides mean a more
    positive environment for parasitic wasps allowing wasp numbers to
    increase more than in similar pesticide treated areas. ARS scientists
    studying parasitic wasps in other locations have found that increased
    nitrogen fertilizer which stimulates plant growth also affects the
    attractiveness of these plants to whitefly adults. ARS scientists are
    linking these findings together through an ARS led ``Silverleaf
    Whitefly: 5-Year National Research and Action Plan''.
        Question. What is the coordination and relationship of these
    studies and the studies on cotton insects at your Gainesville
    laboratory investigating plant emissions to attract beneficial insects?
        Answer. ARS conducts research on parasitic wasps affecting
    whiteflies at several different locations including, Beltsville, MD;
    Montpellier, France; Orlando, FL; Phoenix, AZ; and Weslaco, TX. These
    programs are coordinated within the Agency by the ARS National Program
    Staff, and with other state and federal institutions through an ARS led
    ``Silverleaf Whitefly: 5-Year Research and Action Plan''. Although the
    ARS scientists in Gainesville, FL are investigating parasitic wasps
    that attack caterpillars rather than whiteflies, they have found that
    plants under stress by defoliating caterpillars cause cotton to produce
    volatile chemicals that attract certain parasitic wasps that then
    search these plants for damaging caterpillar pests. Currently, this
    research is investigating basic aspects of plant, pest and parasite
    interactions. The long term goal of this work is the manipulation of
    these interactions to better manage parasitic wasps by controlling
    their behavior through plant characteristics that may be enhanced
    through plant breeding or genetic engineering. Through the ARS National
    Program on ``Crop and Commodity Pest Biology, Control and Quarantine'',
    studies of this type are integrated by the ARS National Program Staff
    into sets of nationally organized activities to accelerate the
    development and application of many different types of biologically-
    based pest control efforts.
        Question. ARS has discovered a new class of insect repellent,
    Piperidine. Does ARS have a CRADA for commercial development?
        Answer. ARS does not have a CRADA for the commercial development of
    Piperidine. Piperidine, a natural repellent of insects, is being
    evaluated as a component of fire ant baits. It is expected that by
    incorporating Piperidine into our proprietary fire ant baits, ant
    species we do not want attracted to the bait will be repelled. It seems
    that fire ants themselves use Piperidine to repel other ant species
    from their food and nests. ARS has a Memorandum of Understanding with
    the University of Brussels, Belgium, to produce Piperidine, which must
    be synthesized in a laboratory, for ARS' use. Additional studies are
    rapidly progressing and ARS hopes to identify a commercial partner
    before the end of the year.
        Question. Irradiation of blueberries is a proposed alternative to
    methyl bromide. How will acceptance of this quarantine treatment
    enhance U.S. and foreign markets? Is this procedure acceptable to the
    market place? Is this an effective substitute for methyl bromide? What
    other commodities are subject to this treatment?
        Answer. Some countries that import U.S.-produced blueberries
    require a methyl bromide fumigation treatment to kill quarantined
    insect pests that might be present in the commodity. Methyl bromide
    will not be available for use in the U.S. after January 1, 2001. The
    short shelf life and delicate nature of blueberries limits options for
    replacing methyl bromide. Irradiation is a promising methyl bromide
    alternative to disinfest blueberries with minimal phytotoxic effects.
    Acceptance of this treatment will allow continued shipment of
    blueberries to countries currently requiring methyl bromide fumigation.
        Radiation is approved for food use in many countries. Recent tests
    of Hawaiian commodities and Florida strawberries marketed in the U.S.
    showed wide acceptance by consumers. Consumers are likely to become
    even more comfortable with this technology with the publication of new
    regulations allowing radiation to treat chicken and other meats and as
    a fruit fly quarantine treatment.
        Many commodities, including spices and grains are irradiated in
    many countries. The U.S. is publishing regulations to allow irradiation
    of various animal products to ensure microbial decontamination and of
    fruits and vegetables to disinfest fruit flies. As methyl bromide is
    phased out in many countries around the world in the next several
    years, there will be an increased reliance on radiation as a quarantine
    treatment to replace methyl bromide for many commodities.
        Question. Describe the utilization and cost benefits U.S. cotton
    farmers are realizing through the use of the GOSSYM-COMAX cotton model.
    How many farmers are employing this model and what are the total
    estimated savings from its application?
        Answer. Over 500 producers have licensed GOSSYM-COMAX since 1986
    and over 200 growers have recently renewed their licenses or are new
    buyers of licenses, while the number of producers currently using old
    versions of the model are unknown. In addition to individual farmers,
    about 50 consultants use GC. They consider the number of clients
    serviced to be proprietary information. According to a commissioned
    report by Dr. Howard Ladewig, Texas A&M University, farmers across the
    cotton belt who have not licensed GOSSYM-COMAX (GC) are benefiting from
    this technology's principles in a number of ways:
      --60 percent of all cotton growers are using plant mapping, a
            practice that was introduced by GC.
      --54 percent of GC users have modified their irrigation schedules.
      --76 percent of GC users have modified their nitrogen fertilization
            rates.
      --47 percent of GC users pay more attention to early-season insect
            damage.
      --29 percent of GC users have reduced their production costs.
      --57 percent of GC users have increased cotton yields.
        Net income increase was found by Dr. Ladewig to average $45 per
    acre per year, as determined by the growers.
        Dr. Ladewig also estimated that about $187 million has been the
    total financial benefit of GC to date.
                         national agricultural library
        Question. The National Agricultural Library supports information
    centers including the Rural Information Center, Water Quality
    Information Center, Animal Welfare Information Center, Technology
    Transfer Information Center, Plant Genome Information Center, Food and
    Nutrition Information Center, and the Biotechnology Information Center.
    What are the resources currently committed to these programs in each of
    fiscal years 1996-98?
        Answer. The appropriated resources committed for the Information
    Centers for the three fiscal years are provided below.

    ----------------------------------------------------------------------------------------------------------------
                                                                                       Fiscal year--
                                                                     -----------------------------------------------
                           Information center                                              1997            1998
                                                                       1996 (actual)    (budgeted)      (estimated)
    ----------------------------------------------------------------------------------------------------------------
    Rural...........................................................        $411,540        $393,000        $403,485
    Water quality...................................................         233,708         232,000         237,107
    Animal welfare..................................................         708,076         711,000         720,825
    Technology transfer.............................................         245,096         230,000         231,636
    Plant Genome....................................................       1,448,668       1,383,000       1,383,000
    Food and Nutrition..............................................         705,466         688,000         680,331
    Biotechnology...................................................         182,340         165,000         130,748
    ----------------------------------------------------------------------------------------------------------------

        Question. Provide the NAL appropriations and staff year levels for
    fiscal years 1996, 1997, and 1998.
        Answer. The NAL appropriations levels for fiscal years 1996, 1997,
    and 1998 are $19,464,000, $19,319,000, and $19,394,000 respectively.
    The staff year levels for fiscal years 1996, 1997, and 1998 are 209,
    201, and 196 respectively.
                              organization of nal
        Question. Briefly describe the major organizational components of
    the NAL and provide respective funding and staffing levels in each of
    fiscal years 1996-1998.
        Answer. NAL has 4 major organizational components:
        The Office of the Director (OD) provides leadership, general
    support, and building services.
        The Technical Services Division (TSD) selects and acquires
    information resources for the collection and provides bibliographic and
    subject access to that literature.
        The Public Services Division (PSD) facilitates access to the
    information and materials needed by researchers, scientists, educators,
    administrators and the general public through a variety of general and
    specialized information services, document delivery services, and
    instructional programs.
        The Information Systems Division (ISD) is responsible for the
    automation activities of NAL.
        The funding and staffing levels for each component (including
    repair and maintenance funding) follow:

    ----------------------------------------------------------------------------------------------------------------
                                     Fiscal year 1996 (actual)       Fiscal year 1997           Fiscal year 1998
                                    ---------------------------         (budgeted)                (estimated)
                                                               -----------------------------------------------------
                                         Funding      Staffing      Funding      Staffing      Funding      Staffing
    ----------------------------------------------------------------------------------------------------------------
    OD.............................      $4,310,701         13      $3,074,000         15      $3,086,000         13
    TSD............................       6,629,073         82       6,971,000         82       6,998,000         82
    PSD............................       6,114,802         76       6,457,000         74       6,482,000         72
    ISD............................       3,831,919         24       2,817,000         30       2,828,000         29
                                    --------------------------------------------------------------------------------
          Total....................      20,886,495        195      19,319,000        201      19,394,000        196
    ----------------------------------------------------------------------------------------------------------------

              national agricultural library object classification
        Question. Provide a breakdown of NAL's 1996 obligations by object
    classification for fiscal years 1996-98.
        Answer. The object classification table for the National
    Agricultural Library for fiscal years 1996-98 is provided for the
    record.

    ------------------------------------------------------------------------
                                                  Fiscal year--
                       Object       ----------------------------------------
                   classification                      1997      1998 budget
                                     1996 actual  appropriation    estimate
    ------------------------------------------------------------------------
          Personnel Compensation

        1Permanent positions            $7,782        $8,162        $8,192
        1Positions other than              258           270           271
          permanent
        1Other personnel                    88            92            92
          compensation
                                  ------------------------------------------
               Total, Personnel          8,128         8,524         8,555
                Compensation
        1Personnel benefits:             1,619         1,699         1,706
          civilian retirement
        1Former employees                   18  .............  ...........
                                  ------------------------------------------
               Total, Object             9,765        10,223        10,261
                Classes 11-13
                                  ==========================================
             Other Obligations

        2Travel and                        132           108           108
          transportation of
          persons
        2Transportation of things           91            75            75
        2Comm., util, other rents          739           605           605
        2Printing and                      110            90            90
          reproduction
        2Other services                  2,163         1,768         1,805
        2Purchases of goods and             62            51            51
          services
        2Operations and                  1,928         1,577         1,577
          maintenance of facil
        2Research and development        1,310         1,072         1,072
          contracts
        2Operations and                    150           122           122
          maintenance of equip
        2Subsistence and support             6             5             5
          of persons
        2Supplies and materials          1,259         1,030         1,030
        3Equipment                       2,481         2,029         2,029
        4Grants, subsidies and             690           564           564
          contributions
                                  ------------------------------------------
               Subtotal, All            11,121         9,096         9,133
                Other
                                  ------------------------------------------
               Total                    20,886        19,319        19,394
    ------------------------------------------------------------------------

        Question. What is the annual maintenance cost of the Beltsville NAL
    facility for each of fiscal years 1996-1998?
        Answer. The annual maintenance costs include NAL's Repair and
    Maintenance budget as well as contracts for building maintenance
    activities such as cleaning, an elevator repair contract, and other
    similar activities. The total maintenance costs for fiscal years 1996-
    98 were: 1996--$1,358,700 (actual); 1997--$1,333,000 (budgeted); and
    1998--$1,346,000 (estimated).
        Question. Identify funding by agency that NAL receives from Federal
    and non-federal sources.
        Answer. The funding by agency that NAL receives from Federal and
    non-federal sources is provided in the table below:

    NAL Federal funding:
        Office of the Secretary...................................   $32,114
        Agricultural Marketing Service............................    45,195
        Animal Plant Health Inspection Service....................    65,862
        Cooperative State Research, Education, and Extension
          Service.................................................   270,157
        Economic Research Service.................................    76,500
        Food and Consumer Service.................................   405,950
        Forest Service............................................    40,805
        Office of Operations......................................     2,103
        Natural Resources Conservation Service....................    53,387
        Foreign Agricultural Service..............................    23,857
        Grain, Inspection, Packers and Stockyards Administration..     4,106
        Rural Development.........................................   125,053
        Office of the Inspector General...........................     1,949
        Food Safety and Inspection Service........................   107,647
        Farm Service Agency.......................................    65,689
        National Bureau of Standards..............................     6,000
        Food and Drug Administration..............................    30,000
        National Institutes of Health.............................   692,370
        National Institute of Mental Health.......................    12,500
        Department of Justice.....................................    30,000
        National Finance Center...................................     2,147
        National Agricultural Statistics Services.................    12,500
                        --------------------------------------------------------------
                        ____________________________________________________

          Total, NAL Federal funding.............................. 2,105,891
                        ==============================================================
                        ____________________________________________________
    NAL non-Federal funding:
        University of Mississippi.................................    43,000
        Virginia Polytechnic Institute and State University.......    16,000
        National Rural Electric Cooperative Association...........     7,028
                        --------------------------------------------------------------
                        ____________________________________________________

          Total, NAL non-Federal funding..........................    66,028
                        ==============================================================
                        ____________________________________________________
          Total, NAL funding...................................... 2,171,919

        Question. Identify the services NAL provides other agencies through
    reimbursable agreements.
        Answer. NAL provides three types of services that other agencies
    fund via reimbursable agreements. (1) Through the Current Awareness
    Literature Services (CALS), NAL provides USDA researchers ongoing
    literature searches through a centralized electronic database. (2) NAL
    also arranges Dunn and Bradstreet financial database services that
    provide USDA agencies with business and financial reports. (3)
    Additional reimbursable arrangements make it possible for NAL to
    provide specialized information services that support other agencies.
    The Rural Information Center, for example, provides information and
    referral services to local government officials, community
    organizations, health professionals and organizations, rural electric
    and telephone cooperatives, libraries, businesses, and rural citizens
    working to maintain the vitality of America's rural areas. Through a
    separate reimbursable agreement, the Alternative Farming Systems
    Information Center operates the Sustainable Agricultural Network which
    fosters the exchange of scientific and practical information on
    sustainable agricultural systems.
        Question. Agricultural Genomes Information System. ARS also
    maintains the GRIN system. How do these two systems differ? Why are
    they managed separately?
        Answer. The Agricultural Genomes Information System (AGIS) and the
    Germplasm Resources Information Network (GRIN) differ by being
    designed, at least initially, to serve somewhat different groups of
    users, to play different information management roles, and to address
    different objectives. Because of the generally substantial differences
    in the preceding factors, the databases were developed and are managed
    separately but contain appropriate links between the genomic and
    germplasm data.
        The GRIN was developed primarily to play two central roles in
    managing germplasm and associated information. First, it is the means
    whereby germplasm managers of the National Plant Germplasm System
    (NPGS) manage the local inventory of information, seeds, and plants
    conserved at various NPGS sites. For example, it is used to record
    requests for germplasm accessions, to keep a running tally of the
    number of seeds, clones, available per accession, etc. It also serves
    as an archive for the results of seed quality assays, the ambient
    experimental conditions during germplasm production, and similar
    information. The preceding uses require that a variety of standard and
    nonstandard reports be generated periodically from the GRIN database by
    a variety of germplasm managers. In general, the segments of GRIN
    devoted to inventory management are only accessible to NPGS germplasm
    managers.
        Second, GRIN is designed to help encourage the use of genetic
    diversity, in the form of germplasm, in crop improvement and in
    scientific research. An extremely wide variety of information is
    available on GRIN for germplasm accessions, because the user community
    is extremely broad, ranging from plant scientists and breeders, to
    educators and students, to crop producers. The information entered into
    GRIN emphasizes traits that are often immediately useful for crop
    production and improvement, such as yield, adaptation, and resistance
    to biotic or abiotic stresses. Often, the genetic basis of the
    preceding traits is unknown, or may be irrelevant for effectively
    deploying the traits for certain applications.
        In contrast to GRIN, AGIS is designed primarily to make information
    relevant to plant genome research readily available in useful formats.
    The primary clientele for AGIS is the biological research community,
    especially plant geneticists.
        There are also substantial technical differences between the
    systems. For example, they were constructed with somewhat different
    software, with the GRIN now being based on the industry-standard
    Oracle. AGIS is Unix-based, and constituent crop-specific genome
    databases in AGIS have been constructed with ACeDB or with Sybase (the
    maize genome database) software. The database structures of GRIN and
    AGIS--the electronic arrangement of the data--are different, with GRIN
    generally arranged around the germplasm accession as the central,
    unifying element, with accession attributes, such as physical location,
    being extremely important descriptors. In contrast, the constituent
    crop-specific databases of AGIS focus on specific genes and their
    locations on the genome as the unifying database structural elements.
        Despite their differences, various elements of the two separate
    database systems are now linked electronically via the World-Wide-Web
    (WWW). In the future, it is anticipated that additional components of
    the two systems will be similarly linked. Nonetheless, it is likely
    that the two database systems will remain separate entities in the
    future, because of the intrinsic factors noted above.
                         national preservation program
        Question. NAL established a Preservation Officer position. How many
    staff years are employed in this effort?
        Answer. The equivalent of four staff years are employed in the NAL
    preservation effort.
        Question. How much money does NAL spend in contracting for
    preservation workload?
        Answer. NAL is spending $215,000 in fiscal year 1997 on contracts
    and cooperative agreements to obtain a variety of preservation services
    and products.
        Question. What does the Agency envision this effort costing on an
    annual basis?
        Answer. NAL envisions that a fully implemented ongoing preservation
    effort would cost more than $2 million per year.
        Question. Please explain, in more detail, the National Preservation
    Program for Agricultural Sciences.
        Answer. NAL has established a national preservation program for
    agricultural sciences in conjunction with the United States
    Agricultural Information Network. The National Preservation Plan for
    Agricultural Literature is a discipline-based approach to creating a
    distributed system for preserving agricultural literature. The Plan
    calls for each state in the U.S. to take responsibility for
    preservation of its own state and local agricultural literature. This
    will result in the systematic identification of the universe of state
    and local level published literature. NAL's role in the Plan is to
    focus on federal publications, rare books, manuscripts and other
    uniquely held materials.
                         performance measures and goals
        Under the outcomes listed by ARS, NAL will receive and handle
    customer requests within established timeframes: deliver of documents,
    95 percent; and library research (references), 95 percent.
        Question. Who are the clientele of the Library?
        Answer. The clientele of the Library includes members of Congress
    and their staff; Federal administrators and managers; state and local
    officials of government; agricultural program administrators,
    scientists, engineers, and researchers; extension personnel; educators;
    employees of agriculturally-related businesses and industries; students
    and scholars; consumers and the general public.
        Question. How many types of electronic and hard copy delivery
    systems are in place?
        Answer. NAL delivers both publications and reference services, and
    different delivery systems are appropriate in each case. For
    distributing publications, two electronic systems are used. One system
    is via telefacsimile, and the other utilizes the Ariel System. Ariel
    involves the use of a document delivery software to deliver
    publications over the Internet. Hardcopy documents are generally sent
    by U.S. mail, although rush delivery is sometimes arranged by other
    carriers.
        For the delivery of reference services, all the common methods of
    communication are employed. Electronic means include electronic mail,
    telefacsimile and telephone. Other reference requests are answered via
    the U.S. mail. Reference information of general use to NAL clientele
    are available 24 hours a day via the World Wide Web on the Internet.
        Question. How will you document efforts to achieve these goals?
        Answer. NAL periodically samples workflow to ensure prompt document
    delivery and reference services for customers. Based on a comparison of
    data from before and after the designated period we will be able to
    document progress toward these goals.
        Question. How will you distinguish performance achievement among
    these goals?
        Answer. NAL will distinguish performance achievement among these
    goals by comparing data from before and after the designated period.
                            buildings and facilities
        NAL completed a facility study in 1991 that identified numerous
    code, mechanical, electrical and architectural deficiencies estimated
    at $18 million.
        Question. Please list the deficiencies and costs identified in this
    study.
        Answer. In general the deficiencies and costs can be categorized
    into three major areas of work: architectural, mechanical/plumbing, and
    electrical. The types of deficiencies and associated estimated costs
    are as follows:
        Architectural deficiencies include items such as deteriorating
    brick; exterior glazing leaks; egress requirements; fire code
    deficiencies; accessibility issues; and other items of this type. The
    estimated cost to correct these deficiencies is $4.7 million.
        Mechanical/plumbing deficiencies include items such as lack of
    sprinkler system; insufficient cooling capacity; lack of temperature
    and humidity control; poor air circulation; lack of vacuum breakers on
    hose bibbs; worn out water control valves; and other miscellaneous
    items. The estimated cost to correct these deficiencies is $10.2
    million.
        Electrical deficiencies include items such as improper lighting
    levels; insufficient emergency power system; branch circuit wiring
    devices in disrepair; insufficient lightning protection system; and
    other miscellaneous items. The estimated cost to correct these
    deficiencies is $3.1 million.
        The $18 million estimate is based on constant 1998 dollars. The
    total program cost will increase depending on how much is appropriated
    each year and the corresponding rate of inflation.
        Question. Why has NAL waited until fiscal year 1998 to request
    funding for these deficiencies?
        Answer. When the facility study was completed in late fiscal year
    1991, the NAL Director worked with USDA building engineers to analyze
    and prioritize the recommendations. Some existing funds were used to
    begin addressing the highest priority deficiencies, and the 1991 study
    has been used since its receipt as justification for increased
    building-related appropriations. In fiscal year 1992, NAL did receive a
    small increase in its annual Repair and Maintenance budget.
        Question. How many phases will be involved in correcting facility
    deficiencies and adding storage space?
        Answer. The number of phases to correct facility deficiencies and
    add storage space is dependent on both funding and impact to library
    services.
        Question. How much will each phase cost and what work will be
    accomplished?
        Answer. Due to uncertainty regarding future funding levels, the
    Agency has not developed a firm phasing plan beyond Phase 1. Phase 1
    will address the replacement of boilers, renovations to the first,
    third, fourth, and fifth floors, and installation of sprinklers. It is
    estimated at $6 million.
        Question. You state that in addition to these facility
    deficiencies, NAL needs to acquire additional storage space. How do you
    plan to do this?
        Answer. NAL plans to acquire additional storage space through more
    efficient use of its existing space. Current plans call for returning
    the fifth floor to a stack floor and relocating the staff currently
    located on the fifth floor to floors one, three, and four.
        Question. What is the cost involved for added space?
        Answer. It is not expected that there will be any significant cost
    increase for this work since most of the work required would have been
    needed to address the facility deficiencies.
        Question. Is this cost part of the original study?
        Answer. The cost for added space was not directly identified in the
    original study, however, addressing the architectural, mechanical/
    plumbing, and electrical deficiencies will require extensive tear out
    of existing finishes. It will be during the repair of these disturbed
    areas that staff consolidation can be accommodated.
        In addition to the Facility Condition Study, the NAL also
    commissioned a space utilization study in 1990/1991 to investigate how
    best to meet competing space needs for the staff, the collection, and
    library users. As a result of that study, it became clear that NAL
    needed more space for collections.
        Question. NAL has annual funding appropriated for building repairs.
    How will these funds be used in defraying these costs?
        Answer. NAL has available $900,000 per year in repair and
    maintenance funds. Much of this funding goes to immediate repair and
    maintenance needs not necessarily related to the major facility
    deficiencies being addressed in this effort. An additional problem is
    the repair and maintenance funds are annual appropriations, therefore,
    they cannot be used to supplement the Buildings and Facilities
    appropriations.
        Question. Detail your plans and costs in conjunction with the
    overall $18 million.
        Answer. Because of the uncertainty regarding what immediate repair
    and maintenance demands may be made on the annual repair and
    maintenance account from year to year, and the difference in type of
    funds, no plans have been developed addressing how these repair and
    maintenance funds could supplement the Building and Facility request.
    The $18 million cost estimate is based on 1998 dollars. The total
    program cost will increase depending on how much is appropriated each
    year and the corresponding rate of inflation.
        Question. The justification for $18 million ``in 1998 dollars'' is
    tied to the comprehensive Facility Condition Study. This study refers
    to deficiencies. The request for 1998 includes First Floor Alterations.
    Were these alterations also included in this study?
        Answer. These alterations were not specifically included in the
    Facility Condition Study.
        Question. Are alterations requested outside this study, and if so,
    please detail for the Committee your request?
        Answer. In addition to the Facility Condition Study, the NAL also
    commissioned a space utilization study in 1990/1991 to investigate how
    best to meet competing space needs for the staff, the collection, and
    library users. As a result of that study, it became clear that NAL
    needed more space for collections. It was determined that the most
    cost-effective approach to the storage issue was to return the fifth
    floor, originally designed for book storage and subsequently modified
    for staff use, back to book storage and relocate the personnel
    currently occupying the fifth floor to floors one, three, and four.
        Question. How much of the $18 million is planned for alterations?
        Answer. Correcting the numerous facility deficiencies will require
    demolishing existing facility components to access the underlying
    utilities. The additional cost of alterations required to accommodate
    personnel displaced from the fifth floor is not expected to
    significantly increase the cost of correcting facility deficiencies
    beyond the $18 million estimate.
        Question. Funds are requested to alter existing space. Please
    provide for the Committee the current utilization of NAL space and
    planned use for this space.
        Answer. The current and planned utilization of NAL space (exclusive
    of mechanical areas) is as follows:

    ------------------------------------------------------------------------
                                                     Approximate percent of
                                                           space usage
                        Purpose                    -------------------------
                                                      Current      Planned
    ------------------------------------------------------------------------
    Office space..................................           38           33
    Collections...................................           53           59
    Public areas..................................            9            8
    ------------------------------------------------------------------------

        Question. What areas need to be modified?
        Answer. In order to increase the space available for collection
    growth, it is necessary to reduce slightly the office space and public
    areas.
                                  object class
        Question. The actual full-time equivalents for 1994, 1995 and 1996
    are well below the Agency's authorized ceiling for those years. What is
    the cause for underutilization of your work force?
        Answer. The fiscal year 1995 budget proposed closure of 20 research
    locations. Hiring during fiscal year 1994 was curtailed and vacancies
    were held open to provide maximum placement opportunities for affected
    employees. Although final congressional action directed the closure of
    only 10 locations and 2 programs, the locations which did not close
    began the year with a significant number of vacancies. In addition, in
    fiscal year 1995 there was a freeze placed on all hires outside of USDA
    and personnel actions were frozen on grade 13-15 positions. These
    actions caused the agency to begin fiscal year 1995 with a large number
    of vacancies. Early retirement was also offered to eligible employees
    in fiscal years 1994 and 1995 to comply with the Administration's
    streamlining initiatives. This action produced additional vacancies and
    further reduced full-time equivalents (FTE) usage below ceiling levels.
    ARS is now moving toward aggressively to recruit new personnel to fill
    existing vacancies but is experiencing a significant lag problem and
    new offsets due to continuing retirement attrition.
        Question. Please provide a detailed breakdown of your equipment
    purchases in fiscal year 1996. Please distinguish scientific or
    laboratory equipment purchases, computer and related costs and other
    major purchases for the Committee.
        Answer. A detailed breakdown of ARS equipment purchases for fiscal
    year 1996 is provided for the record. The information follows:

                                                            Fiscal year 1996
            Object Class 31 Equipment                                 actual
    Research Equipment such as: Atomicabsorbtion
        Spectrophotometer, Bicemek 2000 Laboratory
        Automatic, Accelerated Solvent Extractor, Gas
        Chromatograph Laboratory Casework and Fumehoods,
        Hewlett Packard Benchton, 6 Incubators, Near Infra
        Red Instruments, and other scientific equipment.....      $6,871,545
    Furniture and Fixtures..................................         303,735
    Laboratory Equipment such as: Laboratory Casework and
        Fumehoods, Autoclaves, Columns, High Pressure Liquid
        Chromatograph Ultracentrocentrafuses, and other
        similar lab equipment...............................      13,097,007
    Snow Telemetry Equipment................................           1,376
    Engineering Equipment...................................          58,788
    Radio and Communications................................         110,672
    Agricultural Machinery and Equipment (includes heavy
        vehicles such as pickup trucks and tractors)........         622,954
                        --------------------------------------------------------
                        ____________________________________________________
          Subtotal..........................................      21,066,077
    ADP Software, Personal Computers........................       4,451,225
    Motor Vehicles, Working Capital Fund Fleet Equipment....       1,264,115
    All Other Equipment: Telephone, office machines,
        reproduction machines, etc..........................       9,878,830
                        --------------------------------------------------------
                        ____________________________________________________
          Subtotal..........................................      36,660,247
    Buildings and Facilities Account........................         400,000
                        --------------------------------------------------------
                        ____________________________________________________
          Total.............................................      37,060,247

        Question. How much money was obligated for consultant services in
    fiscal year 1996?
        Answer. There were no funds obligated for consultant services under
    5 U.S.C. 3109 in fiscal year 1996.
        Question. Please provide a detailed breakdown of obligations
    incurred in fiscal year 1996 in the area of ``Other Services'':
    contracts for research services, contracts for administrative services,
    etc.
        Answer. Provided is a detailed breakdown of obligations incurred in
    fiscal year 1996 in the area of ``Other Services'': contracts for
    research services, contracts for administrative services, etc.

                                 Other services

                                                            Fiscal year 1996
    Research and Development Contracts:
        Service Contracts...................................     $26,705,209
        Research Contracts..................................      17,577,024
        Research Support Agreements.........................      26,494,290
        Interagency Agreements..............................       7,356,339
        Specific Cooperative Agreements w/State Institutions      20,246,792
        Specific Cooperative Agreements w/Private
          Corporations and Institutions.....................       2,391,926
        General Cooperative Agreements......................      11,491,518
        Advisory and Assistance Services from Non-
          Governmental Sources..............................       1,192,000
    Contractual Services for: Auditing, Stenographic
        Services, Training, Reimbursable Details, Fees,
        Health Units and Related Activities.................       6,523,126
    Purchase of Services from USDA Account: NFC Processing/
        Greenbook Costs, Video and Film Services, ADP Data
        Processing Services and Related Services............       2,916,194
    Operation and Maintenance of Facilities: Contracts,
        Including Government-Owned Contractor-Operated
        Facilities, and Services Contracts and Routine
        Repair, Upkeep of Land, and Maintenance of
        Facilities, and A-76 Contractual Services...........      20,828,308
    Operation and Maintenance of Equipment: Maintenance of
        Motor Vehicles, Office Equipment, Telephones, ADP
        Software, Other General Type Equipment..............       9,121,296
    Subsistence and Support of Persons......................         923,936
    Medical Care (Clinical/Services)........................         185,592
                        --------------------------------------------------------
                        ____________________________________________________
          Subtotal, Other Services..........................     153,953,550
    Building and Facilities Contracts.......................      20,985,000
                        --------------------------------------------------------
                        ____________________________________________________
          Total, All Other Services.........................     174,938,550

        Question. Provide a breakdown of the costs associated with
    ``Personnel Benefits'' in fiscal year 1996.
        Answer. A breakdown of costs associated with ``Personnel Benefits''
    in fiscal year 1996 is provided for the record. The information
    follows:

                                                                 Fiscal year
                                                                 1996 actual
            Personnel benefits                                (In thousands)
    Contribution to CSRS..........................................   $12,313
        (Number of Employees).....................................   (3,127)
    Contribution to FERS (Includes Thrift Savings Plan)...........    29,498
        (Number of Employees).....................................   (4,186)
    Health Insurance..............................................    17,368
    Life Insurance................................................       618
    Workmen's Compensation........................................     2,790
    Quarters Allowance............................................     1,021
    Other costs, e.g. FICA, Medicare..............................     6,780
                        --------------------------------------------------------------
                        ____________________________________________________

          Subtotal Benefits.......................................    70,388
    Former employees..............................................       434
                        --------------------------------------------------------------
                        ____________________________________________________

          Total, Personnel Benefits...............................    70,822
                         funds and research management
        Question. Again in fiscal year 1996 as in fiscal year 1995, ARS was
    under its personnel ceiling by a significant 300 full-time equivalents.
    How much money budgeted for compensation for these positions was saved
    by your Agency?
        Answer. A total of $12.4 million was saved due to ARS being below
    ceiling.
        Question. What was done with these savings?
        Answer. A portion of these savings accrued to Headquarters and were
    reallocated as follows:

                                                                 Fiscal year
                                                                  1996 funds
            Use of funds                                      (In thousands)
    Area-Wide Priorities(Research Equipment and Other High Cost
        Needs)....................................................  $2,193.9
    Location Closures, Conversions, and Transfers.................   2,299.5
    Remedial Investigation and Feasibility Study (Beltsville, MD).   1,400.2
    ADP and Other Infrastructure Upgrades.........................   1,147.9
    Removal Actions (Hazardous Waste Material)....................     436.9
    RCRA Closure Sites (Greenport, NY)............................     360.0
    SES Relocations...............................................     309.5
    Roof Repairs (Beltsville, MD).................................     275.8
    Oil Spill (Orient Point, NY)..................................     164.6
    Summer Intern Program.........................................     118.0
    USDA Liaison Program..........................................     100.0
    ESA Phase II Sampling (El Reno, OK)...........................      70.0
    Agency-Wide Hazardous Waste Cleanup...........................      68.4
                        --------------------------------------------------------------
                        ____________________________________________________

          Subtotal...............................................\1\ 8,944.7

    \1\ The balance of accrued lapsed salaries was retained at ARS field
    locations for locally-based spending decision. The primary uses of these
    funds were for research equipment, employee relocations, facilities
    repair and maintenance, safety and health improvements, and
    unanticipated operating needs.

        Question. To what extent were these funds obligated at the
    locations where they were saved?
        Answer. Approximately, 40 percent of the funds saved were obligated
    at the locations where they were saved. The remaining 60 percent was
    used for Agency priorities not necessarily at the location where the
    funds were saved. An example of this would be the funding provided for
    location closures; no savings occurred at these locations, however,
    funds were obligated at these sites for closure costs.
        Question. How many active projects does ARS currently engage?
        Answer. 1200 individual research projects are in progress at this
    time.
        Question. How many scientists are currently on-board?
        Answer. There are currently 1,810 permanent scientists on-board in
    ARS as of April 29, 1997. Additionally, ARS employs a variable number
    of temporary scientists or post-docs on 2 to 4 year appointments. The
    current number of post-doctoral scientists is 312.
                               extramural funding
        Question. Please list the funding ARS commits to Land Grant
    Universities. Please identify these amounts by recipient.
        Answer. A list of funding committed to 1890 Land Grant Universities
    follows:

            School                                          Fiscal year 1996
    Alabama Agri and Mech College...........................         $12,500
    Alcorn State (MS).......................................         488,300
    Auburn University.......................................          71,000
    Clemson University......................................          41,000
    Colorado State University...............................         609,500
    Cornell University......................................         734,400
    Florida Agri and Mech University........................           5,100
    Iowa State University...................................         143,000
    Kansas State University.................................         274,700
    Louisiana State University..............................         146,700
    Michigan State University...............................         250,700
    Mississippi State University............................       1,080,700
    Montana State University................................         874,500
    New Mexico State University.............................         687,400
    North Carolina State University.........................         976,300
    North Dakota State University...........................         215,600
    Ohio State University...................................         343,800
    Oklahoma State University...............................         144,500
    Oregon State University.................................         479,400
    Pennsylvania State University...........................          87,600
    Purdue University.......................................         708,800
    Rutgers University......................................          98,200
    Southern University.....................................         340,900
    Texas A&M University....................................       1,064,500
    Univ of Alaska..........................................           6,000
    Univ of Arizona.........................................         309,100
    Univ of Arkansas........................................         456,700
    Univ of California......................................       2,247,000
    Univ of Connecticut.....................................          80,000
    Univ of Delaware........................................           4,500
    Univ of Florida.........................................       1,603,700
    Univ of Georgia.........................................         377,500
    Univ of Hawaii..........................................       1,507,300
    Univ of Idaho...........................................         162,400
    Univ of Illinois........................................         470,700
    Univ of Maryland........................................         784,200
    Univ of Massachusetts...................................          10,000
    Univ of Minnesota.......................................         435,200
    Univ of Missouri........................................         685,800
    Univ of Nebraska........................................         749,500
    Univ of Tennessee.......................................         149,900
    Univ of Vermont.........................................          45,000
    Univ of Wisconsin.......................................         720,900
    Univ of Wyoming.........................................          48,700
    Utah State University...................................         156,000
    Virginia Polytechnic Institute and State Univ...........         100,000
    Washington State University.............................         859,300
                        --------------------------------------------------------
                        ____________________________________________________
          Totals............................................      21,848,500

        Question. Please identify other extramural recipients of ARS
    research contracts.
        Answer. In fiscal year 1996 ARS committed $11.77 million to Tufts
    University and $4.22 million to Westat Inc. for research contracts.
        Question. In fiscal year 1997, the Committee directed that general
    reductions be taken across each program, project and activity. What was
    the magnitude of the fiscal year 1997 general reduction and explain how
    this was implemented?
        Answer. As directed by the Congress, the agency applied general
    reductions totaling $4.8 million in fiscal year 1997. This was
    implemented through an across-the-board reduction of all research
    specific projects.
                      obligations for new crops and pests
        Question. Provide for the record fiscal year 1996 obligations
    incurred and your current fiscal year 1997 funding estimates for the
    following areas of research: canola, hops, kenaf, guayale, Lesquerella,
    and sunflowers. Similarly, provide the Committee with information on
    the pests: bollworm, boll weevil, whitefly, karnal bunt, fire ant, and
    gypsy moth.
        Answer. Obligations incurred for fiscal year 1996 and fiscal year
    1997 estimated funding for crops and pest research are provided as
    follows:

                             CROPS AND PEST RESEARCH
    ------------------------------------------------------------------------
                                                       Fiscal year--
                                             -------------------------------
                                                   1996
                                                obligations    1997 funding
    ------------------------------------------------------------------------
    Crops:
        Canola..............................        $188,867        $147,400
        Hops................................         374,114         388,200
        Kenaf...............................       1,328,338       1,391,700
        Guayule.............................         621,617         567,700
        Lesquerella.........................         589,801         584,900
        Sunflower...........................       2,788,706       2,483,600
    Pests:
        Boll Worm/Corn Earworm..............       5,242,793       4,532,100
        Boll Weevil.........................       1,897,062       1,758,300
        Whitefly............................       5,480,163       5,276,500
        Karnal Bunt.........................         348,267         218,100
        Fire Ant............................       1,194,834       1,159,400
        Gypsy Moth..........................       2,353,078       1,620,600
    ------------------------------------------------------------------------

                                   contracts
        Question. What are the total obligations for contractual services
    in fiscal years 1995 and 1996 and what is estimated in fiscal year
    1997? Please specify amounts in support of research and those in
    support of management.
        Answer. The total obligations for contractual services in fiscal
    year 1995 was $60,269,044. Of this total, $59,970,486 was obligated in
    support of research and $298,558 was obligated in support of
    management.
        The total obligations for contractual services in fiscal year 1996
    was $61,377,791. Of this total, $61,191,791 was obligated in support of
    research and $186,000 was obligated in support of management.
        The total estimated obligations for contractual services in fiscal
    year 1997 is $53,000,000. Of this total, $52,820,000 is estimated for
    support of research and $180,000 is estimated in support of management.
        Question. Please indicate A-76 contract agreements in effect, by
    location, the funding, and when they were implemented.
        Answer. This information is detailed as follows:

    ------------------------------------------------------------------------
                                       Fiscal year
                Location              1997 funding       When implemented
    ------------------------------------------------------------------------
    Philadelphia, PA...............      $2,286,857  May 1982.
    New Orleans, LA................       1,557,458  July 1982.
    Peoria, IL.....................       2,400,000  September 1982.
    Athens, GA.....................       1,570,705  July 1983.
    Beltsville, MD.................         500,000  April 1985.
    Albany, CA.....................       1,823,358  June 1988.
    Orient Pt., NY.................       5,491,132  February 1991.
    ------------------------------------------------------------------------

        Question. How many full-time equivalents are represented through
    contractual services in ARS?
        Answer. This information is detailed as follows:

    ----------------------------------------------------------------------------------------------------------------
                                                                         Facility        Scientist       Research
                                Location                                support FTE     support FTE     support FTE
    ----------------------------------------------------------------------------------------------------------------
    San Francisco, CA...............................................            22.0  ..............  ..............
    Philadelphia, PA................................................            38.0  ..............  ..............
    Orient Point, NY (Plum Island)..................................            87.0  ..............  ..............
    Boston, MA......................................................            15.0              39             171
    Athens, GA......................................................            34.0  ..............  ..............
    New Orleans, LA.................................................            40.2  ..............  ..............
    Albany, CA......................................................            28.0  ..............  ..............
    Peoria, IL......................................................            43.6  ..............  ..............
                                                                     -----------------------------------------------
          Total.....................................................           307.8              39             171
    ----------------------------------------------------------------------------------------------------------------

        Question. Identify the research contracts and agreements entered
    into by ARS for fiscal year 1996 by recipient and funding.
        Answer. Research contracts for fiscal year 1996 were:

                                                             Contract amount
            Contractor                                              (annual)
    Tufts University, Boston, MA............................     $11,771,000
    Westat, Inc., Rockville, MD.............................       4,220,000

        Answer. Agreements for fiscal year 1996 were:

            Cooperator                                                Amount
    A. Duda & Sons, Inc., Salinas, CA.............................    $3,000
    Agriculture and Agri-Food Canada Research Station, Summerland,
        Canada....................................................    20,000
    Alabama Agri and Mech College, Normal, AL.....................    12,500
    Alcorn State University, Lorman, MS...........................   488,262
    Arkansas Children's Hosp., (Univ of AR) Little Rock, AR....... 1,646,400
    Auburn University, Auburn, AL.................................    71,000
    Baylor University, Waco, TX...................................    15,000
    Bringham Young University, Provo, UT..........................    25,440
    Carrington Agri Expt Station, Carrington, ND..................     6,375
    Catholic University, Washington, DC...........................    65,000
    Central Oregon Expt Station, Redmond, OR......................    27,425
    Clemson University, Clemson, SC...............................    41,000
    Colorado State University, Ft. Collins, CO....................   609,500
    Conservation Technology Information Center, W. Lafayette, IN..     6,500
    Cornell University, Ithaca, NY................................   734,435
    Crow Valley Livestock Coop. Inc., Fort Collins, CO............    18,000
    Delta State College, Cleveland, MS............................    25,000
    Drexel University, Philadelphia, PA...........................    20,000
    Duke University, Durham, NC...................................    70,721
    East Carolina University, Greenville, NC......................     4,884
    East Central State College, Ada, OK...........................    11,500
    East Tennessee State University, Johnson City, TN.............     5,000
    Farm Service Cooperative, Council Bluffs, IA..................    16,065
    Florida Agri and Mech University, Tallahassee, FL.............     5,125
    GA Federal State Inspection, Service, Albany, GA..............   139,069
    Gail G. Harrison, Thousand Oaks, CA...........................    10,000
    George Washington University, Washington, DC..................     2,640
    Georgia Coastal Plain Expt, Station, Tifton, GA...............    60,000
    Hawaiian Sugar Planter's Assn., Aiea, HI......................   569,587
    Heartland Co-op, Slater, IA...................................    70,955
    Howard University, Washington, DC.............................    37,000
    Illinois Agricultural Expt Station, Urbana, IL................    57,000
    Institute of Microbiology and Virology, Almaty, Kazakhstan....     5,000
    Institute for Technical Development, NSTL, MS.................    70,000
    Instituto De Ecologia, Xalapa, MX.............................    20,000
    Inta--Insectario de Invest., Castellar, AR....................    12,500
    International Inst. of Biological Control, Ascot, England.....    30,000
    International Maize and Wheat Improv Ctr, Mexico City, MX.....    77,000
    Iowa State University, Ames, IA...............................   142,960
    John Hopkins University, Baltimore, MD........................    94,084
    Kansas State University, Manhattan, KS........................   274,667
    Lake Chelan Producer Association, Chelan, WA..................   130,000
    Louisiana State University, Baton Rouge, LA...................   146,650
    LSU Medical Center, Shreveport, LA............................    20,000
    Maryland Dept. of Agriculture, Annapolis, MD..................    50,000
    Memphis State University, Memphis, TN.........................    12,000
    Mercer University, Atlanta, GA................................     3,000
    Michigan State University, East Lansing, MI...................   250,650
    Ministry of Agriculture, British Columbia.....................     2,000
    Miss Agri and Forestry Exp Station, Mississippi State, MS.....   879,006
    Mississippi State University, Mississippi State, MS........... 1,080,650
    Missouri Botanical Garden, St. Louis, MO......................     5,960
    Montana State University, Bozeman, MT.........................   874,500
    New Mexico State University, Las Cruces, NM...................   687,384
    New York Agriculture Expt Station, Geneva, NY.................   111,292
    North Carolina State University, Raleigh, NC..................   976,305
    North Central Agri Expt Station, Grand Rapids, MN.............   132,353
    North Dakota State University, Fargo, ND......................   215,606
    Ohio State University, Wooster/Columbus, OH...................   343,790
    Oklahoma State University, Stillwater, OK.....................   144,500
    Oregon State University, Corvallis, OR........................   479,375
    Pennington Biomed Res Ctr (LSU), Baton Rouge, LA..............   340,909
    Pennsylvania State University, University Park/Biglerville, PA    87,596
    Purdue University, West Layafette, IN.........................   708,795
    Rio Farms, Inc., Edcough, TX..................................    17,500
    Rodale Institute Research Ctr (PSU), Kutztown, PA.............   324,523
    Rutgers University, New Brunswick, NJ.........................    98,228
    Sam Houston State University, Huntsville, TX..................   108,000
    Southeastern University, Durant, OK...........................     5,000
    Southern Univ and A&M College, Baton Rouge, LA................   340,909
    Texas A&M University, College Station, TX..................... 1,064,549
    Texas Tech University, Lubbock, TX............................   160,500
    The Holden Arboretum, Mentor, OH..............................    20,726
    Tulane University, New Orleans, LA............................    25,000
    Tuskegee University, Tuskegee, AL.............................    15,000
    Universidad Nacional De La Plata, La Plata, AR................    12,000
    University of Alaska, Palmer, AK..............................     6,000
    University of Arizona, Tucson/Yuma, AZ........................   309,129
    University of Arkansas, Fayetteville/Pine Bluff, AR...........   456,683
    University of California, Davis/Berk/Parlier/Riverside, CA.... 2,246,984
    University of Connecticut, Storrs, CT.........................    80,000
    University of Delaware, Newark, DE............................     4,500
    University of Florida, Gainesville/Lake Alfred, FL............ 1,603,712
    University of Georgia, Athens/Tifton, GA......................   377,516
    University of Hawaii, Honolulu, HI............................ 1,507,317
    University of Houston, Houston, TX............................    15,168
    University of Idaho, Moscow/Aberdeen, ID......................   162,369
    University of Illinois, Urbana/Champaign, IL..................   470,691
    University of Maine, Orono, ME................................    35,721
    University of Maryland, College Park, MD......................   778,207
    University of Maryland, Eastern Shore, Princess Anne, MD......     6,000
    University of Massachusetts, Amherst, MA......................    10,000
    University of Michigan, Flint, MI.............................     9,000
    University of Minnesota, St. Paul, MN.........................   435,182
    University of Mississippi, University, MS..................... 1,568,227
    University of Missouri, Columbia, MO..........................   685,754
    University of Nebraska, Lincoln/Scotts Bluff, NE..............   749,500
    University of Nebraska East C, Lincoln, NE....................    12,000
    University of New Orleans, New Orleans, LA....................    18,700
    University of North Carolina, Chapel Hill, NC.................    38,000
    University of North Dakota, Grand Forks, ND...................    28,850
    University of Oklahoma, Norman, OK............................    27,000
    University of S W Louisiana, Lafayette, LA....................    37,449
    University of South Carolina, Columbia, SC....................    10,000
    University of Southern Mississippi, Hattiesburg, MS...........   340,909
    University of Tennessee, Knoxville, TN........................   149,863
    University of Texas, Houston, TX..............................    38,852
    University of Vermont, Burlington, VT.........................    45,000
    University of Wisconsin, Madison, WI..........................   720,934
    University of Wyoming, Laramie, WY............................    48,747
    Utah State University, Logan, UT..............................   156,000
    Virginia Military Institute, Lexington, VA....................    54,000
    Virginia Poly Inst and State University, Blacksburg, VA.......   100,000
    Washington State University, MtVm/Prosser/Pullman/Wenatchee,
        WA........................................................   859,293
    Yale University, New Haven, CT................................   384,485
                                   contracts
        Question. ARS receives significant reimbursements from APHIS,
    CSREES, ERS, NASS, and FSIS. Explain the use of the funds.
        Answer. The reimbursements from APHIS are for the support agreement
    at Plum Island Animal Disease Center. Research is also conducted on
    silverleaf whitefly and water quality program activities. Funds
    received from FSIS are used to develop dosimetry standards for
    radiation processing of food and mathematical models to predict levels
    of bacterial pathogens in food. ARS reimbursable agreements with
    CSREES, ERS and NASS are primarily for support of the Administrative
    and Financial Management unit which provides personnel, contractual and
    financial management services to the Research, Education and Economics
    agencies.
        Question. ARS receives significant reimbursements from other
    Federal agencies: HHS, EPA, DOE, and DOI. Explain the research
    performed for these agencies.
        Answer. The research performed for HHS includes anti-microbial
    susceptibility testing of veterinary origin salmonella isolates; effect
    of nitrofurazone in dairy cattle; nutrient content of foods in the
    American diet; methods for food components associated with reduced
    cardiovascular disease risk and fumonisin exposure, serum sphingolipids
    and esophageal cancer relationships. The research performed for EPA
    includes the comparison of remediation and assessment of contaminated
    soils, water and air in agricultural watersheds and the development and
    evaluation of an aerial video imaging system for natural resource
    assessment. The research performed for DOE includes the metabolic
    regulation of plant hormones; investigation of heavy bioaccumulation in
    plants grown on metal-polluted soils; genetic variation among
    switchgrasses for agronomic traits; forage quality and biomass fuel
    production; and control of sucrose biosynthesis in plants by protein
    phosphorylation. The research performed for DOI includes the
    application of modeling technology in rangeland resource management and
    improved water quality in Mississippi Delta watersheds and lakes.
        Question. ARS received funding from State and other sources:
    California; Cotton Incorporated; International Life Science; Florida
    and North Carolina. Explain the use of these funds.
        Answer. ARS funding received from the State of California were used
    to develop a means for controlling aquatic weeds in the Sacramento
    Delta, and to manage aquatic weeds in California waterways. Research
    was also performed to develop systems and sprays for monitoring and
    suppressing fruit fly populations, as well as mex and medfly. The
    funding that ARS received from Cotton Incorporated were used in the
    identification and chemical characterization of insect honeydews on
    sticky cotton; development of an integrated resistance management
    program for the silver leaf whitefly in AZ and CA; and methods for
    improving the handling characteristics of fuzzy cottonseed. The funding
    that ARS received from International Life Science Institute were used
    in the controlled diet human studies assessing dietary fatty acid
    impact on blood lipids and hemostasis. The funding that ARS received
    from Florida were used in the study of biological control agent
    development for the Australian Malaleuca and the management of bio-
    agents for hydrilla, pista and water hyacinth. The funding that ARS
    received from North Carolina were used in the evaluation of alternative
    constructed wetland systems for swine wastewater treatment and
    management practices to reduce nonpoint source pollution.
                             ars appropriations law
        Please describe your activities and funding obligations in fiscal
    year 1996 under the provisions limiting construction, alteration,
    repair and improvements of buildings in the ARS appropriation language:
        Question. The cost of constructing any one building shall not
    exceed $250,000.
        Answer. No obligations were made by ARS in fiscal year 1996 under
    this unlimited building program limitations.
        Question. Head houses and greenhouses which shall be limited to
    $1,000,000.
        Answer. No obligations were made by ARS in fiscal year 1996 under
    the headhouse and greenhouse building program limitations.
        Question. Ten buildings to be constructed or improved at a cost not
    to exceed $500,000 each.
        Answer. No obligations were made by ARS in fiscal year 1996 under
    the ten buildings program limitations.
        Question. How were these activities funded?
        Answer. No projects required funding by ARS under these provisions
    in fiscal year 1996.
                               national arboretum
        Question. Please describe the projects and programs conducted at
    the National Arboretum.
        Answer. The National Arboretum has a diversified program that
    includes Research, Gardens, and Education functions. The Research
    program develops new and improved trees, shrubs and flowers to meet the
    needs of a rapidly expanding market for floral and nursery products and
    to satisfy public demand. The Gardens program is responsible for
    developing and maintaining public display gardens on the 440 acre site
    in Washington, D.C. The Education program conducts a wide ranging
    program of public education in plant conservation, environmental
    stewardship and the application of principles of integrated pest
    management in public and private gardens.
        Question. What is the resource distribution to these programs?
        Answer. The National Arboretum budget in fiscal year 1997 is $7.274
    million. Resources are distributed as follows: Research program--$4.616
    million; Garden program--$1.976 million; Education program--$.682
    million.
        Question. In fiscal year 1997, Congress appropriated an increase of
    $200,000 for floriculture/horticultural research. How are these funds
    being implemented?
        Answer. The funds are supporting research on genetic engineering of
    roses for disease resistance; tissue culture of crape myrtle to develop
    a tissue regeneration procedure for genetic engineering; and studies on
    impatiens necrotic spot virus and the engineering of virus-resistant
    impatiens.
        Question. What is the status of replacing and modernizing the water
    lines at the National Arboretum? When will this be completed? What is
    the total estimated cost for this project?
        Answer. The Arboretum has received and obligated $2.9 million
    through fiscal year 1997 for the replacement of the irrigation water
    system. These funds have been used to replace the main irrigation lines
    throughout the National Arboretum. As part of this replacement project,
    three wells were drilled and tied into the system. (This project does
    not address replacing and automating the lateral irrigation lines off
    the mains.)
        Upon activating the wells, it was determined that the quality of
    the well water was not adequate for irrigation purposes. A study is now
    underway. ARS will evaluate this study carefully to determine the
    economic feasibility of building this treatment facility rather than
    staying on District of Columbia water. Preliminary estimates put the
    cost of installing a treatment system at approximately $1.75 million
    and estimate 18 months to construct. If this course of action is
    chosen, the total cost for the new water system at the Arboretum will
    total about $4.65 million.
        Question. How much money does the Arboretum commit to overall
    renovation and modernization annually? Describe the use of these funds
    in fiscal years 1995-1997.
        Answer. The Arboretum commits $739,633 annually to renovation and
    modernization. The major projects these funds were used for are as
    follows:

    Fiscal year 1997:                                                 Amount
        Update Master Plan........................................  $300,000
        Design renovation of Herb Garden Paths....................    60,000
        Design Bonsai Complex Courtyard...........................    60,000
        Replace directional and traffic signs.....................    30,000
        Design exterior lighting..................................   115,000
        Design renovation of Lath Facility........................    30,000
        Trim and remove trees.....................................    25,000
        Design renovation of Building 015.........................    55,000
        Design renovation of Asian Valley Paths...................    40,000
    Fiscal year 1996:
        Replace directional and traffic signs.....................    87,008
        Phase V, Water System replacement.........................   134,292
        Repairs to Bonsai Museum..................................    53,536
        Repairs to Chinese Pagoda.................................    57,080
        Replace Auditorium roof...................................   128,980
        Install irrigation system.................................    66,467
        Trim and remove trees.....................................    29,341
        Install Fibre Optics cable................................    41,220
        Renovate hallways, Administration Building................    19,727
        Renovate heading systems, Bldgs. 013/014..................    34,052
    Fiscal year 1995:
        Phase IV, Water System replacement........................   203,488
        Trim and remove trees.....................................    24,000
        Replace Greenhouse cooling/ventilation....................   129,425
        Replace drainage system, Gotelli Collection...............    41,820
        Restoration Projects......................................   134,144
        Repairs to Bonsai Museum..................................    43,253
        Replace boiler, Bldg. 012.................................    18,945

                             centers of excellence
        Question. For fiscal year 1998, identify the proposed ARS Centers
    of Excellence, where they are located and their funding. Describe the
    programs at these Centers.
        Answer. The ARS Centers of Excellence, at 1890 Land Grant
    University locations and fiscal year 1998 funding are as follows:

                        ARS 1890's Centers of Excellence

                                                            Fiscal year 1998
            Location                                                estimate
    Delaware State University, Dover, Delaware....................  $250,000
    Langston University (proposed), Langston, Oklahoma............   200,000
    Alcorn State University, Lorman, Mississippi..................   166,000
    Tennessee State University, McMinnville, Tennessee............   491,000
    University of Arkansas, Pine Bluff, Arkansas..................   373,000
    University of Maryland Eastern Shore at Princess Anne,
        Maryland..................................................   246,000
                        --------------------------------------------------------------
                        ____________________________________________________

          Total................................................... 1,726,000

        The research program is as follows:
        Dover: Aquaculture Products.--Rapid methods are needed for
    monitoring the microbial profile of aquaculture processes and products
    to assure safety. Develop rapid detection and monitoring methods for
    pathogens and spoilage microorganisms in aquaculture process and
    products and to improve puring efficiency in order to prevent human
    illness.
        Langston: Grazing lands.--Determine impact of pasture design and
    grazing animals on quality of water emerging from watersheds, and
    develop pasture management systems that will optimize water quality and
    productivity in the semi-arid U.S.
        Lorman: Swine Production.-- Development of an efficient system for
    production of meat-type pigs in the southern United States. The
    objectives are to: evaluate breeds of swine that have good reproductive
    performance and produce high quality lean carcasses in the southern
    U.S.; develop feeding systems to obtain efficient conversion of feeds
    at minimum cost; and to develop a system to transfer this new
    technology to local producers.
        McMinnville: Horticulture.--Develop new and improved ornamental
    trees and shrubs for the U.S. nursery industry. Develop basic genetic
    and physiological information related to nursery crop species. Reduce
    pesticide use and fertilizer run-off during nursery crop production.
    Develop improved nursery crop propagation methods. Evaluate existing
    germplasm or ornamental trees and shrubs for pest resistance, tolerance
    of environmental stress, and superior ornamental value.
        Pine Bluff: Aquaculture.--Evaluate alternatives and develop new
    components of aquaculture production systems to improve efficiency of
    freshwater fish farming including cultural and processing methods to
    enhance quality.
        Princess Anne: Food Safety.--Identify and conduct research on
    critical control points affecting the microbiological contamination of
    poultry from grow-out through final consumer preparation, and to
    develop interventions and quantitative risk models to ensure food
    safety.
        Question. What are the Agency's long-term plans with respect to
    staffing these Centers?
        Answer. ARS' long-term plans with respect to staffing these Centers
    is as follows:
        Dover, Delaware: One scientist will be hired with funds
    appropriated in fiscal year 1997. At the current level of funding,
    there are no plans to expand beyond one scientist.
        Langston, Oklahoma: Proposed Center of Excellence in fiscal year
    1998. Plans are to use funds, if appropriated in fiscal year 1998, for
    a cooperative undertaking utilizing cooperative university staff. We do
    not plan to add any permanent staff.
        Lorman, Mississippi: At present only temporary staff have been
    hired to support the project. At the current level of funding, we do
    not plan to add any permanent staff.
        McMinnville, Tennessee: Current staffing includes an ARS Research
    Geneticist and a Research Horticulturist is being recruited.
        Pine Bluff, Arkansas: One ARS scientist is now in place. A second
    scientist is currently being recruited with additional funds
    appropriated in fiscal year 1997. At the current funding level, there
    are no plans to expand beyond two scientists.
        Princess Anne, Maryland: ARS has no plans at present to expand
    beyond the one scientist and support staff currently in place.
        Question. Describe the working relationship and accomplishments
    resulting from these collaborations.
        Answer. The working relationship and accomplishments resulting from
    these collaborations are as follows:
        Dover, Delaware: The program is just being developed. The
    combination of physical resources (facilities, laboratory space, and
    water resources of the Microbial Food Safety Unit, at ARS' Eastern
    Regional Research Center, and the Aquatic Ecology/Aquaculture Research
    Program at Delaware State University) will allow the conduct of
    important aquaculture food safety research that neither organization
    could carry out independently.
        Langston, Oklahoma: The anticipated outcome of the proposed
    cooperative endeavor between ARS' El Reno Grazing Lands Research
    Laboratory will result in new research information: (1) impacting
    pasture design and grazing animals on quality of water emerging from
    watersheds, and (2)the development of pasture management systems that
    will optimize water quality and productivity in the semi-arid U.S.
        Lorman, Mississippi: A new physical facility is being developed
    that will permit the housing of boars that are needed to initiate an
    artificial insemination program. Alcorn State University staff members
    have received training in ARS' laboratories on the technologies
    associated with the use of implementing a program on artificial
    insemination in swine. Selected genetic stock (females) have been
    purchased and are now part of the Alcorn project. ARS and the Alcorn
    State University have worked together in developing the plan that was
    used to select the genetic stock that will be used in the project. The
    overall plan for the implementation of the long term project on swine
    is now being developed by Alcorn State University and ARS scientists.
    The progress to date has been good. The project has led to considerable
    interactions between Alcorn State University and ARS scientists. More
    importantly, the project has outstanding potential to improve swine
    production systems for local producers that at a later date can be
    transferred to other producers in the south.
        McMinnville, Tennessee: An excellent collaboration has been
    established between Tennessee State University, ARS and the Tennessee
    Nursery industry. This partnership has resulted in jointly establishing
    research objectives including breeding for resistance to dogwood
    anthracnose and the development and use of natural products for pest
    and disease control on nursery crops.
        Pine Bluff, Arkansas: The ARS program is cooperative with and
    complementary to the strong aquaculture research and extension program
    already in place at the University of Arkansas at Pine Bluff (UAPB)
    (five Ph.D.-level scientists and four M.S.-level staff members have
    research appointments in the UAPB's Aquaculture/Fisheries Program).
    UAPB and ARS share facilities, space and water resources and cooperate
    on research related to aquaculture engineering, water quality, and
    systems technology. The cooperation results in substantial benefits to
    both ARS and UAPB in terms of cooperative research, technology transfer
    (through UAPB's extension activities), and training and recruitment of
    minority scientists.
        Princess Anne, Maryland: A survey of growth characteristics of
    various Salmonella isolates obtained from poultry operations in the
    Delmarva was completed. The results of this survey will provide the
    basis for developing predictive models to estimate changes in
    Salmonella numbers on poultry as it moves through the farm to fork
    chain. The ARS laboratory uses University of Maryland at Eastern Shore
    (UMES) laboratory space and UMES scientists and students provide
    support for the research program. Thus, working relationships for this
    program are close with the UMES, as well as the Eastern Regional
    Research Laboratory of the ARS at Wyndmoor, Pennsylvania, and the
    combined expertise provides for a strong research program.
                              technology transfer
        Question. Please describe your activities in the area of technology
    transfer. How many licenses, patents and CRADA's were entered into in
    fiscal year 1996? How do these statistics compare to fiscal year 1994?
    What is your activity to date in fiscal year 1997?
        Answer. There are a variety of activities associated with
    technology transfer in ARS. There are currently eight individuals in
    field locations functioning as full or part time Technology Transfer
    coordinators. Their duties include working closely with ARS scientists
    to identify developing technologies of potential commercial interest,
    identifying specific strategic partners, and negotiation of a variety
    of agreements including CRADA's, Trusts, Reimbursable Cooperative
    Agreements, Memorandums of Understanding, Material Transfer Agreements,
    and Confidentially Agreements. Domestic and foreign patents and
    licenses continue to be an important part of technology transfer
    activities. Each year OTT staff members participate in more than 30
    technology transfer meetings and targeted trade shows where they
    exhibit materials and/or give presentations on new technologies
    available for licensing, examples of past successes, and how to develop
    partnership with ARS. These events also provide a venue for farmers,
    industry representatives, consumers, and end users to inform ARS of
    their specific problems and needs. In addition, OTT staff members also
    develop and conduct workshops targeting specific industries who are
    potential strategic partners. Other recent efforts to enhance and speed
    the transfer of ARS technology have focused on electronic access via
    the OTT home page, and closer working relationships with the
    Information Staff, and the National Agricultural Library. The area or
    rural development has received special emphasis with efforts ranging
    from active participation in the USDA Rural Development Action Team,
    closer ties with the SBIR program, AARC, and BRDC, to the development
    of agreements with several state Economic Development Agencies to
    foster closer working relationships at the local level. In fiscal year
    1996, ARS filed 76 patent application, while 53 ARS patents were issued
    by the Patent and Trademark Office. Also in fiscal year 1996, ARS
    licensed 25 inventions to the private sector, while entering into 81
    Cooperative Research and Development Agreements. In fiscal year 1994,
    ARS filed 40 patent applications, while 36 patents were issued by the
    PTO. Also in fiscal year 1994, ARS licensed 9 inventions and negotiated
    93 CRADA's. For fiscal year 1997, to date, ARS has filed 19 patent
    applications, while 20 have been issued by the PTO. ARS licensed 11
    inventions and negotiated 45 CRADA's as of April 29, 1997.
        Question. How does ARS interface with Federal and State Extension
    activities? How effective is this relationship?
        Answer. The application of new technologies to complex modern
    farming systems is becoming extremely complicated. A key component in
    the successful transfer of new technologies to producers and users is
    to provide training and education in the diagnosis of problems,
    selection of solutions, and method of application. In addition, a new
    system of independent crop consultants is involved in the rapid
    dissemination of new technical developments that are effective,
    economically feasible, and environmentally friendly. ARS is heavily
    dependent on Federal and State Extension services to achieve this vital
    element of training and education of all interested parties. This
    relationship has been highly effective in the continued success of
    American agriculture. The interface between ARS and Extension occurs in
    many ways. Numerous ARS units are co-located at Universities where the
    close working relationship among ARS scientists and their University
    colleagues leads to a daily transfer of information. Furthermore, many
    new ARS technologies undergo pilot tests and demonstration phases in
    which extension personnel are intimately involved. Two recent examples
    where ARS/extension interactions have been critical for progress are
    release of predatory wasps for augmentive biocontrol of the cotton boll
    weevil in West Texas, and release of a beetle for biocontrol of the
    noxious weed melaleuca in Florida.
        Question. Describe major accomplishments through the CRADA program?
        Answer. Since passage of the Technology Transfer Act of 1986, ARS
    has entered into more than 670 CRADA's with companies and other
    entities, resulting in new products ranging from edible coatings to
    extend shelf life of fruits and vegetables, new plastic products from
    renewable resources, new diagnostic tests for toxins and food safety
    microorganisms, to novel and more effective pest control and crop
    protection. Through the CRADA program, ARS is leveraging its resources
    by encouraging domestic companies to partner in high-risk unproven
    technologies. Such partnerships permit these companies and the U.S. to
    remain globally competitive, while delivering improved and
    environmentally-friendly products to farmers and consumers in a timely
    manner. In some cases, the CRADA program has been instrumental in the
    creation of new businesses.
        Some examples include:
        CRADA's with EMBREX, Inc. of Research Triangle Park, North
    Carolina, are leading to the development of several new poultry
    vaccines, such as the recently registered Bursaplex vaccine to combat
    infectious bursal disease in poultry. EMBREX Inc., a start-up company
    with two employees in 1985, today employs more than 120 people, with
    international operations in London, where it has entered European and
    African markets. The company is also working on similar arrangements
    with the Japanese to enter the Asian market. EMBREX has seven research
    and development agreements on techniques ranging from poultry
    protection against avian coccidiosis to Salmonella.
        A CRADA with Handley Yosemite Farms of Turlock, California is
    evaluating molding technologies to develop value-added restructured
    fruit products. A Cooperative Research and Development Agreement
    (CRADA) is assisting in commercial development of shelf-stable products
    that are convenient and nutritious to consumers, while offering growers
    and processors new markets for fruits, such as apricots, peaches,
    grapes, strawberries and oranges. Potential markets for these products
    include the confectionery and health food markets.
        A stable, nonseparable composition made from starch and oil
    developed by ARS led to three CRADA's for uses in food and nonfood
    applications. A CRADA with the Union Camp Corporation of Wayne, New
    Jersey, was used to develop environmentally friendly adhesives, glues,
    and coatings. The technology could capture a significant share of the
    $100 million per year adhesive and coating market for wood-based
    products. A CRADA with Opta Food Ingredients of Bedford, Massachusetts
    used the technology in a variety of food applications, such as fat
    replacements. The total market for fat replacements and food
    ingredients exceeds more than $300 million per year. The starch-oil
    combination also attracted the attention of Seedbiotics, Inc. of
    Caldwell, Idaho, which in partnership with ARS developed a way to
    encapsulate fertilizers and biological pesticides and herbicides in
    compositions that can be used to coat seeds to enhance seedling
    development.
        A CRADA with Demeter Biotechnologies Ltd. of Research Triangle
    Park, North Carolina is developing technologies to control bacterial
    diseases of channel catfish. ARS researchers are investigating the
    potential of synthetic lytic peptides to control specific bacterial
    diseases. Losses from these diseases in commercial production range
    from 20 percent with mild infections to 95 percent with severe
    infections. Enteric septicemia, caused by the bacterium Edwardsiella
    ictaluri is responsible for about 30 percent of all channel catfish
    disease losses in the southeastern United States. Research results will
    be used to develop disease-resistant stocks of channel catfish for
    release to commercial catfish farmers.
        A CRADA with Zellweger Uster, Inc. of Knoxville, Tennessee, is
    incorporating a new moisture sensor into the company's system of
    measuring cotton fiber quality for the international cotton industry.
    The moisture sensor was originally developed for the cotton ginning
    industry, but also has applications in other industries, such as
    textile processing and marketing classification of cotton. For
    classification, some of the measured fiber qualities such as strength
    and micronaire are strongly influenced by the fiber moisture. The
    mutual interest of ARS and Zellweger Uster is to validate a moisture
    measurement system which can be commercialized and introduced into the
    cotton industry.
        A CRADA with the Whirlpool Corp. of Benton Harbor, Mich. is
    evaluating fabric damage during laundering of cotton fabric. The
    objectives of this project include minimizing fabric damage, lint
    generation and cross contamination of lint between garments during
    laundering of cotton fabric. ARS scientists are studying the effects of
    moisture, heat, duration and extent of tumble drying and laundering
    additives on fiber structure and morphology of fabric by light and
    electron microscopy and image analysis. In addition, the partnership is
    addressing the problem of lint production and cross contamination
    between garments. The results of the CRADA will assist Whirlpool, a
    major manufacturer of laundering machines, in improving their
    laundering machines, primarily tumble dryers.
                                 ars personnel
        Question. The fiscal year 1998 budget proposes a 186 reduction in
    ARS full-time equivalent positions (FTE's) from 7,800 in fiscal year
    1997 to 7,614, the fiscal year 1996 level. How will this reduction be
    realized, by location? How many scientists will ARS lose as a result of
    this proposed reduction? What number of staff year reductions will be
    taken from headquarters?
        Answer. The 7,800 FTE authorized for fiscal year 1997 represents an
    increase over actual FTE used in fiscal year 1996. The proposed
    allowance for fiscal year 1998 is equal to the fiscal year 1996 level.
    ARS currently is working toward increasing the number of research
    scientists to 2000 from the current level of 1810 by changing the mix
    of administrative, technical, clerical and post doctoral support
    positions. These changes will be accomplished through normal attrition
    in headquarters and the field offices. ARS does not anticipate losing
    any scientists due to authorized ceiling allocations. Any FTE changes
    between fiscal year 1997 and fiscal year 1998 which occur will be
    managed, if necessary, through normal attrition. Until actual FTE's are
    reduced reductions in staffing cannot be broken out by location.
        Question. Update the Committee on the average age of ARS
    scientists. Compare this to that of 1990 and 1985.
        Answer. ARS does not have employment statistics for the years prior
    to fiscal year 1986. The current average age of ARS scientists on-board
    is 50.8. At the end of fiscal year 1990 the average age was 48.33. The
    average age was 47.78 at the end of fiscal year 1986.
        Question. How many scientists are currently on-board?
        Answer. There are currently 1,810 permanent ARS scientists on-
    board.
        Question. How many were on-board at the beginning of fiscal years
    1996 and 1995?
        Answer. In the beginning of fiscal year 1996, there were 1,906
    permanent ARS scientists on-board. At the start of fiscal year 1995,
    there were 1,969 permanent ARS scientists on-board.
        Question. What is the current scientist to laboratory capacity
    ratio in ARS? Has this changed over the past 10 years? For each of the
    following locations, list the current capacity and scientists on board:
    Beltsville, MD; Utilization Centers at Peoria, IL; Albany, CA;
    Philadelphia, PA and New Orleans, LA; and NADC, Ames, IA.
        Answer. The current scientist to laboratory capacity ratio in ARS
    is about 80 percent. This ratio has not changed significantly over the
    past 10 years. The current capacity and scientists on-board for
    specific locations requested are as follows:

    ------------------------------------------------------------------------
                                                                    Ratio
                 Location                Capacity    Scientists   (percent)
    ------------------------------------------------------------------------
    Beltsville, MD...................          600          512           85
    Peoria, IL.......................          164          134           82
    Albany, CA.......................          208          166           80
    Philadelphia, PA.................          154          121           79
    New Orleans, LA..................          127           90           71
    NADC, Ames, IA...................          160          106           66
                                      --------------------------------------
          Total......................        1,413        1,129           80
    ------------------------------------------------------------------------

        Question. ARS' actual staff years have come in well below its
    authorized ceilings the past two years. What do you anticipate in
    fiscal year 1997?
        Answer. Current staffing and plans indicate that ARS' full-time
    equivalent (FTE) usage for fiscal year 1997 will be an estimated 300
    below the ceiling of 7,800.
        Question. Please identify the number of personnel defined as
    management in ARS in Washington headquarters and in the field.
        Answer. The number of personnel defined as ARS management is 11.
    These positions are located in Washington headquarters.
        Question. How has this changed since 1990?
        Answer. In fiscal year 1990, ARS had 13 management positions. The
    total increased to 16 in fiscal year 1991 due to the expansion of the
    National Program Staff from two program areas to five. Near the end of
    fiscal year 1996 the total decreased to 11 when activities under the
    Global Warming Staff were reassigned to the National Program Staff.
        Question. What is the makeup and diversity of the ARS work force?
    How does it compare to 1990?
        Answer. The chart below identifies the diversity of the ARS work
    force for fiscal year 1990 and the current ARS work force. The numbers
    are expressed as percentages of the total work force based on end-of-
    year employment data.

    ------------------------------------------------------------------------
                                                            Percent--
                                                   -------------------------
                         Race                       Fiscal year    Current
                                                        1990      work force
    ------------------------------------------------------------------------
    Asian/Pacific Islanders.......................            4            3
    Black.........................................            8            9
    Hispanic......................................            3            4
    Native American...............................  ...........            1
    White.........................................           85           83
                                                   -------------------------
          Total...................................          100          100
    ------------------------------------------------------------------------

        Question. Provide the Agency level of ARS FTE's for 1985, 1990, and
    1996. Provide scientific, support, and management FTE's for these same
    years.
        Answer. ARS FTE's for 1985, 1990, and 1996 are as follows:

            Fiscal year                                                FTE's
    1985.............................................................. 8,112
    1990.............................................................. 8,207
    1996.............................................................. 7,614

        FTE information by specific employment categories is not available.
    However, on-board end-of-year employment by major position categories
    for fiscal year 1986, 1990 and 1996 is listed below. The categories are
    defined as follows:
        Professional.--Occupations which require knowledge or learning
    acquired through education or training equivalent to a bachelor's
    degree or higher, with a major study in a specialized field. Examples
    include: entomologists, geneticists, soil scientists, chemists, etc.
        Technical.--Occupations typically associated with and supportive of
    a professional position that requires extensive practical knowledge.
    Examples include: Biological technicians, engineering technicians,
    physical science technicians, and office automation clerks.
        Administrative/Clerical.--Occupations which require analytical
    ability, judgment, discretion, and personal responsibility in applying
    principles, concepts or practices to fields of administration or
    management, as well as positions which involve structured work in
    support of an organization. Examples include: computer specialists,
    administrative officers, personnel specialists, management and program
    analysts.
        Wage Grade/Other.--Occupations involving the trades, crafts, or
    skilled, unskilled or semiskilled manual labor and white collar student
    trainee positions. Examples include: animal caretakers, maintenance
    mechanics, and biological science student trainees.

    ------------------------------------------------------------------------
                                                   Fiscal year--
                  Group               --------------------------------------
                                           1986         1990         1996
    ------------------------------------------------------------------------
    Professional.....................        3,420        3,565        3,063
    Technical........................        2,593        2,791        3,030
    Administrative/Clerical..........        1,461        1,439        1,089
    Wage Grade/Other.................        1,214          873          764
                                      --------------------------------------
          Total \1\..................        8,688        8,668        7,946
    ------------------------------------------------------------------------
    \1\ Total represents on-board, end-of-year employment by major position
      categories as shown.

                                  aquaculture
        The ARS report to the Committee on warmwater aquaculture research
    facilities and programs indicates that the continued growth and
    competitive position of the U.S. aquaculture industry in a global
    marketplace will be directly related to the resources invested in
    research and technology development.
        Question. What level of resources are included in the fiscal year
    1998 request to enhance the growth and competitiveness of U.S.
    aquaculture? How does this compare to the federal resources devoted to
    this purpose for fiscal year 1997?
        Answer. The Department's fiscal year 1998 budget request includes
    $8,572,400 in aquaculture funding for the Agricultural Research
    Service. Fiscal year 1997 funding for aquaculture in the Agricultural
    Research Service is $10,184,800.
        Question. The report indicates that the ability of ARS' research
    program in support of the warmwater aquaculture industry will be
    significantly improved with the completion of programs and facilities
    still under development. With respect to each of the locations where
    warmwater aquaculture research is conducted, which programs and
    facilities are still under development? What staffing and funding will
    be required for the programs and facilities at each of these locations
    once they are fully developed?
        Answer. Warmwater aquaculture research locations still under
    development, with required staffing and funding at each location, are
    as follows:
        National Warmwater Aquaculture Research Center, Stoneville,
    Mississippi.--Total program funding of $5.1 million is projected to
    support a total of 17 research scientists, 11 of which would be
    Mississippi Agricultural and Forestry Experiment Station scientists and
    6 of which would be ARS scientists. With the current funding level of
    $3.2 million, an additional $1.9 million is needed to support research
    programs in catfish production practices, nutrition, water quality/
    quantity, genetics and breeding, disease diagnosis and control, and
    food processing.
        Fish Diseases and Parasites Research Laboratory, Auburn, Alabama.--
    Total program funding of $1.74 million is projected to support a total
    of 6 research scientists. With the current funding of $0.84 million, an
    additional $0.9 million is needed to support research programs in
    disease diagnosis, and control, immunology, and vaccines development to
    solve fish health programs in aquaculture.
        National Aquaculture Research Center, Stuttgart, Arkansas.--Total
    program funding of $3.59 million is projected to support a total of 11
    research scientists. With the current funding of $1.24 million, an
    additional $2.35 million is required to support research programs in
    therapeutics evaluations and production systems for the aquaculture
    industry.
        Aquaculture Systems Research Unit, Pine Bluff, Arkansas.--A total
    of $0.5 million is projected to support a total of 2 research
    scientists. With the current funding of $0.37 million, an additional
    $0.13 million is needed to support aquaculture engineering-related
    research programs in aquaculture pond management practices, postharvest
    procedures, and value-added products.
        Question. The report indicates that during fiscal year 1997, a
    thorough review of the Stuttgart National Aquaculture Research Center
    will be undertaken to determine the specific directions of future
    research programs. When will this review be complete? Please submit the
    results of this review to the Committee.
        Answer. We expect that the review will be completed by September
    30, 1997. The results of the review will be submitted to the Committee.
                              project terminations
        Question. ARS is recommending a number of project terminations to
    fund ``high priority research.'' Why do you consider these projects,
    many of which impact production research, to be low priority?
        Answer. ARS considers all research within its mission to be
    important; however, in situations in which there are not enough
    assigned funds to allocate to all required research, it becomes
    essential to assign priority. The President's budget provides an
    overall net increase of $10 million for ARS, but also identifies $36.5
    million of new high priority research to undertake. Therefore, it
    became necessary for ARS to identify over $26 million invested in
    current research activities to terminate and redirect toward these new
    initiatives. In an effort to objectively identify the most appropriate
    research to terminate, ARS developed a ``Project Evaluation Guide''
    that focuses on an analysis of three primary factors: relevance,
    capacity, and impact. A careful evaluation of the Federal role is also
    included in the analysis. The ARS top management team applied this
    guide to all research projects in the Agency and achieved consensus on
    overall ratings. Projects that were in the lower quatrile were further
    scrutinized. Using this process, the ARS management team selected those
    projects whose terminations were judged to have the least overall
    negative impact on agriculture from a national perspective, in relation
    to all other research ongoing in the Agency. The 71 projects proposed
    for termination were not limited to production agriculture, but
    represented many other areas of concern. Within the diverse ARS
    research portfolio, there are no ``low priority'' research projects;
    however, in times of tight budget scenarios, and required new
    allocations to selected program areas, difficult judgments must be made
    in terms of which projects are less critical.
        Question. What criteria did you impose to determine the projects
    proposed for termination?
        Answer. The criteria imposed include relevance, capacity, and
    impact. A careful analysis of the Federal role was also conducted.
    Relevance deals with the goals and objectives of a project relative to
    critical national or regional problems as identified by customers and
    stakeholders. Capacity deals with the fiscal, human, and physical
    resources available to support the project and meet the stated
    objective(s). Impact is concerned with the beneficial change(s) that
    have occurred or are anticipated to occur for the agriculture and food
    industry, scientific community, economy, society, and/or policy issues
    of the Nation.
        Question. By location, provide a list of the proposed project
    terminations. How many scientists are impacted at each location?
        Answer. A list of the proposed project terminations and number of
    scientists impacted are as follows:

       PROPOSED PROJECT TERMINATIONS IN FISCAL YEAR 1998--RESEARCH PROJECT
                   TITLE BY LOCATION, FUNDING AND STAFF YEARS
    ------------------------------------------------------------------------
                                                   Fiscal year
                      Location                     1997 (base)    Scientists
                                                      gross
    ------------------------------------------------------------------------
    California:
        Albany:
            Flavor Optimization of Major Food
             Crops through Control of Metabolic
             Processes.........................        $357,600           .9
            Modification of Vegetable Oils as
             Raw Materials for Industrial Uses.         681,900          3.0
            In Vitro Creation and
             Commercialization of High Solids
             Tomatoes and High-Solids, Low
             Sugar Potatoes....................         398,900          1.6
            New Bacterial Polysaccharides for
             Food and Industry.................         324,200          1.5
            Novel Biopolymers Based on
             Agricultural Sources..............         282,500          1.0
            Biological Control of Yellow
             Starthistle and Other Non-
             indigenous Plant Pests in the
             Western USA.......................          88,200  ...........
                                                ----------------------------
                Total..........................       2,133,300          8.0
                                                ============================
        Fresno: Shallow Groundwater Management
         Systems for Arid Irrigated Areas......         245,700          2.0
        (w/s Brawley): Irrigated Desert
         Research II...........................         321,000  ...........
                                                ----------------------------
            Total..............................         566,700          2.0
                                                ============================
    Colorado: Ft. Collins:
        Global Change Research, Decision
         Support, Modeling, and Database
         Management (Extramural-CIESIN)
         ($789,137 Est.).......................         727,500  ...........
        Development of Improved Cropping System
         Models and Technology for Sustainable
         Production (Extramural-Colorado State
         Univ.) ($50,000 Est) (Total Agreement
         $170,000 balance of $120,000 funded
         from another CRIS Project in Ft.
         Collins)..............................         158,400  ...........
        Development of a Decision Support
         System for Farmers and Ranchers in the
         Great Plains..........................          80,000  ...........
                                                ----------------------------
            Total..............................         965,900  ...........
                                                ============================
    Florida: Gainesville: Mgt of Termites as
     Urban Pests in the American Pacific
     (Extramural-Univ of HI for Formosan
     Termites) ($120,288 Est)..................         144,100  ...........
                                                ----------------------------
          Total................................         144,100  ...........
                                                ============================
    Hawaii: Aquaculture Productivity Research
     Phase II (Extramural-All to Oceanic
     Institute) ($1,434,195 Est)...............       1,612,400  ...........
                                                ----------------------------
          Total................................       1,612,400  ...........
                                                ============================
    Idaho: Aberdeen: Development and Use of
     Molecular Techniques in Oat Enhancement...         160,700          1.0
                                                ----------------------------
          Total................................         160,700          1.0
                                                ============================
    Illinois:
        Peoria:
            Animal Health Consortium (shown
             geographically in Ames)
             (Extramural-BRDC) ($834,545 Est)..         919,800  ...........
            Exploratory Thermal Chemical
             Conversion of Starch to Enhance
             Derivatization....................         161,700          1.0
            Enhanced Use of Plant Proteins:
             Identifying, Isolating and
             Relating Structures to Properties.         577,900          2.0
            Genetic Engineering of Anaerobic
             Bacteria for Improved Rumen
             Function..........................         490,800          2.0
                                                ----------------------------
                Total..........................       2,150,200          5.0
                                                ============================
        Urbana:
            Reduced Herbicide Inputs for
             Effective Weed Management Systems
             to Improve Water Quality..........         185,700  ...........
            Sensors and Systems for Site-
             Specific Crop Management to
             Improve Environmental Quality
             (Extramural-Ill. Ag. Exp, Sta.)
             ($32,000 Est).....................         229,200          1.0
            Soybean Diseases...................         344,100          2.0
                                                ----------------------------
                Total..........................         759,000          3.0
                                                ============================
    Iowa: Ames:
        Limits to Digestibility and
         Interactions Among Quality, Growth,
         and Persistence of Forages............         171,000  ...........
        Genetic Characterization of Soybean
         Germplasm.............................         178,900          1.0
                                                ----------------------------
            Total..............................         349,900          1.0
                                                ============================
    Kansas: Manhattan: Protecting Hard Red
     Winter Wheat from Biotic Stress...........         250,000  ...........
                                                ----------------------------
          Total................................         250,000  ...........
                                                ============================
    Louisiana: New Orleans:
        Improving Sugarcane Productivity by
         Conventional and Molecular Approaches
         to Genetic Development................         233,300  ...........
        Disease and Insect Control Mechanisms
         for the Enhancement of Sugarcane
         Germplasm Resistance..................          83,400  ...........
        Developing Integrated Weed Management
         Systems for Efficient and Sustainable
         Sugarcane Production..................          83,300  ...........
                                                ----------------------------
            Total..............................         400,000  ...........
                                                ============================
    Maryland: Beltsville:
        Ecologically-Based Technologies for
         Controlling Ixodes Scapularis and
         Reducing Lyme Disease (Extramural-
         Yale) ($157,500 Est)..................         175,200  ...........
        Remote Sensing and Associated
         Technologies for Production Decisions
         (Extramural-Institute of Tech Develop,
         MS) ($70,000 Est).....................         206,100  ...........
        Stability/Maturity/Safety of Composts
         and Organic Residuals: Criteria and
         Tests for Agriculture (Extramural-
         Rodale Inst.) ($237,223 Est.) (Total
         Agreement $324,523 balance of $77,300
         funded from other CRIS Projects in
         Beltsville and $10,000 from ERRC).....         281,700  ...........
        Automated Firmness Classification of
         Apples................................         378,600          1.0
        Production and Evaluation of Tissue-
         Cultured Fruit Crops..................         237,900  ...........
        National Turfgrass Evaluation Program..          55,300  ...........
        Genetic Modification of Soybean
         Inoculants to Improve Their
         Effectiveness.........................         171,800          1.0
        Molecular Genetics of Populations of
         Fungi Important in Biological Control.         182,300          1.0
        Reduction of Chilling Injury by
         Techniques Safe for Food Consump-
         tion..................................         454,000          2.0
                                                ----------------------------
            Total..............................       2,142,900          6.0
                                                ============================
    Michigan: East Lansing:
        Innovation Technology to Improve the
         Production and Handling of Vegetables
         (Extramural-MI State Univ.) ($50,000
         Est)..................................         222,200          1.0
        Crop/Animal Systems to Improve Nutrient
         Management and Sustainability of Dairy
         Farms.................................         170,800          1.0
                                                ----------------------------
            Total..............................         393,000          2.0
                                                ============================
    Minnesota: St. Paul: Germplasm Evaluation
     and Genetic Improvement of Oats and Wild
     Rice (Extramural-No. Central Ag Exp Sta,
     Grand Rapids for Wild Rice) ($132,353 Est)         147,000  ...........
                                                ----------------------------
          Total................................         147,000  ...........
                                                ============================
    Mississippi: Stoneville: Agronomic and
     Economic Evaluation of Kenaf as a Field
     Crop in Mississippi (Extramural-MS. St.
     Univ.) ($418,019 Est).....................         491,500  ...........
                                                ----------------------------
          Total................................         491,500  ...........
                                                ============================
    Missouri: Columbia: Surface and Subsurface
     Hydrology for Watersheds with Limited
     Relief....................................         393,200          1.0
                                                ----------------------------
          Total................................         393,200          1.0
                                                ============================
    Nebraska:
        Clay Center: Influence of
         Gastrointestinal Neuroendocrine
         Peptides on Food Intake and Growth of
         Swine.................................         208,400          1.0
                                                ----------------------------
            Total..............................         208,400          1.0
                                                ============================
        Lincoln: Biology and Control of Virus
         Diseases of Sorghum...................         143,100          1.0
                                                ----------------------------
            Total..............................         143,100          1.0
                                                ============================
    New York:
        Ithaca:
            Entomopathogenic Fungi as
             Biocontrol Agents of Pest Insects
             of Agricultural Crops (Extramural-
             Univ of Vermont for Pear Thrips)
             ($45,000 Est).....................          50,000  ...........
            Agricultural Sustainability and
             Stress Adaptation: Role of
             Differential Root Development.....         221,100          1.0
        (w/s Orono): Production Systems that
         Are Economically Feasible Beneficial
         to the Environment and Natural
         Resources.............................         135,500          1.0
                                                ----------------------------
            Total..............................         406,600          2.0
                                                ============================
    North Carolina: Raleigh:
        Enhancement of Roasted Peanut Flavor
         Intensity Using Genetic Resources.....         285,800          2.0
        Factors Responsible for Control of the
         Textural Properties of Processed
         Sweetpotato Products..................         217,200          1.0
        Evaluation of Temperate Legumes and
         Warm-Season Grass Mixtures in
         Sustainable Production Systems........         374,200          2.0
                                                ----------------------------
            Total..............................         877,200          5.0
                                                ============================
    North Dakota: Mandan:
        Conservation Tillage-Diverse Crop
         Systems to Use Water and Nutrients
         Efficiently Protect Environment.......         941,100          3.0
        Water Management Systems to Sustain
         Production and Environmental Quality
         in the Northern Great Plains..........         708,900          2.0
        Improvement of Forage Germplasm for
         Conservation and Forage-Livestock
         Systems in the No. Great Plains.......         685,200          2.0
                                                ----------------------------
            Total..............................       2,335,200      \1\ 7.0
                                                ============================
    Ohio: Wooster: Development of Soybean
     Germplasm and Production Systems for High
     Yield and Drought Prone Environments......         210,100          1.0
                                                ----------------------------
          Total................................         210,100          1.0
                                                ============================
    Oklahoma: Stillwater: Improving Resistance
     of Peanut to Biological Stress Through
     Germplasm and Cultural Enhancement
     (Extramural-OK State Univ.) ($24,500 Est.)
     (This agreement was initiated 8/95 prior
     to receiving fiscal year 1997 program
     increase of $150,000 for Peanut research).         150,000  ...........
                                                ----------------------------
          Total................................         150,000  ...........
                                                ============================
    Oregon: Corvallis:
        Characterization of Environment and
         Nutritional Induced Cytokinin Changes
         in Wheat..............................         214,800          1.0
        Partitioning of Photosynthate as
         Influenced by Genotype, Mycorrhizae
         and Air Enriched with CO2.............         175,800          1.0
        On-Farm Grass Straw Utilization
         Development...........................         215,200          1.0
        Germplasm Enhancement and Cultivar
         Germplasm Enhancement and Cultivar
         Development of Blackberry, Strawberry,
         Blueberry and Raspberry (Extramural-OR
         State Univ.) ($52,500 Est) (Extramural
         WA State Univ) ($18,610 Est)..........         325,000  ...........
                                                ----------------------------
            Total..............................         930,800          3.0
                                                ============================
    Pennsylvania:
        University Park: The Role of
         Variability in the Distributed Process
         Modeling of Soil Water................         384,300          1.0
                                                ----------------------------
            Total..............................         384,300          1.0
                                                ============================
        Wyndmoor: Value-Added Products from
         Fruit and Vegetable Processing Wastes.         691,500          3.0
                                                ----------------------------
            Total..............................         691,500          3.0
                                                ============================
    Puerto Rico: Mayaguez: Transferring
     Technology for the Improvement of
     Agriculture in P.R. and other Caribbean
     Countries.................................         158,700  ...........
                                                ----------------------------
          Total................................         158,700  ...........
                                                ============================
    Texas:
        College Station: Biological Control of
         Horn Flies in Pasture Ecosys-  tems...         221,500          1.0
                                                ----------------------------
            Total..............................         221,500          1.0
                                                ============================
        Weslaco: Development of Improved
         Cultivars and Efficient Cultural
         Practices for Kenaf and Crotalaria
         (Extramural-Rio Farms) ($17,500 Est)
         (Extramural-Ill. Ag. Exp Sta.)
         ($25,000).............................         343,900          1.0
                                                ----------------------------
            Total..............................         343,900          1.0
                                                ============================
    Washington:
        Prosser:
            Intelligent Farm Management Systems
             (Extramural-WA. State Univ.)
             ($62,550 Est).....................         256,700          1.0
            Viruses and Virus Resistance in
             Alfalfa Germplasm.................         459,700          1.0
            Evaluation of Advanced Potato
             Clones for Resistance, Agronomic
             and Culinary Traits...............         142,100  ...........
            Potato Production Systems to
             Conserve Resources and Reduce
             Pesticide Use.....................         578,200          2.0
                                                ----------------------------
                Total..........................       1,436,700      \2\ 4.0
                                                ============================
        Pullman:
            Genetically Enhanced Wheat for
             Quality Productivity and
             Resistance to Biotic and Abiotic
             Stresses..........................         146,100  ...........
            Biochemical and Molecular
             Regulation of Preharvest Sprouting
             and Grain Dormancy in Wheat.......          67,200  ...........
            Control of Foliar Diseases and
             Smuts of Wheat....................         136,700  ...........
                                                ----------------------------
                Total..........................         350,000  ...........
                                                ============================
    Headquarters: Floriculture.................         200,000  ...........
                                                ----------------------------
          Total................................         200,000  ...........
                                                ============================
          Subtotal Terminations................      22,107,800     \3\ 59.0
                                                ----------------------------
    Management: Management Savings.............         915,200  ...........
                                                ----------------------------
          Grand Total..........................      23,023,000     \3\ 59.0
    ------------------------------------------------------------------------
    \1\ Excludes 2 SY's proposed for redirection to Miles City, MT.
    \2\ Excludes 4 SY's proposed for redirection (2 SY's to Pullman, WA and
      2 SY's to Aberdeen, ID).
    \3\ Excludes 6 SY's proposed for redirection.

    Note: Fiscal year 1997 Extramural Research Estimates are based on Actual
      Agreements in fiscal year 1996.

        Question. Again, you are justifying an increase for Integrated Pest
    Management; yet you are recommending the termination of many projects
    which deal with pest control; biocontrol; sustainability; reduced
    herbicides; production systems beneficial to the environment;
    conservation systems, etc. Please explain your rationale for the
    elimination of many of these projects that target IPM goals.
        Answer. ARS does not propose to terminate all research in these
    areas, but only selected specific projects that have been judged to be
    relatively less critical at this point in time. Also, other locations
    could fill any critical gaps created by the terminations. Factors
    considered as a major part of the rationale in making these judgments
    were research relevance, impact, degree of Federal role, benefit to the
    public at large, adequacy of resource level to sustain a critical mass
    effort, and others.
                                  ars research
                                  bee research
        Question. Please provide a map indicating the history of the
    Africanized bee migration from South America. Where are its current
    boundaries?
        Answer. A map reflecting the history of the Africanized bee
    migration from South America and its current boundaries is provided.
    [GRAPHIC] [TIFF OMITTED] T01AP22.055

        Question. Where do you project the Africanized bee population will
    ultimately extend?
        Answer. There have been several projections on how far the
    Africanized honey bee (AHB) migration will ultimately extend. The
    actual migration will depend on the impact of parasitic mites, climate,
    availability of food throughout the year, and competition for food from
    the commercial European honey bees (EHB).
        We predict that along the Pacific coast, the Africanized bee will
    extend its range as far north as San Francisco, on a seasonal basis if
    not permanently. Similarly, along the East coast it may extend its
    range to Norfolk, Virginia, on a seasonal basis if not permanently. In
    the South, we believe that ultimately the Africanized bee will migrate
    to and establish in the southern States--Florida, Georgia, Alabama,
    Mississippi, Arkansas--along the Gulf Coast.
        However, as the Africanized bees extend their range northward, they
    will, through matings with the commercial European bees over many
    generations, lose their distinctive genetic and behavioral
    characteristics. This is expected to happen because by mating with
    local bees in successive generations, the genetic material of AHB will
    be diluted out to the point that it would be difficult to distinguish
    the hybrid from the European bees.
        Question. What is the status of Varroa and Acarine mites? What
    research is being done on these pests? At what locations?
        Answer. Varroa and Acarine mites continue to cause significant
    economic losses to beekeepers. However, honey bee colony losses this
    past winter have been light compared to those in the previous winters.
    This is probably due, in large part, to the relatively mild winter and
    increased beekeepers' attention to monitoring and treating with
    available acaricides. Most beekeepers lose bee colonies to mites during
    the winter. Consequently, beekeepers must replace these colonies in the
    spring. The high demand for honey bee queens drives up the cost of
    starting new colonies to make up for the winter loss of colonies. This,
    in turn, increases the cost of rental bees to the farmers and vegetable
    and fruit growers.
        New and improved methods of mite control are being developed at
    four ARS locations. Scientists at the Honey Bee Research Units at
    Weslaco, Texas, and Tucson, Arizona, are developing new and improved
    methods for chemical control of mites; the Bee Research Laboratory at
    Beltsville, Maryland, is focused on finding natural products including
    such things as clove oil, eucalyptus, and thymol for mite control.
    Scientists are conducting research on developing a gel formulation of
    formic acid, which is being tested for efficacy in controlling mites
    under different climates in Texas, Nebraska, and Minnesota. Scientists
    at the Honey Bee Breeding, Genetics, and Physiology Research Unit at
    Baton Rouge, Louisiana, are working on selection and propagation of
    mite resistant stocks of honey bees.
        Question. How much is the agency spending on honey bee research by
    location for fiscal years 1997 and 1998?
        Answer. In fiscal year 1997, funding for honey bee research is
    $4,720,000. This excludes funds for ``other pollinating insects'' in
    the amount of $1,193,100. The ARS total bee research budget in fiscal
    year 1997 amounts to $5,913,100. The proposed fiscal year 1998 funding
    remains at the same level. Honey bee research by location is provided
    in the following table.

    ------------------------------------------------------------------------
                                                       Fiscal year--
                    Location                 -------------------------------
                                                1997 funds      1998 funds
    ------------------------------------------------------------------------
    Tucson, AZ..............................      $1,021,900      $1,021,900
    Baton Rouge, LA.........................       1,115,600       1,115,600
    Beltsville, MD..........................       1,772,800       1,772,800
    Weslaco, TX.............................         809,700         809,700
                                             -------------------------------
          Total.............................       4,720,000       4,720,000
    ------------------------------------------------------------------------

        Question. Please breakdown your spending by honey bee research;
    Africanized bee research, Varroa mite research, and Acarine mite
    research. How many scientists are involved in these areas of research?
        Answer. A breakdown in spending by honey bee research, Africanized
    bee research, Varroa mite research, and Acarine mite research is
    provided in the following table.

    ------------------------------------------------------------------------
                                                      Fiscal year 1997--
                  Area of research              ----------------------------
                                                      Funds       Scientists
    ------------------------------------------------------------------------
    Honey bee research.........................      $4,720,000       \1\ 19
    Africanized bee research...................       1,860,000            8
    Varroa mite research.......................         417,700            1
    Acarine mite research......................         941,900            4
    ------------------------------------------------------------------------
    \1\ This excludes ``other pollinating research'' of $1,193,100 and 4
      scientists.

        Question. By location, how many scientists working on bee-related
    research are on board and how many positions are unfilled?
        Answer. The following table provides, by locations, the number of
    scientists on board working on bee-related research and the number of
    unfilled positions.

    ------------------------------------------------------------------------
                                                                  Number of
                       Location                      Number of     unfilled
                                                     scientists   positions
    ------------------------------------------------------------------------
    Tucson, AZ....................................            5  ...........
    Baton Rouge, LA...............................            4  ...........
    Beltsville, MD................................            8  ...........
    Weslaco, TX...................................            3            1
    Logan, UT.....................................            3            1
    ------------------------------------------------------------------------

                                 range research
        Question. Specify the objectives of ARS range research?
        Answer. The primary objective of the ARS rangeland research program
    is the development of better practices for the management of range
    vegetation and livestock practices which not only sustain profitable
    production of meat and fiber but also protect the soil and vegetation,
    maintaining the ability of rangelands to function as watersheds and
    provide wildlife habitat. For example, research at certain locations
    focuses on how to manage rangelands during periods of drought. Another
    objective of the rangeland research program is to develop a better
    understanding of the ecological processes which characterize these
    complex environments, such as nutrient cycling, the hydrological cycle,
    and the effects of grazing on the many kinds of plants which grow on
    rangelands. This work supports the development of computer models and
    decision-support tools which allow managers of both public and
    privately-owned rangelands to select the best options from among the
    alternatives available to them. The ecosystem research also provides
    the fundamental knowledge upon which improvements can be made in
    natural resource conservation and environmental protection. ARS
    research focuses on the development of more productive and drought-
    tolerant forage grasses, provides information concerning the biology
    and control of introduced weeds, and provides better ways to avoid
    livestock losses due to poisonous weeds. ARS laboratories in the
    eastern U.S. and in foreign countries support the research directed at
    range weed control and poisonous plants by evaluating potential
    biological control agents and characterizing the chemistry of plant
    toxins.
        Question. Which locations carry out these objectives? What funds
    were obligated in fiscal year 1996? What is your funding estimate for
    fiscal years 1997 and 1998?
        Answer. The locations and funds allocated for fiscal years 1996-
    1998 to carry out these objectives are as follows:

    ----------------------------------------------------------------------------------------------------------------
                                                                                       Fiscal year--
                                Location                             -----------------------------------------------
                                                                        1996 funds      1997 funds      1998 funds
    ----------------------------------------------------------------------------------------------------------------
    Booneville, AR..................................................        $247,090        $253,300        $253,300
    Tucson, AZ......................................................         320,292         320,100         320,100
    Albany, CA......................................................         166,980         166,900         122,800
    Fresno, CA......................................................         578,386         536,100         536,100
    Ft. Collins, CO.................................................         565,592         659,600         643,600
    Boise, ID.......................................................         498,070         495,700         495,700
    Dubois, ID......................................................         319,813         309,300         309,300
    Columbia, MO....................................................          30,393          30,000          30,000
    Beltsville, MD..................................................         110,474         106,400         106,400
    Frederick, MD...................................................         132,858         124,100         124,100
    Bozeman, MT.....................................................         461,737  ..............  ..............
    Miles City, MT..................................................         481,910         438,700         719,800
    Sidney, MT......................................................       3,170,921       1,891,300       1,891,300
    Lincoln, NE.....................................................         156,302         102,000         102,000
    Mandan, ND......................................................         601,398         555,200  ..............
    Las Cruces, NM..................................................       1,107,472       1,046,300       1,346,300
    El Reno, OK.....................................................         139,291  ..............  ..............
    Burns, OR.......................................................         381,400         350,700         350,700
    Woodward, OK....................................................       1,199,756       1,066,700       1,066,700
    Temple, TX......................................................       1,432,860       1,342,300       1,342,300
    Weslaco, TX.....................................................         332,014         318,900         318,900
    Logan, UT.......................................................       1,680,204       1,404,800       1,404,800
    Cheyenne, WY....................................................         798,269         708,000         708,000
    Buenos Aires, Arg...............................................         283,237         258,100         258,100
    Montpellier, France.............................................         573,567         496,000         496,000
                                                                     -----------------------------------------------
          Total.....................................................      15,770,286      12,980,500      12,946,300
    ----------------------------------------------------------------------------------------------------------------

        Question. Please explain how your range research objectives relate
    to those of the Forest Service, BLM, and Interior.
        Answer. ARS range research objectives directly support the research
    needs and objectives of the Forest Service, Bureau of Land Management,
    and Bureau of Reclamation of the Department of the Interior, in that
    the technology and knowledge produced by the ARS range research
    programs are often directly applicable to their specific problems. Much
    of the ARS range research is conducted in western States where most
    rangeland is managed by the Forest Service and Bureau of Land
    Management. Such research is often conducted cooperatively by ARS and
    other Federal agencies. Rangeland research conducted by the Forest
    Service is primarily directed at maintenance and restoration of native
    plants and animals and their habitats, biodiversity, shrub ecology, and
    monitoring of the ecological status of rangelands. Forest Service
    research does not address the agricultural use of rangelands for food
    and fiber production, with the exception of a program concerned with
    overlap of habitat requirements for livestock and wildlife. The Bureau
    of Land Management and the Bureau of Reclamation have little in-house
    research capability, and they are considered to be important customers
    by ARS range researchers. Similarly, the ARS range research program
    supports the needs of the Natural Resources Conservation Service for
    science and technology related to improved management and conservation
    of privately-owned rangelands.
                              aquaculture research
        Question. Please list those locations involved in aquaculture
    research, their specific programs and current funding and staffing.
        Answer. The funding and scientists for aquaculture by location are
    as follows:

    ------------------------------------------------------------------------
                                                      Fiscal year 1997--
                      Location                   ---------------------------
                                                       Funds      Scientists
    ------------------------------------------------------------------------
    Auburn, AL..................................        $841,800         3.0
    Pine Bluff, AR..............................         373,300         2.0
    Stuttgart, AR...............................       1,235,600         4.0
    Hilo, HI, Oceanic Inst......................       1,612,400  ..........
    New Orleans, LA.............................         759,400         2.4
    Beltsville, MD..............................         142,800  ..........
    Stoneville, MS:
        Warm Water Aquaculture..................       2,652,000         2.5
        Other--In-house.........................         505,100         2.5
                                                 ---------------------------
          Total MS..............................       3,157,100         5.0
    Wyndmoor, PA................................         250,000         1.0
    Kearneysville, WV...........................       1,447,200  ..........
    Headquarters, College Sta., TX..............         365,200  ..........
                                                 ---------------------------
          Total.................................      10,184,800        17.4
    ------------------------------------------------------------------------

        The specific ARS aquaculture research programs are as follows:
        Auburn, AL.--Diagnosis and control of diseases and parasites of
    cultured fish.
        Beltsville, MD.--Aquaculture Information Center. Provides the
    public with information on aquaculture.
        Albany, CA (Hilo, HI).--Tropical aquaculture, feeds and culture
    technology development.
        New Orleans, LA.--Improve flavor quality of farm-raised catfish.
        Pine Bluff, AR.--Aquaculture production and processing technology.
        Stoneville, MS.--Improve production efficiency, including breeding,
    genetics, and endocrinology of catfish.
        Kearneysville, WV.--Water quality control and intensive culture of
    fish.
        College Station, TX.--Food safety of catfish.
        Stuttgart, AR.--Research on therapeutics evaluation, health
    management and culture systems for farm-raised fish.
        Dover, DE (Wyndmoor, PA Worksite).--Food safety of farm-raised
    fish.
        Question. What accomplishments are being generated from aquaculture
    research?
        Answer. ARS scientists conducting disease research at Auburn, AL
    have demonstrated that some strains of commercial channel catfish have
    resistance against columnaris disease. Columnaris disease, caused by
    the bacterium Cytophaga columnaris, is responsible for widespread
    mortality in channel catfish farms. Through a Cooperative Research and
    Development Agreement with Gold Kist, Inc., Inverness, MS, ARS
    scientists at the Fish Diseases and Parasites Research Laboratory,
    Auburn, AL, demonstrated that some strains of channel catfish
    selectively bred by Gold Kist were more resistant than other strains to
    mortality from columnaris disease. Selective breeding of the resistant
    strains should result in commercial catfish less susceptible to
    columnaris disease. This could reduce losses to the disease by $10 to
    $15 million annually.
        ARS scientists at Auburn, AL, have developed an experimental
    vaccine to control enteric septicemia of commercial catfish.
    Edwardsiella ictaluri causes the disease, enteric septicemia, in
    catfish. Losses from the disease reduce catfish farm revenues by $25
    million annually. Scientists at the Fish Diseases and Parasites
    Research Laboratory, Auburn, AL, have developed a modified live vaccine
    to protect commercial catfish. Protection from the vaccine lasts 6
    months or more. While the vaccine is presently applied through
    immersion of the fish in water, the ARS scientists are working on feed-
    delivery of the vaccine for catfish fingerling producers.
        ARS scientists at Stuttgart, AR, have shown that disease treatment
    with copper sulfate poses no hazard to human consumers of cultivated
    food fish. Cooper sulfate has been effectively used for many years as a
    treatment for waterborne parasitic, bacterial, and fungal diseases of
    cultivated fish, but has never been approved by the U.S. Food and Drug
    Administration (FDA) for use on food fish because of questions about
    human food safety. Scientists at the National Aquaculture Research
    Center, Stuttgart, AR, demonstrated that copper concentrations in fish
    tissue remain unchanged when cultivated channel catfish are exposed to
    levels of copper sulfate far in excess of concentrations required to
    treat diseases. The FDA has accepted the results of the study as
    demonstrating that the use of copper sulfate for treatment of
    waterborne diseases of cultivated food fish presents no hazard to the
    health of human consumers.
        ARS scientists in Stoneville, MS, have developed genetically
    improved strains of channel catfish for commercial culture. Commercial
    use of improved catfish germplasm, developed through an applied
    selective breeding program, will dramatically improve production
    efficiency in commercial catfish production. Scientists at the Catfish
    Genetics Research Unit, Stoneville, MS, have evaluated and selected
    strains of channel catfish for commercially important traits such as
    growth, reproductive performance, processing characteristics, and
    disease resistance. DNA markers, termed microsatellites, have been
    isolated and characterized; the microsatellites are useful for
    identifying and tracking genetically improved strains. These markers
    will form the basis of a catfish genetic map that will improve the
    efficiency of genetic selection in this species.
        Canned bighead carp products developed by an ARS food technologist
    at Pine Bluff, AR, were evaluated by consumer taste panels and were
    found to have a high level of acceptance.
        ARS scientists in New Orleans, LA, have developed highly sensitive
    methods to detect off-flavor compounds in farm-raised catfish. The high
    incidence of environment-derived off-flavors in farm-raised catfish has
    consistently been identified as the most important production-related
    problem in the catfish aquaculture industry. Scientists at the Southern
    Regional Research Center have developed extraction and gas
    chromatographic methods that can detect geosmin and MIB, the two most
    important catfish off-flavor metabolites, at concentrations near the
    theoretical limits of the most sensitive electronic sensors and equal
    to the levels of human perception.
        Scientists at Shepherdstown, WV, have developed an improved
    ultrasonic waste feed monitor through a cooperative arrangement with
    the University of Mississippi's National Center for Physical Acoustics.
    This device efficiently detects waste feed, while ignoring fecal
    material, and represents an improvement over earlier technology
    developed by these scientists. The device is currently being
    commercialized through a California computer company.
        Funding levels provided for the cooperative research program with
    the Freshwater Institute are $1,447,200 in both fiscal year 1997 and
    fiscal year 1998.
                               fruit fly research
        Question. Please detail the fruit fly research program.
        Answer. The ARS fruit fly research program encompasses a diversity
    of approaches that address the issues of detection, control and
    eradication of pest species. Major emphasis is placed on the following
    seven fruit fly species: Mediterranean, Oriental, Caribbean, Mexican,
    Melon, Malaysian, and Papaya. Innovative research programs include the
    development of new, sensitive traps for detecting fruit flies;
    development of an environmentally acceptable toxicant as a replacement
    for malathion in bait sprays, including photoactivated dyes; commodity
    treatments to allow movement of fruit-fly host material from areas
    quarantined for fruit flies; biological control with fruit fly specific
    parasites to reduce the level of pest populations; enhancement of
    natural resistance of host fruit to infestations; and improvements in
    competitiveness of sterile flies released as a part to the sterile
    insect technique. Taken together, these programs provide an integrated
    approach to the control of pest species of fruit flies, that emphasizes
    early detection with more effective traps, reduction in the pest
    populations through biological control with parasites and
    environmentally acceptable pesticides, and improvements in the sterile
    insect technique.
        Question. Where is this research carried out?
        Answer. Research on fruit flies is based at the following eight ARS
    locations: Albany, CA; Fresno, CA; Gainesville, FL; Miami, FL; Orlando,
    FL; Hilo, HI; Beltsville, MD and Weslaco, TX.
        Question. How much money was obligated for each of those pests in
    fiscal year 1996; what is currently planned and what is your estimate
    in fiscal year 1998?
        Answer. The amounts for each pest species are as follows:

    ----------------------------------------------------------------------------------------------------------------
                                                                                       Fiscal year--
                                                                     -----------------------------------------------
                                 Species                                   1996
                                                                        obligations     1997 funds      1998 funds
    ----------------------------------------------------------------------------------------------------------------
    Caribbean Fruit Fly.............................................      $1,652,744      $1,539,600      $1,539,600
    Malaysian Fruit Fly.............................................         766,054         745,500         745,500
    Mediterranean Fruit Fly.........................................       3,242,847       3,240,400       3,240,400
    Melon Fruit Fly.................................................         845,814         823,400         823,400
    Mexican Fruit Fly...............................................         947,197         781,400         781,400
    Oriental Fruit Fly..............................................       1,076,926       1,066,300       1,066,300
    Papaya Fruit Fly................................................         175,098         176,000         176,000
    Other Fruit Flies...............................................       2,124,327       2,086,700       2,086,700
                                                                     -----------------------------------------------
          Total.....................................................      10,831,007      10,459,300      10,459,300
    ----------------------------------------------------------------------------------------------------------------

                              sugar crops research
        Question. Please describe your research in sugar crops.
        Answer. Research on sugar crops includes breeding for improved
    cultivar adaptation to stress environments and increased levels of pest
    and disease resistance; more efficient production systems; improved
    management for pest, disease and weed control; and development of
    value-added coproducts of sugarcane production.
        Question. Where is the research performed? What is the current and
    projected funding for this research?
        Answer. Listed below are the locations where research is performed
    and the fiscal year 1997 and 1998 funding for this research.

    ------------------------------------------------------------------------
                                                       Fiscal year--
                    Location                 -------------------------------
                                                1997 funds      1998 funds
    ------------------------------------------------------------------------
    Albany, CA..............................         $21,900         $21,900
    Salinas, CA.............................       1,314,400       1,314,400
    Ft. Collins, CO.........................         620,300         620,300
    Canal Point, FL.........................         891,600         891,600
    Miami, FL...............................         108,600         108,600
    Hilo, HI................................       1,491,700       1,491,700
    Peoria, IL..............................          94,000          94,000
    Urbana, IL..............................         217,400         217,400
    New Orleans, LA.........................       2,101,900       1,702,000
    Beltsville, MD..........................         951,800         951,800
    Frederick, MD...........................          32,000          32,000
    East Lansing, MI........................         659,700         659,700
    Sydney, MT..............................         111,500         111,500
    Fargo, ND...............................       1,080,200       1,080,200
    Wyndmoor, PA............................          62,600          62,600
    Mayaguez, PR............................          95,600          95,600
    College Station, TX.....................         219,700         219,700
    Weslaco, TX.............................         319,900         319,900
    Headquarters............................          64,000          64,000
                                             -------------------------------
          Total.............................      10,458,800      10,058,900
    ------------------------------------------------------------------------

        Question. Please discuss recent accomplishments in sugar crops
    research.
        Answer. Recent accomplishments for sugarcane and sugarbeets are
    provided for the record.
        Sugarcane--(1) The research team in Houma, Louisiana has made major
    advances in breeding for resistance to sugarcane rust, smut, yellow
    leaf syndrome and leaf scald. Four recent cultivars, were developed.
    These cultivars have the potential of increasing sugar yields per unit
    area by 10-25 percent. The team has released 6 varieties in the last 6
    years and has registered 5 germplasm clones with superior resistance to
    the sugarcane borer. (2) Research in Florida is focusing on the
    development of sugarcane that can be grown under high water table
    conditions. Varietal selections have been made that tolerate these
    conditions in the changing south Florida ecosystem environment. Studies
    are also in progress on reducing the levels of phosphorus applied to
    sugarcane and preliminary results show that concentrations of
    phosphorus applied to the crops may be reduced without affecting plant
    growth.
        Sugarbeets--(1) Research in Fargo, North Dakota, on development of
    a biopesticide for control of sugarbeet root maggot has shown that
    selected strains of Bacillus thuringiensis can be used to infect the
    maggot achieving high mortality. In addition, a germplasm line has been
    selected that has a high level of resistance to the root maggot. (2)
    ARS researchers have released sugarbeet lines with resistance to
    Cercospora leafspot disease, Rhizoctonia root disease, and Rhizomania,
    three of the most serious diseases of sugarbeet.
                         lower delta nutrition research
        Question. Please describe your progress in establishing and
    coordinating research and intervention activities in the Lower Delta.
        Answer. The Lower Mississippi Delta Nutrition Intervention Research
    Initiative (Delta NIRI) involves a consortium of seven partners: Alcorn
    State University, Arkansas Children's Hospital Research Institute,
    Pennington Biomedical Research Center, Southern University and A&M
    College, University of Arkansas at Pine Bluff, University of Southern
    Mississippi, and the Agricultural Research Service (USDA/ARS). The
    consortium is publishing a monograph of existing data relative to the
    nutritional status and health of people in the Delta of Arkansas,
    Louisiana, and Mississippi. Thirty-six counties (10 in Arkansas, 12 in
    Louisiana, 14 in Mississippi) have been selected for the research based
    on rates of unemployment, population, and percent of population below
    the poverty level. A key informant survey has been piloted and the main
    survey will be implemented in the 36 counties in May/June, 1997. With
    direction from a USDA Scientific Review Board, a pilot/validation study
    to determine the feasibility of using telephone interview methodology
    to obtain food consumption and food security data will be underway
    during the summer of 1997. This information will be used as baseline
    data to evaluate the impact of welfare reform programs in the area at a
    later time. Other research protocols are being developed, i.e., a
    community assessment survey and a longitudinal study of nutritional
    status of select segments of the population.
        Question. Please list objectives and funding by participant. Does
    the Agency still consider this to be a ten-year program?
        Answer. The overall objective of the project is ``to design,
    implement, and to experimentally test nutrition interventions that will
    improve the health and well-being of people in the Lower Mississippi
    Delta.'' This objective is consortium-wide with each partner
    participating in each of them. To further this objective, each partner
    is participating in capacity building and hiring at least one new
    nutrition related scientist. Each participant in the Lower Delta
    Nutrition Intervention Initiative is currently funded at $448,100. ARS
    considers this to be a major assessment and intervention study which
    will require 10 years to complete.
        Question. What is your overall funding?
        Answer. The overall funding of the program in fiscal year 1997 is
    $3,166,900. Of this, the Agricultural Research Service receives
    $478,300 and each of the other partners is funded at $448,100 each.
        Question. Describe your accomplishments to date.
        Answer. A functioning and fully participatory consortium of seven
    diverse partners was organized, and they have identified the problems
    to be addressed based on an understanding of the information that is
    available regarding the needs of the population of the Lower
    Mississippi Delta. A monograph describing existing data about the
    nutritional health and well being of the population was written and is
    soon to be published. An electronic communication system among the
    partners (including electronic mail, fax, and video conferencing) was
    implemented and is in regular use. A pilot study of key informants as
    part of a larger community assessment was implemented.
        Advisory Groups were established in each State. A pilot/validation
    study of food consumption and food security was developed. All partners
    participated in three capacity building workshops focused on
    nutritional and dietary assessment methods, community assessment
    methods, and nutrition intervention methodology.
        Question. To what extent do you classify your activities as
    intervention as opposed to research?
        Answer. The proposed activities are research. Although the main
    objective of the project is to carry out nutrition intervention
    research, the interventions will be experimentally tested (with
    controls) to determine which interventions are effective and can be
    sustained in the Delta. Such information can then be used by other
    agencies to design and implement effective interventions based on the
    results of sound research.
        Question. What is your funding goal for this program?
        Answer. An effective nutrition intervention research program is
    projected to require $10.5 million per year. This level of support will
    provide for complete cross-sectional and longitudinal data collection.
    The data collected will determine specific nutritional and food related
    problems that could be amenable to interventions and development and
    testing of the nutrition intervention methodology. The proposed funding
    for the Lower Delta Nutrition Intervention Initiative activities in
    fiscal year 1998 is $3,166,900.
        Question. What level of funding is included in the fiscal year 1998
    request for the Lower Delta Nutrition Initiative?
        Answer. The fiscal year 1998 budget request is $3,166,900 which is
    the same level of funding as the current fiscal year.
                            animal science research
        Question. Please identify priority research needs in the area of
    animal production efficiency research. Identify funding requirements
    and current resources.
        Answer. Current resources for animal production efficiency research
    total $43,024,000. The animal production program includes research on:
    dairy and beef cattle, swine, chickens, turkeys, goats, sheep, and
    aquaculture.
        The overall goal of the ARS program of research is to improve the
    sustainability and competitiveness and long-term profitability of
    animals used to produce food and fiber, while protecting the
    environment. Research is conducted in the disciplines of genetics,
    reproduction, nutrition, pre-harvest food safety, animal waste
    management of integrated systems, grazingland management and product
    quality. ARS scientist and laboratories are using the most recent
    technologies to improve the efficiency of animal production, based on
    ARS facilities and scientific capabilities. There are five high
    priority areas in animal production that warrant additional research
    effort. The budget proposes to expand and initiate new research in Pre-
    harvest food safety in animal production systems--$1.6 million.
    Pre-harvest Food Safety in Animals--$1.6 million of additional funding,
            current resources total $9.5 million
        Exposure, infection, and contamination of animals by certain
    bacteria and parasites during production is a known source of pathogens
    in our meat-based foods. Several components of the live animal sector
    offer opportunity for significant reduction of pathogens in the animals
    presented for slaughter. The dynamics of pathogen transmission and the
    host parasite relationship of microbial organisms which are important
    to food safety, must be elucidated in order to identify critical
    control points.
        Effective pathogen interventions, such as competitive colonization
    systems, which have been successfully accomplished for broilers, need
    to be developed to protect swine and cattle against Salmonella and E.
    Coli 0157:H7. Production practices for cattle and swine must be
    correlated with post-processing contamination of food products. The
    dynamics of Campylobactor transmission during production must be
    delineated in order to identify control points and strategies to limit
    contamination in poultry. Antibiotic resistance is emerging as a food
    safety concern, and we need to characterize the epidemiology,
    transmission and biological basis of the emerging resistance of
    Salmonella typhimunium DT104 in order to prevent its occurrence and
    maintain consumer confidence in meat and poultry based foods.
        Question. Please update your priority research needs in the area of
    animal health. Identify funding requirements.
        Answer. The USDA-ARS Animal Health Program of research concentrates
    on three areas: (1) emerging diseases within the U.S.; (2) chronic
    animal diseases within the U.S. that cause production losses; and, (3)
    foreign animal diseases that pose a threat to the U.S. livestock
    industry. The 1998 budget request for ARS emerging diseases requested
    $2.5 million in new funding research in these three categories as
    follows: (1) porcine reproductive syndrome, bovine viral diarrhea, and
    Cryptosporidia; (2) Johne's disease and transmissible spongiform
    encephalopathies; and, (3) foreign animal diseases including classical
    swine fever (hog cholera), highly pathogenic Avian Influenza, and
    velogenic Newcastle Disease.
        Question. ARS has a number of animal science laboratories. Please
    explain the distinction of the research at these centers.
        Answer. ARS has four major animal science laboratories. The Plum
    Island Animal Disease Center (PIADC), Greenport, New York, is
    responsible for research to protect U.S. animal industries and exports
    against catastrophic economic losses caused by foreign animal disease
    agents. The National Animal Disease Center (NADC), Ames, Iowa, conducts
    basic and applied research on selected diseases of economic importance
    to the U.S. livestock and poultry industries. The Roman L. Hruska U.S.
    Meat Animal Research Center (MARC), Clay Center, Nebraska, is
    responsible for efficiency of production that includes reproductive
    efficiency, nutrition, production and health systems, genetics,
    germplasm and gene mapping, environmental stress, manure management and
    product safety and quality research for the U.S. beef, sheep, and swine
    industries. The Livestock and Poultry Sciences Institute (LPSI),
    Beltsville, Maryland, conducts fundamental research to improve genetic
    evaluation techniques for dairy breeding, develops knowledge of the
    genomes/germplasm of livestock, identifies factors that affect growth
    and lactation, controls parasitic diseases, improves the efficient use
    of dietary nutrients for livestock and poultry, and develops techniques
    to enhance the quality and safety of meat and poultry products.
        In addition, ARS has animal sciences laboratories at a number of
    locations that focus on regional problems such as aquaculture, forage/
    grazingland production systems, and other animal health related issues.
        Question. How are these programs coordinated?
        Answer. All ARS research programs are coordinated by the National
    Program Staff (NPS), which consists of approximately 30 National
    Program Leaders (NPL's), 3 Associate Deputy Administrators (ADA's), and
    the Deputy Administrator for national programs. The NPS professional
    staff members are distinguished scientists in their fields. The work of
    the ARS animal science laboratories is managed by one or more NPL's
    with expertise in various disciplines of animal and veterinary sciences
    under the leadership of the ADA for Animal Production, Product Value
    and Safety. In establishing national research programs relating to
    animals, the NPL's focus the work of the scientists on addressing
    specific problems of high national priority.
        The recent restructuring of NPS and the aggregation of 1,100
    research projects in 25 national programs, is changing the way ARS
    manages its research activities. The new broader-based national
    programs will be coordinated by multi-disciplinary teams of NPL's. This
    new organizational structure will improve program management, and make
    it easier for ARS to meaningfully involve customers and stakeholders in
    the process of setting research priorities and increase the rate and
    timeliness of knowledge, technology, and information transfer to
    potential users. The new approach in managing NPS and its research
    programs will also make ARS more responsive to meeting the priorities
    identified by Congress in the Farm Bills and Appropriations measures.
        Question. Provide current funding and staffing levels for each.
        Answer. The current funding and scientific staffing levels for
    animal science research by location are as follows:

    ------------------------------------------------------------------------
                                                      Fiscal year 1997--
                      Location                  ----------------------------
                                                      Funds       Scientists
    ------------------------------------------------------------------------
    Auburn, Alabama............................        $841,800          3.0
    Booneville, Arkansas.......................         971,700          2.9
    Fayetteville, Arkansas.....................         917,800          4.5
    Brooksville, Florida.......................         415,700          1.5
    Gainesville, Florida.......................       4,288,500         15.0
    Athens, Georgia............................       4,138,300         12.9
    Hilo, Hawaii...............................       1,612,400  ...........
    Dubois, Idaho..............................       1,700,600          3.6
    Peoria, Illinois...........................         919,900  ...........
    West Lafayette, Indiana....................         985,600          3.0
    Ames, Iowa.................................         189,200          1.0
    Ames, Iowa (NADC)..........................      18,354,200         46.0
    Beltsville, Maryland (LPSI)................      23,725,900         55.6
    East Lansing, Michigan.....................       2,705,100          9.1
    St. Paul, Minnesota........................         194,700          1.0
    Mississippi State, Mississippi.............         818,400          3.6
    Stoneville, Mississippi....................       3,157,100          2.5
    Columbia, Missouri.........................         629,000          2.0
    Miles City, Montana........................       1,745,100          5.3
    Clay Center, Nebraska (MARC)...............      13,566,800         37.3
    Lincoln, Nebraska..........................         874,900          1.0
    Ithaca, New York...........................         265,900          1.0
    Greenport, New York (PIADC)................       9,853,300          6.9
    Raleigh, North Carolina....................         149,700          0.8
    Fargo, North Dakota........................         931,900          3.5
    El Reno, Oklahoma..........................         346,400           .8
    Wyndmoor, Pennsylvania.....................         186,800           .6
    Bushland, Texas............................         308,200          1.2
    College Station, Texas.....................       2,155,100          8.7
    Kerrville, Texas...........................       2,939,600          9.0
    Logan, Utah................................       1,833,600          6.6
    Pullman, Washington........................       2,059,700          6.0
    Beckley, West Virginia.....................         496,300          1.5
    Kearneysville, West Virginia...............       1,447,200  ...........
    Madison, Wisconsin.........................       1,574,000          5.5
    Laramie, Wyoming...........................       2,199,300        6.0.8
    Panama City, Panama........................         997,900          2.0
    H.Q. Administered Funds....................       4,454,800  ...........
                                                ----------------------------
          Total................................     114,952,000        273.9
    ------------------------------------------------------------------------

                             fruit and nut research
        Question. Describe your current program in fruit and nut research?
        Answer. The current program in fruit and nut research includes
    research activities on many different fruit and nut crops including
    apples, pears, oranges, grapefruit, lime, lemon, plum, peach, prune,
    strawberry, raspberry, blueberry, grape, pecan, walnut, hazelnut and
    many minor tropical and subtropical crops. Projects include both pre-
    and post-harvest investigations for improved product varieties and
    quality. Projects at 35 locations involve both basic and developmental
    research in plant breeding and genetics, physiology, entomology,
    pathology, and engineering technologies.
        Question. Where is it conducted? By location, provide major
    research objectives, current funding, and staffing.
        Answer. Research locations, current funding, staffing and major
    research objectives are:

    ------------------------------------------------------------------------
                      Location                    1997 funding    Scientists
    ------------------------------------------------------------------------
    Booneville, AR.............................        $126,700          0.2
    Tucson, AZ.................................          92,700           .5
    Albany, CA.................................       3,096,000         10.9
    Davis, CA..................................       1,162,300          3.5
    Fresno, CA.................................       3,667,200         10.9
    Riverside, CA..............................          57,500           .3
    Salinas, CA................................         491,000           .9
    Ft. Collins, CO............................         279,100           .5
    Newark, DE.................................          33,200           .2
    Winter Haven, FL...........................          63,200           .4
    Montpellier, FR............................         204,100           .9
    Byron, GA..................................       2,632,000          6.0
    Tifton, GA.................................          51,100  ...........
    Hilo, HI...................................         132,900           .3
    Peoria, IL.................................         142,800           .7
    Urbana, IL.................................           2,100  ...........
    New Orleans, LA............................         937,400          2.4
    Beltsville, MD.............................       4,529,000         15.5
    Frederick, MD..............................         243,800           .9
    Poplarville, MS............................         871,800          4.0
    Stoneville, MS.............................         133,400           .5
    East Lansing, MI...........................         210,000           .5
    Geneva, NY.................................         713,600          1.3
    Wooster, OH................................         296,400          1.5
    Lane, OK...................................         188,100           .6
    Corvallis, OR..............................       2,967,800          8.6
    Wyndmoor, PA...............................         372,500          1.5
    Mayaguez, PR...............................          39,000           .1
    College Station, TX........................         590,200          2.0
    Weslaco, TX................................         199,000           .8
    Prosser, WA................................          26,600  ...........
    Wenatchee, WA..............................       1,520,200          6.0
    Yakima, WA.................................       3,164.200          4.6
    Beckley, WV................................          44,100           .2
    Kearneysville, WV..........................       5,316,900         15.9
    Headquarters...............................       1,022,900  ...........
                                                ----------------------------
          Total................................      35,620,800        103.1
    ------------------------------------------------------------------------

        Booneville, AR.--Develop management practices for soil and water
    and implement agroforestry techniques on family farms.
        Tucson, AZ.--Improve bee pollination of crops and ecologically
    important plants.
        Albany, CA.--(1) Develop improved methods for detection of
    compounds affecting healthfulness and quality of foods; (2) control of
    nutritional properties of extruded cereal based foods; (3) detection of
    aflatoxin contamination in human foods by imaging technologies; (4)
    image analysis and other physical methods for detection of unwanted
    matter in fresh and processed food for improved quality. Other projects
    include: (1) the modification of vegetable oils as raw materials for
    industrial uses; (2) development of edible coatings to keep lightly
    processed vegetables fresh; (3) devise innovative processing to develop
    value-added fruits and vegetables for foreign markets; (4) control
    aflatoxin in tree nuts using biocontrol procedures; and (5) genetically
    engineer resistance and reduce aflatoxin in tree nuts and figs by
    decreasing invasion of Aspergillus flavus caused by insects.
        Davis, CA.--Develop control practices for bacterial and viral
    diseases of fruit and nut trees and grapes, resistant rootstocks or
    cultivars, and chemical treatments to eliminate pre-plant fumigation
    with methyl bromide.
        Fresno, CA.--Develop quarantine/post-harvest control strategies to
    reduce losses by insect pests in the investigation of new fumigants and
    methodologies to reduce methyl bromide emissions. This includes: (1)
    research on reducing or eliminating chemical pesticides and developing
    alternative biological and physical treatments and integrated pest
    management control procedures. Research is also being done to develop
    alternatives to methyl bromide in the management of soil pests. In
    addition, Prunus and Vitis germplasm is hybridized for increased pest
    resistance, drought and salinity tolerance with improved fruit
    characteristics. Control post-harvest decay utilizing microbial
    biocontrol and improve commodity handling with reduced injury to fruit.
    Determine the feasibility of cropping systems utilizing subsurface drip
    irrigation to apply alternative fumigants as well as irrigation.
        Riverside, CA.--Determine the fate and transport of alternative
    fumigants to methyl bromide in field application. Salinas, CA--Develop
    biologically-based or chemical alternatives to methyl bromide as a soil
    fumigant for control of soilborne pests of strawberry as a component of
    integrated management strategies for suppression and control of
    soilborne pests in strawberry and vegetable crops.
        Salinas, CA.--Development of preplant soil treatments as
    alternatives to the use of methyl bromide in the production of
    strawberries.
        Ft. Collins, CO.--Determine the physiological and biochemical
    factors responsible for loss of seed viability and deterioration in
    storage and develop improved storage methods.
        Newark, DE.--Develop biological control of selected insect pests:
    Tarnished Plant Bug, Alfalfa Plant Bug, and Sweetpotato Whitefly (in
    greenhouses) and quarantine evaluation of predators of Russian Wheat
    Aphid.
        Winter Haven, FL.--Develop alternative chemical and non-chemical
    treatments for preserving quality and improving convenience of
    minimally processed fresh fruits and vegetables.
        Montpellier, FR.--Discover, collect, and ship to the U.S. new
    natural enemies to reduce populations of codling moth, gypsy moth, pear
    thrips, pear psylla, and apple ermine moth.
        Byron, GA.--(1) Breed and develop deciduous peach fruit cultivars
    and rootstocks adapted to the Southeast. (2) Develop control strategies
    for insect problems of deciduous fruit. (3) Identify and develop
    improved cultivation and disease management strategies for pecan. (4)
    Identify factors affecting the nature and occurrence of disease and
    nematode problems of deciduous fruits in the southeastern U.S. (5)
    Develop disease and nematode management procedures based on biological
    control and nonchemical methods for the management of post-harvest
    diseases of stone fruits. (6) Develop alternative methods of biological
    control for insect pests of pecan.
        Tifton, GA.--Determine pesticide residues in food crops in support
    of petitions to EPA through the IR-4 ``Minor Use'' project for
    registration or reregistration of pesticide use.
        Hilo, HI.--Develop novel and more efficient semiochemical based
    eradication technology for fruit flies.
        Peoria, IL.--Identify biologically active natural products and
    determine their potential for commercial exploitation as herbicides,
    fungicides, and plant growth regulators.
        Urbana, IL.--Develop control measures for weeds in vegetables,
    fruits and specialty crops and determine pesticide residues in
    harvested products.
        New Orleans, LA.--This multifaceted research program includes: (1)
    investigation on the conversion of commodity by-products (nut shellers,
    grain millers, oilseed crushers) to value-added absorbents and the
    optimization of absorbent properties for removal of metals and
    organics; (2) immunological studies on enzymes involved in aflatoxin
    formation to investigate processes of aflatoxin formation; (3) clone
    genes governing aflatoxin formation in studies designed to select
    plants expressing compounds inhibitory to aflatoxin formation; and (4)
    optimize the flavor and texture of fresh cut fruit products and develop
    methodologies for predicting food sensory quality to meet consumer
    demand.
        Beltsville, MD.--(1) establish and implement area-wide pest
    management for high priority agricultural pests of fruit and other
    crops; (2) develop instrumentation to nondestructively assess apple
    fruit quality; (3) develop methods to utilize gypsum byproducts for use
    in field soil applications of fruit crops; (4) enhance the development
    of blueberry cultivars utilizing molecular techniques to manipulate the
    chilling required for flowering; (5) develop methods to genetically
    transform raspberry and regenerate plants in tissue culture; (6)
    develop and introduce new germplasm and cultivars of small fruits, such
    as blueberry and strawberry, that are pest and disease resistant; (7)
    develop molecular methods for detection and control of viruses and
    viroids in fruits; (8) process prohibited foreign germplasm through
    quarantine and deposit in U.S. repositories; (9) develop molecular
    methods to detect and identify phytoplasms pathogens in plants; (10)
    transfer genes and develop tissue culture methods to improve peach,
    apple and pear; (11) increase quality and shelflife of fruit by
    controlling ripening and softening; (12) reduce the use of fungicides
    in control of post-harvest decay; and (13) determine the role of
    membrane lipid metabolism and composition in fruit ripening, senescence
    and quality.
        Frederick, MD.--Identify casual agents of graft and insect
    transmissible disorders of foreign horticultural germplasm and develop
    rapid methods of detection of exotic pathogens.
        Poplarville, MS.--Develop new and improved muscadine grape and
    other small fruit cultural practices, management techniques and
    germplasm for the Gulf States Region to increase yield, minimize
    production losses and conserve natural resources.
        Stoneville, MS.--Develop and integrate biological and other non-
    pesticidal methods for control of insect and mite pests of pecan.
        East Lansing, MI.--Develop, evaluate and implement new technologies
    to reduce post-harvest handling damage and nondestructively measure
    fruit quality for fresh markets and maintain U.S. competitiveness in
    international markets.
        Geneva, NY.--Acquire, maintain, characterize and distribute apple,
    grape, and sour cherry genetic resources from this national collection.
        Wooster, OH.--Develop improved spray application technology for
    crop protection using surfactants to reduce crop damage, reduce cost
    and energy use as well as pollution of the environment.
        Lane, OK.--Characterize the physiological changes occurring during
    storage and ripening of small fruits and utilize this information to
    develop practices leading to increased shelflife.
        Corvallis, OR.--Evaluate genetic variability within raspberry,
    blueberry, and strawberry and identify traits, individuals and
    populations valuable to breeding programs.
        Wyndmoor, PA.--Develop and utilize pectin by-products from fruit in
    the production of biodegradable polymers.
        Mayaguez, PR.--Acquire, preserve, characterize and distribute
    valuable tropical and subtropical germplasm.
        College Station, TX.--Characterize genetic diversity of existing
    pecan and hickory cultivars and develop improved pecan cultivars with
    disease and pest resistance.
        Weslaco, TX.--Develop a systems approach to quarantine security for
    tropical and subtropical fruits with emphasis on fruit flies.
        Prosser, WA.--Develop chemical control measures for weeds in fruit
    crops and determine herbicide residues in crops and soils.
        Wenatchee, WA.--Determine the factors that influence the
    development of fireblight disease and develop environmentally sound
    management practices.
        Yakima, WA.--(1) Develop new control methods for green peach aphid
    and Colorado Potato Beetle utilizing beneficial agents in biological
    control; (2) develop areawide control program for codling moth using
    pheromones sterile insects and other biological control agents; (3)
    determine the amount persistence and fate of insect control chemicals
    and their toxic breakdown products; and (4) provide efficacy,
    phytotoxicity, and yield data residue samples for analyses to support
    the registration of minor use pesticides.
        Beckley, WV.--Develop agroforestry systems that incorporate
    production of high-value specialty products to fill niche markets.
        Kearneysville, WV.--(1) Identify and isolate genes affecting fruit
    development; (2) develop enhanced pear and plum cultivars with disease
    and pest resistance and improved fruit yield and quality; (3) identify
    and characterize genes associated with cold hardiness and stress
    resistance; (4) develop pest management methods to reduce pesticide use
    in deciduous fruit tree production systems; (5) develop plant-based
    technologies to treat water and concurrently produce a high-value
    product; (6) develop principles and mechanisms for improved harvesting
    of fruits for fresh market; (7) develop improved orchard practices
    affecting fruiting, fruit development and stress tolerance; (8) develop
    information on interactions between soilborne pests, root development
    and plant growth; (9) evaluate cover crop species and organic
    amendments on soilborne disease organisms and weeds as alternatives to
    methyl bromide; (10) examine the effects of cultural management
    techniques on the severity of fireblight in apple; (11) develop
    fundamental knowledge of the microbial community on fruit surfaces and
    methods for control of pre- and post-harvest disease and soilborne
    disease; and (12) develop nondestructive sensors measuring the post-
    harvest quality of apples and incorporate the sensing techniques into
    an automatic inspection system for sorting apples based on surface and
    internal defects.
        Headquarters.--Staffing and operation of national clonal
    repositories for plant germplasm including fruits.
        Question. Does the fiscal year 1998 budget propose decreases in
    this area?
        Answer. The fiscal year 1998 budget proposes decreases in small
    fruits research and in development of instrumentation for the
    nondestructive assessment of apple fruit quality in Beltsville,
    Maryland. A decrease has also been proposed for herbicide work on drip
    irrigation in grapes with the proposed closure of the ARS location in
    Prosser, Washington.
                             small grains research
        Question. Describe your current program for each of the small
    grains.
        Answer. The small grains include wheat, oat, barley, and rice. We
    have research on wheat at 38 locations, oat at 13 locations, barley at
    16 locations, and rice at 19 locations. The Agricultural Research
    Service's small grain research program is a nationally managed, fully
    coordinated, multi-disciplinary approach to solving production and
    postharvest issues. The thrusts of this research by location are:
    Wheat
    Albany, CA (PGEC)--Genetics modification and gene action
    Albany, CA (WRRC)--Product quality and transformation
    Riverside, CA--Salt tolerance
    Ft. Collins, CO--Germplasm preservation
    Newark, DE--Biocontrol
    Gainesville, FL--Stored product insects
    Athens, GA--Product composition and value
    Aberdeen, ID--Preserve and evaluate germplasm
    Peoria, IL--Toxin research
    Urbana, IL--Virology
    W. Lafayette, IN--Mechanisms of resistance to disease and insect
    Manhattan, KS--Resistance to Hessian fly and rusts
    Beltsville, MD--Stress physiology and disease resistance
    Frederick, MD--Exotic diseases
    Morris, MN--Production systems
    St. Paul, MN--Spring wheat improvement and cereal rust research
    Columbia MO--Wide crosses and cytogenetics
    Stoneville, MS--Insect management
    Sidney, MT--Management systems
    Raleigh, NC--Disease resistance
    Fargo, ND--Host-plant resistance, cytogenetics and quality evaluation
    Mandan, ND--Production systems
    Lincoln, NE--Genetic enhancement with emphasis on quality and virus
            resistance
    Geneva, NY--Genome database management
    Ithaca, NY--Virus-vector interactions
    Wooster, OH--Quality evaluation
    El Reno, OK--Production systems
    Stillwater, OK--Insect resistance and biocontrol
    Corvallis, OR--Stress physiology
    Pendleton, OR--Management systems
    Brookings, SD--Production systems
    College Station, TX--Aerial application technology
    Lubbock, TX--Production systems
    Temple, TX--Sustainable agriculture
    Logan, UT--Wide crosses
    Pullman, WA--Stress physiology, genetic improvement, disease resistance
            and quality evaluation
    Montpellier, FR--Biocontrol
    Headquarters--Administrative activities
    Oat
    Albany, CA--Gene action and quality trait evaluation
    Newark, DE--Biocontrol
    Aberdeen, ID--Germplasm preservation, evaluation and enhancement
    Urbana, IL--Virology
    W. Lafayette, IN--Mechanisms of resistance--disease and insects
    Ames, IA--Molecular basis of disease resistance
    Beltsville, MD--Cold hardiness
    St. Paul, MN--Genetic engineering and rust pathology
    Ithaca, NY--Virus-vector interactions
    Raleigh, NC--Disease resistance and cold hardiness
    Fargo, ND--Quality trait research
    Madison, WI--Quality and nutritional trait evaluation
    Montpellier, FR--Biocontrol
    Barley
    Albany, CA--Gene action and transformation
    Newark, DE--Biocontrol
    Athens, GA--Pathology
    Aberdeen, ID--Preserve evaluate and enhance germplasm
    Urbana, IL--Virology
    W. Lafayette, IN--Mechanisms of resistance--disease and insects
    Beltsville, MD--Stress physiology
    St. Paul, MN--Rust pathology
    Sidney, MT--Weed control
    Ithaca, NY--Virus-vector interaction
    Raleigh, NC--Disease resistance and cold hardiness
    Fargo, ND--Genetic transformation and virology
    Stillwater, OK--Insect resistance
    Madison, WI--Malting quality and fungal pathology
    Pullman, WA--Disease resistance
    Montpellier, FR--Biocontrol
    Rice
    Stuttgart, AR--Germplasm evaluations and enhancement
    Albany, CA--Product utilization and value
    Davis, CA--Molecular genetics
    Riverside, CA--Salt tolerance
    Gainesville, FL--Stored product insects
    Athens, GA--Plant structure and composition
    Aberdeen,ID--Germplasm preservation
    Manhattan, KS--Stored product insects
    New Orleans, LA--Product quality and utilization
    Beltsville, MD--Molecular biology
    Frederick, MD--Exotic diseases
    St. Paul, MN--Wild rice
    Geneva, NY--Genomic database management
    Ithaca, NY--Mineral nutrition
    Mayaguez, PR--Tropical agricultural systems
    Beaumont, TX--Variety development
    College Station, TX--Aerial application
    Houston, TX--Children's nutrition
    Madison, WI--Fungal pathology.

        Question. Please describe and identify recent accomplishments in
    this research.
        Answer. More than 15,000 new accessions have been added to the
    National Small Grain Germplasm Collection in the past 10 years. Well
    over 400,000 accession samples have been distributed to scientists in
    the U.S. and worldwide in the past decade. Small grain germplasm has
    been evaluated for such traits as growth habit; agronomic spike-
    panicle, and seed descriptors; disease and insect reaction data and
    quality components. Characterization and evaluation data have been
    included in the GRIN database. All genetic and cytogenetic stocks, that
    have been analyzed or collected, have been systematically cataloged and
    stored for use by scientists nationally and internationally.
    Immunological and biochemical means have been developed to rapidly
    identify wheat lines carrying the 1RS rye chromosome which is related
    to some deleterious quality characteristics.
        ARS geneticist/breeders have had lead responsibility in the
    development of important varieties of rice, hard red spring wheat, club
    wheat, malting barley and oats. ARS scientists have also coordinated
    regional testing nurseries of all small grain species in all parts of
    the country. Data from these nurseries have contributed information
    toward the release of nearly all public small grain varietal releases
    and many releases from private industry.
        A novel gene was identified which controls aroma in a foreign rice
    introduction. This gene will be valuable in U.S. breeding program. The
    entire wheat and barley germplasm collection was evaluated and
    resistance to the Russian wheat aphid identified. Sources of resistance
    have been incorporated into improved germplasm lines, which are proving
    to be of immense value to U.S. breeders. A rapid, inexpensive screening
    method was developed which allows oat lines to be efficiently screened
    for beta-glucan (the cholesterol lowering soluble fiber component). ARS
    scientists identified 160 accessions with specific stem rust resistance
    genes. An 18 chromosome barley was developed, which may exhibit
    agronomic advantages over existing 14 chromosome barley. In situ
    hybridization techniques were utilized to physically map molecular
    markers to chromosomes. With this information, differences were
    established between recombinational maps and true physical locations of
    RFLP's (Restriction Fragment Length Polymorphisms)(of wheat and rye),
    which indicated the presence of ``hot'' and ``cold'' spots of
    recombination along chromosome arms. This information is extremely
    valuable for scientists working on plant transformation.
        Molecular biology offers powerful approaches to plant improvement
    and ARS cereal scientists are at the forefront. Among their
    accomplishments are: 1) developing DNA probes for rice cultivar and
    germplasm identification, 2) developing an oat tissue culture system
    suitable for in vitro gene transfer, 3) producing a seed cDNA library
    which can be used to detect antifungal protein genes, 4) demonstrated,
    through the similarity of gene arrangement among grass species, that
    the convergent domestication of maize, sorghum and rice appears to be
    due to mutations of major gene loci; thus, showing that mapping data
    developed in one crop is applicable to other crops, and 5) identified
    root specific and spike specific ethylene probes--allowing the study
    and improvement of root health and grain production.
        Finally, one of the most exciting ``targets of opportunity'' for
    cereal researchers is to design crops for specific uses. It may be
    informative to present such ARS accomplishment in more detail, as
    follows:
    Discovery and development of non-lethal maize, barley, and rice ``low
            phytic acid'' (LPA) mutants.
        This pioneering research has demonstrated that the fraction of
    grain total phosphate that is ``nutritionally available'' in non-
    ruminant diets is greatly increased in LPA grain. Methods and
    technologies are under development to facilitate utilization of these
    mutants in crop breeding and agricultural production.
        Isolation of LPA mutants confirms ``Mendelian'' inheritance of seed
    phosphorus and mineral storage processes; provides the first genetic
    resources for study of seed phosphorus and mineral storage processes,
    including phosphorus homeostasis during seed development and
    germination; provides the first genetic evidence that phytic acid is
    not an essential component of seeds and provides first genetic
    identification of genes important to phytic acid synthesis; and
    provides the first genetic resources necessary to study the role of
    phytic acid in human and animal nutrition and health.
        This research has been conducted over the past decade and is now
    coming to fruition through technology transfer to private industry and
    facilitation of new levels of nutritional research.
        Poultry, swine, and fish production using LPA grain will be less
    expensive, more efficient, and have a reduced impact on the
    environment. In addition to improvement in the efficiency of
    agricultural production, competitiveness of domestic producers in the
    international marketplace will be enhanced. This work may also lead to
    improved human nutrition and health in those countries or populations
    for whom cereal crops are staple foods.
        Companies representing well in excess of 50 percent of the domestic
    hybrid corn seed production are obtaining licenses to use the LPA
    mutants and related technology to develop ``low phytic acid'' corn.
        Question. What is your current funding and staffing by location?
    Does the fiscal year 1998 budget propose decreases for small grains
    research? Explain.
        Answer. The overall fiscal year 1998 budget proposes an increase in
    research funding for small grains of $685,000. The current funding and
    staffing by location follows:

                                 WHEAT RESEARCH
    ------------------------------------------------------------------------
                                                      Fiscal year 1997--
                      Location                  ----------------------------
                                                      Funds       Scientists
    ------------------------------------------------------------------------
    Albany, CA (PGEC)..........................        $307,700          0.3
    Albany, CA (WRRC)..........................       4,086,400         14.4
    Riverside, CA..............................         143,000           .6
    Ft. Collins, CO............................         284,400           .5
    Newark, DE.................................         142,700           .5
    Gainesville, FL............................         718,400          2.3
    Athens, GA.................................       1,288,600          4.8
    Aberdeen, ID...............................         569,000          1.2
    Peoria, IL.................................       3,099,100         10.6
    Urbana, IL.................................          59,300          0.2
    W. Lafayette, IN...........................       1,166,500          4.7
    Manhattan, KS..............................       4,417,900         17.0
    Beltsville, MD.............................       1,265,200          3.9
    Frederick, MD..............................         377,200           .8
    Morris, MN.................................         140,600           .5
    St. Paul, MN...............................         990,500          4.7
    Columbia, MO...............................         256,100          1.1
    Stoneville, MS.............................          65,500          0.2
    Sidney, MT.................................         189,800          0.7
    Raleigh, NC................................         166,300           .9
    Fargo, ND..................................       1,367,000          5.7
    Mandan, ND.................................         353,200          1.1
    Lincoln, NE................................         932,600          4.2
    Geneva, NY.................................          54,000  ...........
    Ithaca, NY.................................         636,600          2.4
    Wooster, OH................................         625,000          2.2
    El Reno, OK................................         412,300          0.5
    Stillwater, OK.............................       1,103,700          3.9
    Corvallis, OR..............................         214,800          1.0
    Pendleton, OR..............................         561,000          2.5
    Brookings, SD..............................         169,000           .7
    College Station, TX........................          86,500           .4
    Lubbock, TX................................         127,700           .4
    Temale, TX.................................          62,800           .3
    Logan, UT..................................          29,600           .2
    Pullman, WA................................       2,335,300          7.2
    Montpellier, FR............................         135,800           .5
    Headquarters...............................         488,800  ...........
                                                ----------------------------
          Total................................      29,429,900        103.1
    ------------------------------------------------------------------------

                                  OAT RESEARCH
    ------------------------------------------------------------------------
                                                      Fiscal year 1997--
                      Location                  ----------------------------
                                                      Funds       Scientists
    ------------------------------------------------------------------------
    Albany, CA.................................        $237,200          0.6
    Newark, DE.................................          33,200           .1
    Aberdeen, ID...............................         668,000          2.0
    Urbana, IL.................................         148,300           .5
    W. Lafayette, IN...........................          27,600           .1
    Ames, IA...................................         146,400           .8
    Beltsville, MD.............................          42,200           .1
    St. Paul, MN...............................         563,300          1.9
    Ithaca, NY.................................         117,700           .5
    Raleigh, NC................................         223,600          1.0
    Fargo, ND..................................         205,200          1.1
    Madison, WI................................         309,100          1.3
    Montpellier, FR............................          90,500           .3
                                                ----------------------------
          Total................................       2,812,300         10.3
    ------------------------------------------------------------------------

                                 BARLEY RESEARCH
    ------------------------------------------------------------------------
                                                      Fiscal year 1997--
                      Location                  ----------------------------
                                                      Funds       Scientists
    ------------------------------------------------------------------------
    Albany, CA.................................        $532,500          1.4
    Newark, DE.................................          33,200          0.1
    Athens, GA.................................          42,300           .2
    Aberdeen, ID...............................         621,700          2.0
    Urbana, IL.................................          89,000           .3
    W. Lafayette, IN...........................          82,700           .3
    Beltsville, MD.............................          42,200           .1
    St. Paul, MN...............................          50,900           .2
    Sidney, MT.................................         106,200           .4
    Ithaca, NY.................................          65,800           .2
    Raleigh, NC................................          21,800           .1
    Fargo, ND..................................         447,700          2.2
    Stillwater, OK.............................         436,000          1.6
    Pullman, WA................................          96,700           .5
    Madison, WI................................         790,000          2.9
    Montpellier, FR............................          90,500           .3
                                                ----------------------------
          Total................................       3,549,200         12.8
    ------------------------------------------------------------------------

                                  RICE RESEARCH
    ------------------------------------------------------------------------
                                                      Fiscal year 1997--
                      Location                  ----------------------------
                                                      Funds       Scientists
    ------------------------------------------------------------------------
    Stuttgart, AR..............................        $911,000          4.0
    Albany, CA.................................         441,200          1.3
    Davis, CA..................................         166,800          1.0
    Riverside, CA..............................          22,200  ...........
    Gainesville, FL............................         382,700          1.4
    Athens, GA.................................         340,100          1.2
    Aberdeen, ID...............................         194,900          0.5
    Manhattan, KS..............................         290,200          1.2
    New Orleans, LA............................       1,373,700          5.4
    Beltsville, MD.............................         408,300          1.3
    Frederick, MD..............................         145,600           .5
    St. Paul, MN...............................         128,700           .4
    Geneva, NY.................................          54,000  ...........
    Ithaca, NY.................................          50,500           .2
    Mayaguez, PR...............................          25,400  ...........
    Beaumont, TX...............................         969,500          3.3
    College Station, TX........................          86,500           .3
    Houston, TX................................         182,500           .2
    Madison, WI................................          42,500           .2
                                                ----------------------------
          Total................................       6,216,300         22.4
    ------------------------------------------------------------------------

                               new uses research
        Question. ARS carries out a major effort in research to find new
    uses and process for agricultural commodities. Please identify by
    location, the research and funding for fiscal year 1997 and 1998 in
    this area.
        Answer. The focus of the ARS new uses research program is to
    enhance U.S. economies through the development of value-added food and
    industrial (nonfood and biofuels) products for domestic and export
    markets. The fiscal year 1997 and 1998 funding for the ARS value-added
    food, nonfood, and biofuels research by location follows:

                                       NEW USES RESEARCH FUNDING FISCAL YEAR 1997
    ----------------------------------------------------------------------------------------------------------------
                        Location                          Nonfood          Food          Biofuels          Total
    ----------------------------------------------------------------------------------------------------------------
    Phoenix, AZ.....................................        $771,100  ..............  ..............        $771,100
    Albany, CA......................................       3,282,900      $4,942,200        $316,700       8,541,800
    Fresno, CA......................................          69,900         311,300  ..............         381,200
    Orlando, FL.....................................  ..............         144,800  ..............         144,800
    Winter Haven, FL................................         213,300       1,182,300  ..............       1,395,600
    Athens, GA......................................         488,800       3,275,900  ..............       3,764,700
    Dawson, GA......................................  ..............         753,800  ..............         753,800
    Hilo, HI........................................         315,100  ..............  ..............         315,100
    Ames, IA........................................         128,000  ..............  ..............         128,000
    Peoria, IL......................................      13,648,200       2,940,500       2,872,700      19,461,400
    Manhattan, KS...................................  ..............       2,500,900  ..............       2,500,900
    New Orleans, LA.................................       9,668,200       3,586,700  ..............      13,254,900
    Beltsville, MD..................................  ..............       2,434,800  ..............       2,434,800
    East Lansing, MI................................  ..............         150,400  ..............         150,400
    Oxford, MS......................................         882,800         245,600  ..............       1,128,400
    Poplarville, MS.................................  ..............          25,600  ..............          25,600
    Stoneville, MS..................................       1,689,200  ..............  ..............       1,689,200
    Sidney, MT......................................         111,500  ..............  ..............         111,500
    Clay Center, NE.................................  ..............         286,700  ..............         286,700
    Lincoln, NE.....................................  ..............          88,200  ..............          88,200
    Las Cruces, NM..................................       1,068,900  ..............  ..............       1,068,900
    Raleigh, NC.....................................  ..............       1,280,400  ..............       1,280,400
    Fargo, ND.......................................  ..............       1,754,900  ..............       1,754,900
    Wooster, OH.....................................  ..............         571,700  ..............         571,700
    Lane, OK........................................         150,800         881,200  ..............       1,032,000
    Wyndmoor, PA....................................       5,326,000       6,801,700       2,039,200      14,166,900
    Clemson, SC.....................................       1,089,700  ..............  ..............       1,089,700
    Beaumont, TX....................................  ..............         148,300  ..............         148,300
    College Station, TX.............................          37,700  ..............  ..............          37,700
    Lubbock, TX.....................................         536,400  ..............  ..............         536,400
    Weslaco, TX.....................................         343,900         531,200  ..............         875,100
    Pullman, WA.....................................          93,500         759,900  ..............         853,400
    Wenatchee, WA...................................  ..............         808,900  ..............         808,900
    Madison, WI.....................................         154,100         545,200  ..............         699,300
    NAL.............................................           9,000  ..............  ..............           9,000
    Headquarters....................................         106,900  ..............  ..............         106,900
                                                     ---------------------------------------------------------------
                                                          40,185,900      36,953,100       5,228,600      82,367,600
    ----------------------------------------------------------------------------------------------------------------

                                  NEW USES RESEARCH FUNDING FISCAL YEAR 1998 (PROPOSED)
    ----------------------------------------------------------------------------------------------------------------
                        Location                          Nonfood          Food          Biofuels          Total
    ----------------------------------------------------------------------------------------------------------------
    Phoenix, AZ.....................................        $771,100  ..............  ..............        $771,100
    Albany, CA......................................       2,135,600      $4,243,900        $316,700       6,696,200
    Fresno, CA......................................          21,700         311,300  ..............         333,000
    Orlando, FL.....................................  ..............         144,800  ..............         144,800
    Winter Haven, FL................................         213,300       1,182,300  ..............       1,395,600
    Athens, GA......................................         488,800       2,910,300  ..............       3,399,100
    Dawson, GA......................................  ..............         753,800  ..............         753,800
    Hilo, HI........................................         315,100  ..............  ..............         315,100
    Ames, IA........................................         128,000  ..............  ..............         128,000
    Peoria, IL......................................      12,706,700       2,651,500       2,872,700      18,230,900
    Manhattan, KS...................................  ..............       2,500,900  ..............       2,500,900
    New Orleans, LA.................................       9,668,200       3,586,700  ..............      13,254,900
    Beltsville, MD..................................  ..............       1,980,700  ..............       1,980,700
    East Lansing, MI................................  ..............         150,400  ..............         150,400
    Oxford, MS......................................         882,800         245,600  ..............       1,128,400
    Poplarville, MS.................................  ..............          25,600  ..............          25,600
    Stoneville, MS..................................       1,197,700  ..............  ..............       1,197,700
    Sidney, MT......................................         111,500  ..............  ..............         111,500
    Clay Center, NE.................................  ..............         286,700  ..............         286,700
    Lincoln, NE.....................................  ..............          88,200  ..............          88,200
    Las Cruces, NM..................................       1,068,900  ..............  ..............       1,068,900
    Raleigh, NC.....................................  ..............         777,400  ..............         777,400
    Fargo, ND.......................................  ..............       1,754,900  ..............       1,754,900
    Wooster, OH.....................................  ..............         571,700  ..............         571,700
    Lane, OK........................................         150,800         881,200  ..............       1,032,000
    Wyndmoor, PA....................................       4,634,500       6,801,700       2,039,200      13,475,400
    Clemson, SC.....................................       1,089,700  ..............  ..............       1,089,700
    Beaumont, TX....................................  ..............         148,300  ..............         148,300
    College Station, TX.............................          37,700  ..............  ..............          37,700
    Lubbock, TX.....................................         536,400  ..............  ..............         536,400
    Weslaco, TX.....................................  ..............         531,200  ..............         531,200
    Pullman, WA.....................................          93,500         692,700  ..............         786,200
    Wenatchee, WA...................................  ..............         808,900  ..............         808,900
    Madison, WI.....................................         154,100         545,200  ..............         699,300
    NAL.............................................           9,000  ..............  ..............           9,000
    Headquarters....................................         106,900  ..............  ..............         106,900
                                                     ---------------------------------------------------------------
                                                          36,522,000      34,575,900       5,228,600      76,326,500
    ----------------------------------------------------------------------------------------------------------------

        Question. Please explain the recent accomplishments derived from
    this research.
        Answer. Selected examples of accomplishments in developing value-
    added products and processes in each of the categories follow:
        Valuable protein products from solid tannery waste.--The land
    filling of chromium-containing solid waste generated during the
    manufacture of chrome-tanned leather has become a world-wide problems.
    ARS scientists at the Eastern Regional Research Center (ERRC),
    Wyndmoor, Pennsylvania, have developed two processes to treat this
    waste as an alternative to land filling. The products isolated from
    these treatments are a recyclable chromium cake and protein products of
    varying characteristics and quality. To make these processes
    economically viable, end uses need be found for the protein products.
    At present, the ERRC researchers are examining the functional
    properties of the protein--adhesiveness, foamability, oil and water
    absorption, and emulsification capacity. Evidence of worldwide concern
    about the problem and the remedy includes ongoing cooperative
    agreements with ATO-DLO in the Netherlands for modification of the
    protein; with Ramon Llull University in Barcelona, Spain, for process
    improvements and for chrome recycling; and with University of Brno,
    Zlin, Czech Republic, for studying the protein properties and for
    development of an industrial scale treatment plant.
        Animal fats, restaurant grease and vegetable-oil refining waste as
    biodiesel feedstocks.--ARS researchers at the Eastern Regional Research
    Center, Wyndmoor, Pennsylvania, are using nature's enzymes in new
    approaches to make biodiesel. The enzymes allow conversion of three
    feedstocks that are cheaper than conventional vegetable oil: animal
    fats, restaurant greases, and soapstocks. The high content of free
    fatty acids in these feedstocks obviates conventional conversion
    technology. The enzyme process with branched alcohols as co-feedstocks
    enhances the cold-temperature properties of the biodiesel. A
    Cooperative Research and Development Agreement among ARS, the DoE's
    National Renewable Energy Laboratory (NREL) and the Fats and Proteins
    Research Foundation promotes the development and transfer of this
    technology and cost engineering to optimize the economics of the new
    process. Since the cost of feedstock for conventional biodiesel is 75
    percent of the manufacturing cost of the fuel, the importance of using
    cheaper feedstocks is significant.
        Biodegradable polyesters produced by bacteria growing on fats and
    oils.--ARS researchers at the Eastern Regional Research Center (ERRC),
    Wyndmoor, Pennsylvania, are investigating the conversion of fats and
    oils into biodegradable plastics called polyhydroxyalkanoates (PHA's).
    Industry has produced PHA's from other agricultural feedstocks, but
    ERRC's use of selected bacteria on fats and oils results in polymers
    with unique properties--elastomers and intermediates that can be
    further modified chemically for even new types of plastics. The ERRC
    research is multidisciplinary, including molecular and microbiology,
    organic chemistry, and materials engineering; Collaborating with the
    University of Massachusetts (Lowell and Amherst).
        ``Amaizing Gum'': A valuable food and industrial gum made from corn
    processing byproducts.--A novel process has been developed by ARS
    scientists at the Eastern Regional Research Center in Wyndmoor,
    Pennsylvania, to produce a valuable polysaccharide (gum) from corn
    fiber, an abundant but under-utilized byproduct of the corn wet-milling
    industry. About 1.5 pounds of Amaizing Gum can be produced from the
    corn fiber derived from one bushel of corn, so vast quantities are
    potentially available. Amaizing gum has properties which suggest
    numerous uses in foods as a soluble dietary fiber, a thickener, an
    emulsifier and a ``home grown'' replacement for imported Gum Arabic.
    Potential industrial uses include natural adhesives and water-based
    functional ingredients for coatings and paints. A U.S. patent for the
    corn fiber gum process has been filed and a Cooperative Research and
    Development Agreement with a major food and specialty chemical company
    is being finalized to facilitate commercialization of the new
    technology.
        Nutritious restructured fruit snacks.--Utilization and consumption
    of many fruit and vegetable crops are constrained by their short
    harvest seasons and limited market outlets. ARS scientists at the
    Western Regional Research Center in Albany, California, have developed
    new technologies to increase utilization and consumption of fruits and
    vegetables. Novel extrusion and molding technologies are used to
    produce convenient, value-added restructured fruit and vegetable
    products from bulk-processed ingredients. These technologies make use
    of concentrated fruit and vegetable purees as starting materials.
    Novel, convenient and nutritious products have been developed as a
    means to supplement the fruit and vegetable component of a healthy diet
    in accordance with the USDA recommended guidelines. U.S. growers and
    processors would benefit from this research through increased
    utilization and consumption of their crops, extended processing periods
    for seasonal crops and improved production efficiencies.
        Life-threatening allergies to latex products can be avoided using a
    novel latex.--The latest studies suggest that more than 20 million
    Americans now are affected by ``latex allergy,'' which is triggered by
    many of the proteins present in latex products, and a number of deaths
    from anaphylaxis have occurred. Even highly purified products, made
    from commercially available Hevea (natural rubber) latex, are unsafe
    for use by hypersensitive people. Scientists at the Western Regional
    Research Center in Albany, California, have found a way to produce
    hypoallergenic latex products from guayule, a domestic rubber-producing
    plant species. The new latex has successfully passed medical trials and
    processing scale-up, and a U.S. patent has been obtained. Prototype
    latex products have been manufactured and tests by FDA scientists
    showed that guayule latex examination gloves are impermeable to
    viruses. Commercialization efforts are initially aimed at the very high
    margin medical products market with over 300 natural rubber medical
    devices. A license to this technology has been granted to Yulex, Inc.
    of Philadelphia, Pennsylvania.
        Lightweight concrete containing starch.--Lightweight, insulative
    concrete is used in the building industry for non-structural
    applications such as for roof tiles, floors and as insulation around
    fireplaces. Traditional methods of making lightweight concrete require
    either expensive air entraining equipment or a source of lightweight
    aggregate that may be in limited supply and obtained at a cost to the
    environment. Scientists at the Western Regional Research Center in
    Albany, California, have developed a method of making lightweight
    concrete using wheat starch. The wheat starch has the appearance of
    sand and is hydrated before being mixed into the concrete. Concrete
    with varying densities, strengths and insulative properties have been
    made using the starch method. Starch is a renewable resource that is in
    abundant supply and could provide a viable alternative to lightweight
    aggregate for making lightweight concrete. A patent has been issued for
    this technology and licensees are being sought.
        Zero calorie substitute for fat.--It is well recognized that the
    average American diet is too high in fat and too low in fiber. New ARS
    technology should help alleviate both problems. Z-trim, invented by an
    ARS scientist in Peoria, Illinois, is a high-fiber, zero calorie fat
    and/or flour substitute.
        The product is made from seed byproducts (bran, hulls, etc.) of
    commodity grains, such as corn or oat, and is suitable for use in many
    food items. For example, a lunch of Salisbury steak, mashed potatoes
    with gravy, broccoli with cheese sauce, Waldorf salad, and two
    brownies, all containing Z-trim, has a total of 600 calories removed
    and 3.9 grams of fiber added compared to the same lunch without Z-trim.
        New starch-based biodegradable plastics.--``The costs for producing
    biodegradable plastics can be greatly reduced when inexpensive starch
    is used as an ingredient. Until now, however, the resulting starch-
    containing materials often had poor properties and were not useful for
    most commercial applications.'' Scientists at the National Center for
    Agricultural Utilization Research (NCAUR) in Peoria, Illinois, have
    developed new biodegradable plastic materials based on starch and novel
    polyesters. Under a CRADA with the Biotechnology Research and
    Development Corporation (BRDC), NCAUR and BRDC scientists have devised
    new materials with properties similar to commercial plastics such as
    polystyrene, but with starch contents much greater than previously
    achieved. The high starch content makes these materials more cost
    competitive than synthetic biodegradable materials with comparable
    performance characteristics. These materials offer biodegradable
    alternatives to synthetic plastics currently used in disposable
    applications such as cups, utensils, and food service trays. This
    technology has recently been licensed by a major U.S. company with
    plans to commercialize within the fiscal year.
        Discovery of new enzyme for lower cost biofuels.--The research for
    lower cost raw materials for the production of biofuels has led to
    increasing interest in the enzymatic breakdown of cellulosic biomass to
    fermentable sugars. Scientists at the National Center for Agriculture
    Utilization Research, Peoria, Illinois, have discovered several unique
    enzymes from yeast that are free from product and substrate inhibitions
    and work best at high temperatures. These improved properties are the
    desired attributes of an enzyme suitable for commercialization and
    should lower the cost of producing fuel alcohol.
        Seed yields in Vernonia galamensis doubled by improvement in seed
    retention.--Vernonia is a potential oilseed crop for the American
    farmer, with uses in paints and coatings industries. Seeds produced at
    the beginning and middle of the growing season were previously lost by
    harvest time. A new trait, developed by ARS scientists at Phoenix,
    Arizona, keeps seeds on the plant longer, resulting in more seeds at
    harvest. As yields are increased in this crop, it becomes a more
    economically-viable option for commercialization. Production of new
    crops results in diversification, which leads to farm stability and
    sustainability for agriculture.
        Facile dyeing process for blends of wool and cotton.--Wool-cotton
    blends have been shunned by the textile industry because of
    difficulties in dyeing to ``union'' shades, where dye uptake is uniform
    from one fiber to the other. Agricultural Research Service researchers
    at the Eastern Regional Research Center, Wyndmoor, Pennsylvania, have
    optimized their pretreatment protocol for these blends, whereby the
    cotton component is made chemically similar to wool in its ability to
    take up dye. The protocol involves pretreatment with commercial agents
    called dye fixatives. The ARS process should give the public an
    excellent, all-natural, trans-seasonal fabric with excellent comfort
    and appearance qualities, and should provide a new market for domestic
    wool and cotton. A CRADA with the American Sheep Industry Association
    and Cotton, Inc. seeks to demonstrate the technology and promote its
    adoption by the American textile industry as a new use for both
    agricultural fibers.
        Computerized process control for cotton gins increases monetary
    income to farmers and improves cotton quality.--Scientists at the
    Cotton Ginning Research Unit at Stoneville, Mississippi, developed and
    implemented a computerized and automated system to automatically
    measure the quality of cotton at various stages of gin processing and
    automatically select and route the cotton through the optimum machine
    sequence. One commercial gin has been fully automated and two others
    are partially automated. Application of the Computerized Process
    Control Systems (CPCS) will improve fiber quality substantially and
    increase farmer profits $10 to $20 per bale with a potential impact of
    $400 million annually. The CPCS includes new automated bypass valves
    (patent applied for), automated calibration devices (patent applied
    for), automated sample collection and analyses hardware (three patents
    awarded), and associated software. Key components of the CPCS have been
    licensed to an international company for marketing in 1998.
        New process for preserving fresh-cut pears shows promise.--Fresh
    sliced pears are subject to rapid browning, tissue breakdown, and
    microbial spoilage which have, heretofore, prevented the development of
    a fresh-cut product. By optimization of fruit ripeness for fresh-cut
    applications, use of novel browning inhibitor formulations, and special
    packaging in a modified atmosphere, scientists at the Eastern Regional
    Research Center, Wyndmoor, Pennsylvania, have overcome these problems
    with two key pear varieties, d'Anjou and Bartlett, attaining a shelf-
    life of 2-3 weeks at 4  deg.C. Work is in progress to establish the
    feasibility of the new process for commercial use.
        Extending the shelf life of fresh and low temperature pasteurized
    citrus juices.--The marketing of fresh citrus juices is severely
    restricted due to the presence of an enzyme that clarifies the juice.
    Consumers perceive this as a serious quality defect. The same enzyme
    may also cause gelation of frozen concentrated citrus juice and
    flocculation in drinks containing citrus juice. Scientists at the U.S.
    Citrus and Subtropical Products Research Laboratory, Winter Haven,
    Florida, have discovered that a form of the enzyme present in citrus
    fruit peel causes the most rapid juice cloud destabilization. A
    Cooperative Research and Development Agreement has been established
    with a major producer of machinery used to extract juice from citrus
    fruit. This collaboration between ARS scientists and private industry
    is designed to determine if methods of juice extraction can be
    developed to decrease the amount of the detrimental peel enzyme in
    juice, extending the shelf life, and increasing the geographic market
    area for fresh citrus juices.
        Corn Fiber Oil as a Natural Cholesterol-Lowering Product.--ARS
    Scientists at the Eastern Regional Research Center, Wyndmoor,
    Pennsylvania, and the National Center for Agriculture Utilization
    Research, Peoria, Illinois, have developed a process to extract a new
    natural oil from corn. Unlike conventional corn oil, which is extracted
    from corn ``germ,'' corn fiber oil is extracted from corn ``fiber,''
    which is a low-valued by-product of the industrial processes that
    convert corn into sweeteners, starch, and other products such as fuel-
    grade ethanol. Collaborative studies with scientists at the University
    of Massachusetts, Lowell, have confirmed that corn fiber oil
    significantly lowers total serum cholesterol and LDL cholesterol
    (``bad'' cholesterol) in hamsters. The active cholesterol-lowering
    component may be an unusual compound called ``sitostanol-ferulate''
    which comprises about 6 percent of the oil. The natural sitostanol-
    ferulate in corn fiber oil may lower serum cholesterol in the same way
    as a popular new synthetic Finnish Margarine-type product called
    ``Benecol,'' which sells for five to ten times the price of regular
    margarine. ARS has applied for a U.S. patent on this new technology and
    licensing negotiations with major U.S. food companies are now being
    conducted.
        Commercialization of this new technology will result in new uses
    for agricultural byproducts, more revenue for processors and growers,
    and new healthful food products for consumers.
        New Fat Replacer.--ARS scientists at the Southern Regional Research
    Center in New Orleans, Louisiana, have developed a process for making a
    new low-calorie fat replacer from rice flour. This white-colored, all
    natural rice-based product looks and feels like hydrogenated fat. It
    can be used in non-frozen, fat-free or dairy-free products like yogurt,
    cream cheese, sour cream, and whipped cream. A patent on this discovery
    is currently being sought and a Cooperative Research and Development
    Agreement is being negotiated with a U.S. company in order to
    commercialize the new technology.
        Anticancer compounds derived from citrus-processing byproducts.--A
    collection of nearly 200 compounds derived from citrus peel and various
    citrus peel byproducts were submitted to the National Cancer Institute
    for testing for anti-HIV and anticancer characteristics. A number of
    these compounds have been shown in a second study to have strong
    anticancer characteristics against several types of cancer cell lines,
    especially, breast cancer cell lines. ARS scientists at the U.S. Citrus
    and Subtropical Products Laboratory in Winter Haven, Florida have
    isolated a number of additional compounds with structural similarities
    to these active compounds, and these additional compounds have also
    been submitted to a second study. Although the National Cancer
    Institute has completed the screening on only a small percentage of the
    submitted compounds, one compound, a synthetic analogue of a naturally-
    occurring citrus flavonoid, has been shown to have significant
    characteristics against a number of cancer cell lines, and has been
    selected for animal trials. Based on the similarities between this
    compound and others submitted, but not yet tested, more compounds are
    expected to be selected for further study by the National Cancer
    Institute. These findings are contributing to our knowledge of the link
    between improved human health and nutrition and will also lead to
    important new uses for citrus byproducts.
        Question. How many cooperative partnerships with industry have
    resulted from research in this area?
        Answer. Since 1995, of the 56 licenses that have been issued on ARS
    technologies, 21 relate directly to ``value-added'' products derived
    from agricultural commodities. This classification excludes genetic
    engineering technologies, pest control alternatives, diagnostic tests,
    etc. Of the CRADA's issued since 1992, 37 deal specifically with non-
    food value-added products and another 15 deal with new food products.
    Another 180 CRADA partnerships deal with technologies that will enhance
    production, quality, and profitably of crop and animal commodities,
    thus increasing the quantity of economical agricultural-based raw
    materials for the creation of new value-added products and additional
    market opportunities. These partnerships have also led to the
    successful development of new products that have contributed to the
    change in U.S. exports from bulk commodities to value added products.
        Question. What are the prospects for further accomplishments?
        Answer. The prospects for further accomplishments are excellent.
    ARS has adopted a market-rational approach to the development of value-
    added products in which market requirements for cost, performance, and
    functional properties must be clearly understood and the product
    developed must be equal to or better than the product it is displacing.
    Preference is given to development of new products that displace
    imported rather than domestically produced ones in order to further
    enhance the U.S. balance of trade. ARS has developed a unique cost
    engineering and analysis program at the Eastern Regional Research
    Center, Wyndmoor, Pennsylvania, to assist ARS researchers in their
    product/process development goals. ARS is further committed to the
    concept that early involvement of industry is key to rapid development
    of value-added products, to successful development of new business
    opportunities, and to the creation of new jobs.
        Question. Over the past ten years, how much money has ARS
    redirected into new uses research?
        Answer. Since fiscal year 1988, ARS has redirected approximately
    $21 million into new uses research. In addition to the redirections,
    ARS received an increase of $4.3 million for new uses research in
    fiscal year 1994.
                             nursery crops research
        Question. Where does ARS conduct its nursery crops research? Please
    describe the program and funding for each location.
        Answer. Nursery crops research is funded at 12 locations. A summary
    of project activities and funding for each location follows:

            Location                                            1997 Funding
    Washington, DC................................................$5,273,900
    Miami, FL.....................................................    56,200
    Montpellier, FR...............................................    89,400
    Tifton, GA....................................................    76,500
    Peoria, IL....................................................    92,400
    Ames, IA......................................................   128,000
    Beltsville, MD................................................   462,200
    Wooster, OH...................................................   402,700
    Corvallis, OR.................................................   654,300
    Logan, UT.....................................................    20,700
    Yakima, WA....................................................    14,900
    Headquarters..................................................   210,100
                        --------------------------------------------------------------
                        ____________________________________________________

          Total................................................... 7,481,300

        Washington, DC.--(1) Evaluate new floral crops and determine the
    effects of cultural practices on growth and flowering; (2) develop new
    methods to improve floral and nursery crops with enhanced flower color
    and disease resistance utilizing biotechnology; (3) select, evaluate,
    and develop cultivars of new trees and shrubs with improved growth
    habits and stress tolerance; (4) develop biologically-based
    alternatives to methyl bromide; (5) develop new approaches for disease
    control utilizing techniques of molecular biology in characterizing
    plant viruses; (6) identify biologically active natural products for
    insect control; (7) conduct efficacy and phytotoxicity tests to develop
    data in support of expansion of labels for minor use pesticides; (8)
    collect, identify and establish woody and herbaceous plants for public
    display; and (9) establish, develop, operate, and maintain an
    educational center for gardens and collections.
        Miami, FL.--Introduce, preserve, distribute and evaluate tropical
    and subtropical fruit and ornamental plants.
        Montpellier, France.--Discover, collect, and determine the
    potential for biocontrol agents in controlling sweetpotato whitefly and
    export those with promise to the quarantine facility in the U.S. for
    distribution to the research community.
        Tifton, GA.--Evaluate the effectiveness and phytotoxicity of
    nematicides, fungicides, herbicides, insecticides, and acaricides for
    control of nematodes, diseases, weeds, insects and mites in minor use
    pesticide evaluation on ornamental and food crops.
        Peoria, IL.--Develop low-cost culture techniques for producing
    fungal and bacterial biocontrol agents and enhance viability of the
    microorganisms in storage.
        Ames, IA.--Obtain performance data and/or residue samples in
    support of minor-use pesticides registration for pesticide use on
    ornamental specialty and food crops.
        Beltsville, MD.--(1) Integrate practices to improve soil/crop
    health by analyzing interactions of biological and physical properties
    of organic amendments, and combine the use of biocontrol agents and
    organic amendments to increase crop tolerance to water, nutrient and
    pathogen stress; (2) identify microorganisms with potential for control
    of soilborne pathogens and transfer technology to industry; (3) conduct
    research on biocontrol of gypsy moth and turf insects; (4) develop and
    evaluate new methods for detection of phytoplasms; (5) develop and
    coordinate uniform evaluation trials of turfgrass varieties.
        Wooster, OH.--Reduce damage and crop losses caused by selected
    insect pests of horticultural, turf and ornamental crops by developing
    alternative management strategies for pest control.
        Corvallis, OR.--(1) Investigate factors affecting seed quality and
    optimum production of forage and turf grass; (2) determine the effects
    of biocides on mycorrhizal fungi and produce new strains of these fungi
    resistant to biocides for possible use as an alternative to methyl
    bromide soil fumigation; (3) characterize changes in gene expression
    and levels of growth hormone in relation to flower induction; (4)
    investigate the distribution of products of photosyntheses in selected
    horticultural plants with and without mycorrhizal fungi associated with
    the roots; (5) develop technology to identify beneficial organisms to
    apply to roots to reduce stress and reduce disease severity; and (6)
    evaluate various fungicides, insecticides and herbicides for efficacy
    and phytotoxicity in support of floral and nursery crops label
    expansion through the IR-4 minor-use pesticide regional project.
        Logan, UT.--Evaluate and define existing turfgrass germplasms and
    characterize the genetic diversity to enhance germplasms with desirable
    traits for use by plant breeders.
        Yakima, WA.--Provide efficacy, phytotoxicity and yield data and
    residue samples for analyses to support registration or reregistration
    of minor use pesticides for control of insect pests.
        Headquarters.--Support minor use pesticide registration.
        Question. What major accomplishments have come from your research
    in this area?
        Answer.
        Washington, DC.--Introduced more than 100 new trees and shrubs
    during the past 70 years since the National Arboretum was established.
    The Arboretum has developed a wide range of plants with superior
    landscape qualities that are more disease and cold resistant and
    tolerant to urban stresses. For example, the Bradford pear introduced
    from the Arboretum is among the 10 most widely planted ornamental trees
    in the U.S. Other introductions include improved horticultural forms of
    crape myrtle, firethorn, viburnum, elm, magnolia, and holly. In
    addition, new flower introductions include lisianthus, kangaroo paw,
    ornithogalum and clematis for pot plant production. Many of these
    introductions are now produced and utilized nationwide and some
    introductions have been distributed abroad.
        Miami, FL.--Collections of avacado, mango, carambola, passionfruit
    and other tropical and subtropical fruits are maintained for use in ARS
    research programs in plant improvement through breeding and improvement
    of post-harvest quality for domestic use as well as export.
        Peoria, IL.--Molecular techniques have been applied in developing
    improved methods of classification of fungi and bacteria that will
    enhance the utilization of these organisms as biocontrol agents.
        Montpellier, France.--Approximately 25 natural enemies of the
    sweetpotato whitefly have been brought to the U.S. and five have been
    released in Texas, California and Florida for control of the insect.
        Tifton, GA and Ames, IA.--Support of minor-use pesticide
    registrations is a critical need of industry and is an integral part of
    pest and disease control procedures utilized by growers and processors
    to reduce crop loss and maintain high quality products.
                        poultry disease (pems) research
        Question. An increase of $100,000 above the fiscal year 1996 level
    was provided for fiscal year 1997 for ARS poultry enteritis and
    mortality syndrome research. Where is this research being carried out
    and what have been the results of your research on this disease to
    date?
        Answer. The fiscal year 1997 increase was allocated to the ARS
    Southeast Poultry Research Laboratory at Athens, Georgia where poultry
    enteritis and mortality syndrome research is carried out. Collaboration
    with the College of Veterinary Medicine at North Carolina State
    University has been established. Experiments to determine what agents
    are present in the infected samples, but absent from controls, are in
    progress.
                          air quality (pm-10) research
        Question. Where does ARS perform Air Quality (PM-10) research.
    Please describe the program, funding, and staffing by location.
        Answer. At Pullman, Washington, 1.3 scientist years (SY's) and
    $480,500 are allocated to PM-10 and PM-2.5 research. One component of
    the research is directed to understanding the physics of particulate
    emissions from agricultural fields during field operations and wind
    storms. Another component is determining where particulates caught in
    samplers have originated. The third component is directed to developing
    methods for reducing particulate emissions.
        At Manhattan, Kansas, 1.0 SY and $167,700 are allocated to research
    on PM-10 and PM-2.5 particulate physics and on developing a PM-10 and
    PM-2.5 module for inclusion in a wind erosion model (Wind Erosion
    Prediction System--WEPS). The latter will be used to select, from among
    alternative land treatments, the most appropriate treatments for
    controlling wind erosion and particulate emissions.
        At Lubbock, TX, 1.7 SY and $319,500 are allocated to field
    measurement and documentation of particulate fractions during wind
    erosion events.
        Question. What major accomplishments have come from your research
    in this area?
        Answer. a) Considerable progress has been made in identifying the
    physics of PM-10 emissions during weathering, tillage, traffic, and
    abrasion by wind-blown soil clods. b) Progress has also been made in
    establishing typical emission rates under field conditions for various
    tillage practices. c) The PM-10 module for inclusion in the wind
    erosion model has been coded, but still needs validation; and d) A
    scientist in Pullman, WA, has developed a biologically-based method for
    assaying the sources of particulates (i.e. where do particles come
    from--agricultural fields, roads, parking lots).
        Question. Is the ARS research effort in this area connected at all
    to the San Joaquin Valley PM-10 study funded through the CSREES or is
    that separate and apart from the ARS program?
        Answer. The ARS program and the CSREES-administered PM-10 program
    in the San Joaquin Valley of California are funded separately. However,
    there is informal coordination, communication, and cooperation between
    the programs. California personnel participate in the review and
    planning meetings of the Washington study (which is joint study between
    ARS, CSREES-administered Washington State University projects, EPA and
    State of Washington agencies), and ARS and other cooperators in the
    State of Washington participate in similar California meetings.
                               new crops research
        Question. Provide the Committee with a list of new crops ARS is
    researching.
        Answer. ARS currently conducts research on guayule, vernonia,
    lesquerella, cuphea, meadowfoam, crambe, jojoba, kenaf, and Hevea.
        Question. What progress has been made in your research?
        Answer. Guayule--Parthenium argentatum is a desert shrub that has
    been grown in Arizona, California, and Texas. Guayule produces natural
    rubber that has potential markets in non-allergenic products such as
    latex gloves and condoms, and as a resin for paints and coatings. We
    anticipate commercial production of hypoallergenic medical products
    from guayule within the next three to five years building on an ARS
    patent for latex extraction based on work at Albany, CA. The patent has
    been licensed by Yulex, Inc. ARS has proved that guayule latex can be
    manufactured into high-quality latex products and that guayule latex
    films provide an effective barrier to virus transmission. Through work
    at Phoenix, AZ, ARS has released six guayule lines selected for
    improved rubber concentration and yield, and that regenerate following
    harvest.
        Vernonia--Vernonia galamensis is native to Africa. Vernonia oil
    (epoxy oil) has the potential to replace solvents in paints and become
    part of the finished coating, which reduces air pollution from
    solvents. The domestication and commercialization of vernonia depends
    on development of high yielding cultivars and development of reliable
    agronomic practices. We have developed vernonia plants that grow and
    flower during the summer in the United States. Further, the harvestable
    yield of vernonia has been nearly doubled by developing lines with
    modified bracts in the seed head so that seeds remain on the plant
    longer.
        Lesquerella--Lesquerella fendleri is a winter annual that can be
    grown in the southern United States for its oil, gum, and meal. There
    is a large potential market for these products, so we expect that
    several thousand acres could be supported. Barriers to
    commercialization are the current incomplete development of high oil
    content, self-pollinating seed, reliable cultural practices, and seed
    harvesting and cleaning equipment. Basic research is being conducted
    with the oil to make new molecules with potential as biodegradable
    detergents, lubricants, and personal care ingredients. We have released
    three lesquerella lines with increased oil concentration and improved
    oil composition and developed another line with yellow seeds instead of
    the normal brown seeds, which reduces oil pigmentation contamination.
        Cuphea--Cuphea viscosissima is native to the temperate regions of
    the United States and contains medium chain oils. Cuphea oil has the
    potential to replace oils that are now imported such as coconut and
    palm oils from tropical regions, (about one billion pounds per year)
    for use in detergents and other industrial products. We are
    investigating oil modifications that can lead to new products for niche
    markets.
        Meadowfoam--Limnanthes alba is commercially grown in Oregon with
    8,100 acres planted for 1997 harvest, double that of a year ago. The
    economic impact is estimated to the $5 million. Meadowfoam oil, has
    been chemically modified to develop potentially new products for the
    personal care, lubricants, and detergent industries, while the seed
    meal may have application as a natural preemerge herbicide and
    nematocide.
        Crambe--Crambe Abyssinia is grown commercially in North Dakota,
    with 45,000 acres planted for 1997 harvest. The economic value is
    estimated to be over $9 million. We are conducting research to find new
    products from the oil.
        Jojoba--Simmondsia chinensis is a perennial shrub that is
    commercially grown in the desert Southwest for its unique oil. The oil
    has markets in lubricants and personal care items. More than 2 million
    pounds of seed were harvested in 1996 with an oil value of $7.5
    million. We have research underway to develop new products from jojoba.
        Kenaf--Hibiscus cannibinus is an annual fiber crop grown in the
    southern United States on 3,000-4,000 acres for a number of specialty
    fiber applications. Fiber separation facilities are in Texas,
    Mississippi, and Louisiana. Kenaf may have potential as a forage crop
    as well as a fiber crop. We have conducted research to develop improved
    varieties and cultural practices and to find new products.
        Hevea--Hevea braziliensis is the natural rubber tree, which is the
    source of the United State's imported natural rubber. We have conducted
    research to compare the biochemical pathway and enzymes responsible for
    production of rubber in guayule with those in Hevea to better
    understand how to further modify the rubber produced in guayule.
        Question. What benefits have been derived by the marketplace from
    this research?
        Answer. The most striking potential benefit can be shown for rubber
    production from guayule. The United States retail market for latex
    gloves was $3.1 billion in 1993. All natural rubber currently in
    commercial use is obtained from the Brazilian rubber tree (Hevea), a
    species restricted to the tropics for commercial production.
    Consequently, the United States is wholly dependent on nondomestic
    sources for this vital raw material. Furthermore, the recent widespread
    occurrence of life-threatening ``latex allergy'' to Hevea rubber makes
    development of an alternative, safe source of natural rubber
    imperative.
        Guayule commercialization has enormous potential. Allergic
    reactions to Hevea rubber have become severe. The first United States'
    cases appeared in 1988, growing to at least 500,000 by 1992. Estimates
    suggest that more than 20 million Americans were affected by 1994. This
    life-threatening allergy has created a major new, high-value market for
    hypoallergenic natural rubber products throughout the world. A
    hypersensitive individual must take care to avoid contact with current
    natural rubber products, which number 40,000, including more than 300
    medical devices. Severe reactions have occasionally caused death. The
    occurrence of ``rubber allergy'' is not only widespread but may be
    spreading rapidly, which apparently is due to increased use of latex
    gloves and condoms in response to the AIDS epidemic. Proteins present
    in the latex cause the allergy from Hevea and technologies have not yet
    been developed to remove the harmful protein. Latex from guayule does
    not contain these proteins and does not produce these allergic
    reactions.
        Our research has shown that guayule can be grown profitably for
    hypoallergenic latex production without a government subsidy. Thus,
    guayule production would enhance rural development in the southwestern
    United States. Rural development could be enhanced beyond the benefits
    to farmers through the concurrent development of local processing
    facilities and manufacturing plants.
        Development of new uses and improved varieties from the other new
    crops could further diversify American agriculture and aid in rural
    development. A cooperating company has licensed an ARS patent to make
    ``estolids,'' a new biodegradable material and is now starting to
    manufacture new personal care products from meadowfoam based on this
    technology. Finally, at Peoria, IL, ARS has analyzed 15,000 seeds of
    new crops for useful oil and protein concentrations and placed this
    information on the Internet. This information is guiding the
    development of new crops worldwide.
        Question. Please provide the Committee with actual obligations
    incurred for each line of research last year. What is the current and
    budgeted funding level for each?
        Answer. The obligations incurred and the current and budgeted
    funding levels for each of these new crops are as follows:

    ----------------------------------------------------------------------------------------------------------------
                                                                                       Fiscal year--
                                  Crops                              -----------------------------------------------
                                                                           1996            1997            1998
    ----------------------------------------------------------------------------------------------------------------
    Guayule.........................................................        $621,617        $567,700        $519,600
    Vernonia........................................................         160,517         154,200         154,200
    Lesquerella.....................................................         589,801         584,900         584,900
    Cuphea..........................................................         294,689         280,400         280,400
    Meadowfoam......................................................         101,908         101,600         101,600
    Crambe..........................................................          77,922          77,800          77,800
    Jojoba..........................................................         152,862         152,300         152,300
    Kenaf...........................................................       1,328,338       1,391,700         400,500
    Hevea...........................................................         278,842  ..............  ..............
    ----------------------------------------------------------------------------------------------------------------

                                     kenaf
        Question. What is your justification for terminating the Kenaf
    program at Weslaco, Texas and Mississippi State?
        Answer. Kenaf has long been proposed as a source of fiber for
    production of newsprint. Nonetheless, it has not gained a foothold in
    the paper making industry or newsprint market. At current low newsprint
    prices kenaf is unlikely to be produced at an economical cost. Major
    newsprint producers are committed to wood feedstock, and recycling is
    increasing in importance, so the future of kenaf for this market is
    speculative.
        The project at Mississippi State, funded through an extramural
    agreement with ARS, focuses largely on how to produce and harvest kenaf
    for fiber production. With the speculative market ARS can not justify
    investment in production research for kenaf fiber. In Weslaco, TX, ARS
    fulfilled its mission by developing nematode-resistant varieties.
    Entrepreneurs there are satisfied with the varieties, and are now
    concentrating on establishing a vertically-integrated industry to
    reduce costs and improve efficiency.
        Question. Where else does ARS perform research on Kenaf?
        Answer. In addition to Weslaco and Mississippi State, kenaf
    research is performed at College Station, TX; Lane, OK; New Orleans,
    LA; and Athens, GA.
        Question. Provide funding and staff years for fiscal years 1996-
    1998.
        Answer. Funding and staff years for kenaf research are as follows:
    fiscal year 1996, $1,651,400, 3.1 SY; fiscal year 1997, $1,391,700, 3.1
    SY; and, proposed for fiscal year 1998, $400,500, 1.8 SY.
                              fundamental research
        Question. How much money does ARS commit for basic research?
        Answer. ARS commits $363,985,000 for basic research, which is
    approximately one half of the agency's appropriated research funds.
        Question. How much of this research is classified as biotechnology
    research?
        Answer. ARS is devoting $77,439,200 in fiscal year 1997 on
    biotechnology research as a component of its basic research effort.
    This amounts to 10.8 percent of the total ARS appropriation.
        Question. Please identify current funding for plant genome and
    animal genome research.
        Answer. The current funding is $3,708,700 for plant genome research
    and $7,196,500 for animal genome research.
        Question. What portion of ARS' major research activities of Plant
    Sciences, Animal Sciences, etc., is basic, applied and developmental?
    Has this changed over the past 10 years?
        Answer. The portion of ARS' major research activities of Plant
    Sciences, Animal Sciences, etc., that are devoted to basic, applied or
    developmental research follows:

    ----------------------------------------------------------------------------------------------------------------
                            Research activity                              Basic          Applied      Developmental
    ----------------------------------------------------------------------------------------------------------------
    Soil, Water and Air Science.....................................     $43,092,000     $32,543,000      $7,707,000
    Plant Sciences..................................................     123,713,000      93,427,000      22,127,000
    Animal Sciences.................................................      58,504,000      44,182,000      10,465,000
    Commodity Conversion and Delivery...............................      72,638,000      54,856,000      12,992,000
    Human Nutrition Research........................................      32,276,000      24,375,000       5,772,000
    Integration of Ag Systems.......................................      15,343,000      11,587,000       2,745,000
    Ag Information and Library Services.............................      18,419,000  ..............  ..............
                                                                     -----------------------------------------------
          Total.....................................................     363,985,000     260,970,000      61,808,000
    ----------------------------------------------------------------------------------------------------------------

        The research activities and the distribution by basic, applied and
    developmental have not varied over the past 10 years.
                          plant gene expression center
        Question. What programs are being carried out at the Plant Gene
    Expression Center? Reflect funding and staff years for fiscal years
    1996-98.
        Answer. The total funding and scientists for the PGEC in fiscal
    year 1996 was $3,145,700 and 5 SY's, fiscal year 1997 $3,091,300 and 5
    SY's, with $3,091,300 and 5 SY's proposed for fiscal year 1998.
        The Plant Gene Expression Center (PGEC) conducts both long-term and
    short-term research. The long-term fundamental research fills gaps in
    our scientific knowledge of plant genetics, genetic mechanisms, and
    genetic modification. The short-term research is focused on solving
    specific problems by application of basic genetic knowledge to plants.
    Short descriptions of specific PGEC projects and their accomplishments
    are provided for the record.
        Regulatory genes that alter growth patterns.--Scientists at PGEC
    are identifying and analyzing regulatory genes that alter the growth
    patterns in corn. Because the arrangement of genes on the chromosomes
    in various grass species is so similar, this research on corn might be
    applicable to other cereals. A gene has been isolated that regulates
    the number of tillers in a corn plant, a trait that might be useful for
    rice or forage grass breeding. Through a CRADA with Pioneer Hi-Bred
    International, a gene that controls the number of individual flowers in
    a corn inflorescence was characterized. Manipulation of the preceding
    gene in cereals has the potential to increase yield.
        Mutants in pollen-specific receptor-like kinase genes from corn.--
    Researchers at PGEC are studying how the pollen grain interacts with
    female tissue during pollination and fertilization; receptor-like
    kinases are thought to be involved with this interaction and other
    interactions, such as plants with pathogens. Working with scientists at
    Pioneer Hi-Bred through a CRADA, PGEC scientists have isolated and
    characterized pollen-specific kinase genes from tomato and from corn.
    If these kinases play critical roles in determining pollen-female
    interactions, plant breeders may try to manipulate them as a new means
    of controlling pollination and fertilization.
        The NSF-DOE-USDA Arabidopsis Genome Project.--The PGEC initiated a
    large-scale genome sequencing effort for the model plant Arabidopsis in
    conjunction with Stanford University and the University of
    Pennsylvania. The Genome Sequence Lab of the PGEC has produced 1,000
    kilobases of gene sequence data since its recent inception. This
    project constitutes an international effort for identifying for the
    first time the genes that are responsible for the entirety of plant
    form and function.
        Improving gene transfer in cereal crops.--The gene transfer process
    produces unpredictable DNA integration and expression patterns in
    plants. PGEC scientists are applying novel site-specific recombination
    technology to wheat transformation to allow for precise DNA
    integration.
        Degrading the compound gossypol.--Scientists at the PGEC have
    isolated a bacterium that can break down gossypol, a toxic compound in
    cotton. Current research is underway to identify the genes(s)
    responsible for gossypol breakdown. Cottonseed free of gossypol could
    be used for food and feed.
        Transgenic plants.--Scientists from the PGEC have developed
    transgenic plants with a suppressed shade-avoidance response that will
    yield more grain under crowded field conditions than will non-
    transgenic plants. Through research such as this on the fundamental
    biology of the phytochrome (light-detection) system in plants, the
    productivity of crop plants can be increased without increased
    application of fertilizers or changes in cultivation practices.
        Control of plant tolerance to heavy metals.--Scientists at PGEC are
    characterizing several genes that affect metal toxicity in plants.
    Plant genes that confer tolerance to toxic metals may serve as tools
    for regulating and altering the rate and amount of toxic metal
    accumulation in plants. The goal of this research is to reduce the
    accumulation of toxic metals in food plants, and to enhance the rate of
    toxic metal accumulation in selected other plants so that they can be
    used for bioextraction of toxic metals from contaminated soils.
        Genic control of cell division in pollen.--Flower development and
    pollination are critically important to agriculture, because the
    world's major food crops are the products of seeds, which are the
    products of flowering. Many aspects of gene regulation during
    development of pollen grains are poorly understood and therefore
    genetic manipulation of pollen is difficult. Scientists at the PGEC
    have characterized genes that control development of a functional
    pollen grain through a tissue culture maturation system that assesses
    the relative importance of different types of gene regulation to pollen
    development. Manipulation of these genes will enable the development of
    novel pollen (``male-sterility'') systems to improve germplasm and to
    facilitate hybrid seed production.
        Control of plant cell growth.--As in animals, plants have hormones
    that regulate virtually all aspects of growth and development.
    Ethylene, a plant hormone, triggers ripening and decay of many fruits.
    Scientists at the PGEC have blocked ethylene synthesis in ripening
    tomatoes using a DNA-based technique termed ``antisense technology.''
    The genetically engineered tomatoes have excellent flavor compared to
    normal tomatoes, because they can ripen on the plant before picking
    without spoilage. This discovery has been licensed to the private
    sector and is being commercialized. Now the scientists are putting
    their genetic tools to work studying other important metabolic
    processes governed by auxin. The long-term goal of the investigation is
    to enhance the value of agronomic products and to enhance crop
    productivity.
        New approaches for isolating resistance genes to potato late
    blight.--Most plant diseases kill some plants but leave others
    untouched. Naturally-occurring genes for disease resistance offer huge
    potential for protecting crops from pathogens to which they are
    susceptible. The goal of this project is to transfer highly effective
    disease resistance genes into crops that suffer disease problems.
    Scientists at the PGEC previously isolated the tobacco mosaic virus
    resistance gene N from tobacco. The genetic material of tobacco,
    tomato, and potato are highly similar in content and organization, and
    homologues to the N gene have been located in a region of the potato
    genome bearing genes that confer resistance to the fungus that causes
    potato late blight and to the virus that causes a potato viral disease.
    This program is currently trying to isolate and determine the sequence
    of the genetic material near the resistance gene in potato. If
    successful, this research will have developed an effective approach for
    the isolation of numerous disease resistance genes of most crops, as
    well as providing a genetic means of combating diseases that threaten
    agriculturally-important crops.
                           peas and lentils research
        Question. Please describe your research effort in peas and lentils
    research.
        Answer. ARS conducts research on genetic improvement of peas and
    lentils with these efforts concentrated at Pullman and Prosser,
    Washington. Programs at other locations focus on problems of production
    and post-harvest issues.
        Question. By laboratory, what funds were obligated in fiscal year
    1996; what is your current estimate?
        Answer. The funding for peas and lentils for fiscal year 1996 and
    1997 is as follows:

    ------------------------------------------------------------------------
                                                       Fiscal year--
                                             -------------------------------
                    Location                       1996
                                                obligations     1997 funds
    ------------------------------------------------------------------------
    Albany, CA..............................        $153,046        $143,500
    Beltsville, MD..........................  ..............          64,000
    Pendleton, OR...........................          14,874          87,600
    Prosser, WA.............................         199,224         220,000
    Pullman, WA.............................         534,512         478,200
                                             -------------------------------
          Total.............................         901,656         993,300
    ------------------------------------------------------------------------

        Question. How many scientists are involved in Federal/State peas
    and lentils research?
        Answer. The ARS staff for peas and lentils research is 3.3
    scientist years.
        Question. Does ARS execute cooperative agreements for this
    research?
        Answer. When appropriate, ARS executes cooperative agreements to
    accomplish some of the goals of this research.
        Question. Explain with whom and how much.
        Answer. In 1995, ARS executed a specific cooperative agreement with
    Ireland on the Mycosphaerella blight fungus of peas, and funded it with
    $4,500. The purpose was to evaluate resistance of U.S. Plant
    Introduction accessions of peas where the disease is severe. In 1995,
    ARS executed a specific cooperative agreement with Washington State
    University in Mount Vernon, Washington, and funded it with $12,745 in
    fiscal year 1995 and $3,225 in fiscal year 1996. The purpose was to
    evaluate resistance to the pea cyst nematode in field conditions where
    the nematode actually occurs.
                                 grape research
        Question. Please describe your grape research program including
    your efforts in disease research areas of grape phylloxera and grape
    virology.
        Answer. The ARS grape research program involves efforts to enhance
    grape germplasm including development of methods to control pests and
    diseases. Activities include maintenance of a National Clonal
    Repository for grape germplasm, acquisition, evaluation and
    distribution of grape germplasm, development of quarantine and
    postharvest strategies to control arthropod pests, genetic improvement
    of grape scions and rootstocks, development of alternatives to soil
    fumigation with methyl bromide, and development of improved cultural
    practices to improve quality, production efficiency, and pest control.
        Grape phylloxera research is conducted on the cause of the death of
    newly planted phylloxera-resistant rootstocks in young replanted
    vineyards. This work is focused on the role of grapevine viruses and
    water mold fungi. Grape rootstocks with resistance to phylloxera and
    other soilborne pests are being developed by conventional breeding and
    evaluated. Using biotechnology, new genes providing resistance to
    soilborne pests are also being introduced into grapes.
        Grape virology research involves identifying the causal agents,
    describing disease spread, and devising control methods for viruses and
    graft-transmissible pathogens affecting grapevines. This research
    effort also includes developing specific assays for the rapid detection
    and identification of the pathogens. Sensitivities of various
    commercial grape rootstocks to viruses and graft-transmitted pathogens
    are being investigated.
        Question. Where is this research implemented?
        Answer. This research is implemented at Geneva, New York; Fresno,
    and Davis, California; Poplarville, Mississippi; Prosser, Washington
    and Kearneysville, West Virginia.
        Question. Provide actual obligations and staffing for 1996 actual.
        Answer. Actual obligations and staffing for fiscal year 1996 for
    all grape research was $2,486,750 supporting 7.5 SY's. This included
    research on grape phylloxera at $255,777 with 0.6 SY and grape virology
    at $222,522 with 0.6 SY.
        Question. Provide funding and staffing for 1997 current and fiscal
    year 1998 estimated for research on grapes.
        Answer. Funding in fiscal year 1997 and projected for fiscal year
    1998 is $2,420,600 supporting 7.0 scientists.
                                 hops research
        Question. Please describe your research on Hops.
        Answer. Hops research in ARS includes breeding and genetics in the
    development of new varieties with improved flavor characteristics. In
    addition, breeding for pest and disease resistance is an important
    component in the program. ARS also maintains a collection of foreign
    and domestic hop varieties and breeding germplasm used in the research
    program.
        Question. Whom does ARS cooperate with in this program?
        Answer. ARS cooperates with scientists at Washington State
    University at Prosser and with the University of Idaho in Moscow.
    Oregon, Washington, and Idaho are the three hop producing states.
        Question. Please provide your actual obligations and staffing for
    1996.
        Answer. Actual obligations in fiscal year 1996 for Hops research
    was $374,114. The project was supported by 1.1 scientist years.
        Question. Provide funding and staffing for 1997 current and fiscal
    year 1998 estimated for Hops research.
        Answer. ARS Hops research is conducted in Corvallis, Oregon.
    Funding for fiscal year 1997 is $388,200 with 1.1 scientist years of
    support. The same funding and scientist year allocation is projected
    for fiscal year 1998.
                              cooperative research
        Question. Describe the programs jointly carried out between ARS and
    Mississippi State University and the funding involved for fiscal years
    1997 and 1998.
        Answer. The programs in the form of specific cooperative agreements
    jointly carried out between the designated ARS locations and
    Mississippi State University follow. Except where noted, funding for
    fiscal year 1997 and estimated funding for fiscal year 1998 are the
    same.
    College Station, Texas
      --Catfish food safety--$324,700 (est)
      --Classification and database development of sorghum accessions
            screened for acid soil tolerance--$2,800 (est)
    Mississippi State (Starkville), Mississippi
      --Development of the GOSSYM-COMAX systems--$95,000 (est)
      --Insertion of competitor receptors from F strain Mycoplasma
            gallisepticum into M. gallinarum--$55,800 (est)
      --Economic returns on inputs for environmental control of poultry
            houses--$25,500 (est)
    Stoneville, Mississippi
      --Research on kenaf in Mississippi--FY 1997: $418,000 (est); fiscal
            year 1998: $0.
      --Interaction of herbicides with soil humic materials--$15,000 (est)
    ARS Headquarters
      --Impact of Management Systems Evaluation Area on fisheries
            characteristics and ecology of MS Delta watersheds and oxbow
            lakes (2)--$120,900 (est)
      --Aflatoxin development in modules during field storage in the
            Midsouth--$22,900 (est).
        Question. What accomplishments have been generated from these
    research initiatives?
        Answer. Catfish food safety: Treatment of catfish fillets with two
    percent malic or tartaric acids (naturally-occurring chemicals)
    extended microbial shelf-life by 6 days, maintained acceptable flavor,
    and reduced the human pathogen, Listeria monocytogenes. A Master-pack
    system was developed and proven to increase shelf-life of catfish
    fillets, even after placement above freezing conditions. An application
    to FDA for approval in catfish and other aquaculture species is
    pending.
        Classification and database development of sorghum accessions
    screened for acid soil tolerance: 5400 Ethiopian sorghum lines have
    been screened for acid tolerance in soils in Columbia, South Carolina.
    Data will be entered in the GRIN database.
        Development of the GOSSYM-COMAX systems: Cotton growth has been
    correlated with tissue potassium content and potassium deficiency in
    soils from areas of poor cotton productivity. The information is near
    the final analysis stage and will be disseminated to aid producers,
    consultants and state extension personnel in providing updated
    extension bulletins describing potassium deficiency symptoms. This
    information will be incorporated into the GOSSYM-COMAX decision support
    model for cotton production.
        Insertion of competitor receptors from F strain Mycoplasma
    gallisepticum into M. gallinarum: DNA has been prepared from the F
    strain Mycoplasma gallisepticum for use in the construction of DNA
    libraries. Cytakesin mgcl has been cloned for transformation into the
    genome of Mycoplasma gallinarum.
        Economic returns on inputs for environmental control of poultry
    houses: The effect of environmental temperature on growth and feed
    conversion in poultry has been determined. This information will be
    used to ascertain the economic return from changing environmental
    conditions inside poultry houses.
        Research on kenaf in Mississippi: Early breeding and selection
    studies on kenaf indicate that yield improvements for kenaf in the
    Midsouth are possible.
        Impact of MSEA on fisheries characteristics and ecology of MS Delta
    watersheds and oxbow lakes: In upland soils with erodible soils and
    flat slopes of two to six percent, no-till management was highly
    effective in controlling soil erosion. Cover crops enhanced the
    effectiveness of no-till production. Yields and profitability of crops
    with no-till management were equal to or greater than those from
    conventionally-tilled crops. The project has established five riparian
    zone sampling sites to evaluate the movement and degradation of
    herbicides in oxbow lake watersheds.
        Aflatoxin development in modules during field storage in the
    Midsouth: Two modules have been constructed near Corpus Christi, Texas,
    and two in Yuma, Arizona, where aflatoxin contamination of cottonseed
    is high. Additionally, two modules have been constructed at Mississippi
    State, Mississippi. The modules are being used to study aflatoxin
    development during field storage of cotton and wheat. The highest
    concentrations of aflatoxin production to date occurred in 1996 Texas
    modules and seem to be related to temperature within the modules.
        Question. Describe the programs jointly carried out between ARS and
    University of Mississippi and the funding involved for fiscal years
    1997 and 1998.
        Answer. The programs in the form of specific cooperative agreements
    jointly carried out between the designated ARS locations and the
    University of Mississippi follow. Except as noted, funding for fiscal
    year 1997 and estimated funding for fiscal year 1998 are the same.
    Oxford, Mississippi
      --Acoustic detection of insects in field crops--$176,500 (est)
      --Acoustic principles and techniques in soil & sediment research--
            $430,100 (est)
      --Numerical modeling of soil erosion & transport processes to support
            the DEC project--$847,000 (est)
      --Transport of sediment by wave power in shallow flow--$30,000 (est)
      --Development of natural products from plants and microbes for
            replacement of synthetic pesticides--$165,400 (est).
    Headquarters funding
      --Role of tension cracks in surface runoff--$44,700 (est)
      --Impact of agricultural MSEA on water quality and ecology of MS
            Delta watersheds & oxbow lakes--$40,000 (est)
    Beltsville, Maryland
      --Remote sensing & associated technology transfer to production
            agriculture--Fiscal year 1997: $70,000 (est); fiscal year 1998:
            $0
        Question. What accomplishments have been generated from these
    research initiatives?
        Answer. Acoustic detection of insects in field crops: Acoustical
    instruments have been developed for the detection of insect sounds in
    the soil, on plants, and in the laboratory environment. The instruments
    are being used in experiments while they are being further developed
    and refined. Previously unknown sounds made by imported fire ants have
    been detected. This technology has great potential for sensitive
    detection of small numbers of insect pests.
        Acoustic principles and techniques in soil and sediment research:
    The research has established: (1) feasibility of rapid, inexpensive,
    and non-invasive characterization of soil properties; (2) potential of
    acoustical techniques in describing the microtopography of agricultural
    lands; and, (3) usefulness of acoustical techniques in monitoring
    stream bed form.
        Numerical modeling of soil erosion & transport processes to support
    the Demonstration Erosion Control project: Improvements have been made
    in the modeling of soil erosion and sediment transport for watersheds
    and channel systems. A one-dimensional model for routing flow and
    sediment through natural channels with in-stream structures was
    upgraded and verified. A two-dimensional model has also been developed
    for predicting the propagation of unsteady flows along a channel with
    in-stream structures.
        Results demonstrated that when stream corridors needed restoration
    to be stabilized, degraded channels, water quality, aquatic habitat,
    and ecosystem health can be improved at little or no extra cost.
        Impact of agricultural MSEA on water quality and ecology of MS
    Delta watersheds and oxbow lakes: Research on CRP lands has established
    the effectiveness of grass strips in trapping sediments.
        Remote sensing and associated technology transfer to production
    agriculture: Physical and chemical properties of soils were combined
    with remotely sensed and global positioning system (GPS) data for two
    fields. Geostatistics was used to establish optimum designs for
    experiments.
        Question. ARS maintains ARS research locations in Mississippi at
    Stoneville, Starkville, Oxford, and Poplarville, Mississippi. Describe
    the programs carried out at these locations.
        Answer. The programs and their locations are described below:
    Stoneville, Mississippi--The research programs at Stoneville,
    Mississippi, are broad in scope and content. They include: the
    development of soybean genotypes and management systems that are
    specific to the early season and stress environments of the southern
    production area, including host resistant germplasm to manage soybean
    cyst nematodes; improved surveillance and pest control strategies for
    areawide management of cotton insect pests, and biological and genetic
    strategies for controlling the insect pests of soybeans, cotton, and
    pecans; the biochemical genetics of fiber quality, including
    identification of genetic-physiological parameters that enhance fiber
    quality, and the application of this knowledge to the improvement of
    cotton varieties; the development and evaluation of sustainable weed
    management strategies for cotton, soybeans and other crops, including
    assessment of the ecological and environmental benefits of reduced
    herbicide use, and the replacement of herbicides and methyl bromide by
    microbiological agents; the development and implementation of new
    technologies in cotton ginning that will maintain or enhance fiber
    quality while saving energy and other costs and improve efficiency; the
    breeding, genetics, and endocrinology of catfish; and the development
    of innovative technologies for more efficient pesticide applications in
    field crops.
        Mississippi State (Starkville), Mississippi.--The research programs
    at Starkville, Mississippi include: the development of integrated pest
    management strategies with emphasis on boll weevil and other cotton
    insects, as well as augmentation biocontrol and insect mass-rearing;
    the development of insect, disease and nematode resistant varieties of
    corn for the south; the modification and management of forage legume
    traits that enhance beef and dairy cattle production; the etiology and
    control of clover diseases caused by fungi, nematodes, and viruses;
    germplasm conversion and evaluation, and genetic enhancement in cotton,
    including host plant resistance to insects, diseases, and nematodes;
    the development of decision support systems for cotton production and
    cotton pest management; and nutritional and environmental management
    strategies, including the diagnosis and control of mycoplasmosis, to
    improve the quality and production efficiency of poultry.
        Oxford, Mississippi.--The program at the National Sedimentation
    Laboratory emphasizes interdisciplinary research on the processes,
    control, measures, prediction, and evaluation procedures associated
    with soil erosion by water; transport and deposition of sediment; and
    movement of agricultural chemicals in watersheds, streams, and lakes.
    At the National Center for the Development of Natural Products, the ARS
    Natural Products Research Unit research goals include: discovery of
    natural products that can safely be used to manage agricultural pests;
    cultural and genetic alteration of crops and cover crops for self-
    generation of natural chemicals to manage pests; and development of
    alternative crops producing high-value natural products such as
    pharmaceuticals, pesticides, and flavorings.
        Poplarville, Mississippi.--Research at Poplarville includes:
    breeding and cultural evaluation of new and improved small fruits for
    the Gulf Coast region including cultivars of strawberry, blackberry,
    highbush blueberries and muscadine grapes; development of new and
    improved small fruit management practices to increase yields, minimize
    production losses, improve fruit quality and conserve natural
    resources; determination of factors that regulate flowering, fruiting,
    dormancy, yield, cold hardiness, and tolerance to other environmental
    stresses; determination of optimum planting systems, irrigation and
    cultural systems adapted to the Gulf States region; and determination
    of the chemical and physical properties, nutritive value and quality of
    muscadine pomace and develop methods for utilization of products of
    pomace by the food industry.
        Question. What programs are coordinated with Mississippi State
    University, the University of Mississippi, and the University of
    Southern Mississippi?
        Answer. Programs that are coordinated with Mississippi State
    University include GOSSYM-COMAX systems research, boll weevil research,
    genetic engineering of Mycoplasma gallinarum, research on environmental
    control of poultry houses, kenaf research, weed research, and the
    Mississippi Delta MSEA project. Programs that are coordinated with the
    University of Mississippi include acoustic detection of insects in
    field crops, the Demonstration Erosion Control (DEC) project, the
    Mississippi Delta MSEA project, and natural products research. Programs
    coordinated with the University of Southern Mississippi include the
    Lower Delta Human Nutrition Initiative.
                                cotton research
        Question. Describe by location the pre- and post-harvest cotton
    research initiatives in ARS.
        Answer. Cotton research initiatives (projects) in ARS, by location,
    are as follows:
        Auburn, AL.--Managing wheeled traffic to avoid soil compaction in
    cotton production systems.
        Phoenix, AZ.--Management of the sweetpotato whitefly, including the
    basic genetics and ecology of the insect; development of economic
    thresholds for control action; on-farm integrated pest management;
    reduction of lint stickiness in infested cotton; and host plant
    resistance to whiteflies. Also, integrated management for suppression
    of the pink bollworm, crop management for efficient production, and
    breeding and genetics of extra-long staple (American Pima) cotton.
        Albany, CA.--Cost-effective means of rearing biological control
    agents for cotton pests.
        Fresno, CA.--More efficient ways to manage irrigation of cotton,
    especially drip irrigation systems; crop management in the irrigated
    desert.
        Shafter, CA.--Integrated systems for managing cotton production in
    the San Joaquin Valley, including crop production efficiency, pests and
    diseases, computer modeling of the crop, and improved equipment for
    production and harvesting.
        Fort Collins, CO.--Storage and maintenance of the nation's
    germplasm collection.
        Gainesville, FL.--Ecology, behavior, and biological control of
    insect pests; modification of insect behavior through manipulation of
    insect semiochemicals.
        Athens, GA.--New means of fiber processing for pulp.
        Tifton, GA.--Production systems for the Southeast, emphasizing
    management of nematodes, weeds, and insect pests with reduced use of
    nematicides and other pesticides.
        New Orleans, LA.--New instrumentation for cotton fiber quality
    evaluation; new processes for adding value to fiber and to textiles;
    molecular, biochemical, and ecological analysis of cotton fiber quality
    factors; and new products from cotton. Also, elimination of formation
    of aflatoxins in cottonseed; and development of new products and new
    processes to enhance utilization of cottonseed.
        Beltsville, MD (Headquarters).--Area-wide integrated management of
    insect pests; demonstration trials of biocompetitive strains of
    Aspergillus flavus to reduce aflatoxin contamination of cottonseed.
        Mississippi State, MS.--Breeding cotton for resistance to
    pathogens, nematodes, and insects; integrated management of insect
    pests; and development and transfer to users of a computer model of the
    cotton crop production system.
        Oxford, MS.--Farming systems that decrease soil erosion and improve
    water quality in the Mississippi Delta region.
        Stoneville, MS.--Breeding for fiber quality and resistance to
    insect pests; improved crop management with environmentally acceptable
    production practices; operation of the National Cotton Variety Testing
    Program; technology for mass rearing of beneficial insects; biological
    control and other management strategies for insect pests; technology
    for area-wide control of pests; development of sustainable alternatives
    to herbicides for weed management in cotton, emphasizing biocontrol;
    management of herbicide-resistant cotton crops; means to keep
    herbicides from contaminating waters; development and implementation of
    new ginning technology; and more efficient and effective technology for
    application of pesticides to the crop.
        Columbia, MO.--More efficient and effective propagation of insects
    for biocontrol of cotton pests.
        Las Cruces, NM.--Gin plant design and operation to retain fiber
    quality and spinnability of cottons from the West.
        Fargo, ND.--Basic genetics, physiology and molecular biology of
    insect pests.
        Wyndmoor, PA.--New value-added industrial products and biodiesel
    fuel from seed oils and tallow.
        Clemson, SC.--Evaluation of cotton spinning performance and end use
    quality; and instrumentation systems for improved cotton grading.
        Florence, SC.--Developing germplasm and soil, crop, and irrigation
    management practices suitable for Southeastern cotton production
    systems.
        College Station, TX.--Maintenance of the working germplasm
    collection for cotton; genome mapping for improved cotton breeding;
    development and testing of area-wide strategies for managing important
    insect pests of cotton; improved aerial application technology for
    pesticides; and basic and applied research to control pathogens and
    nematodes of cotton.
        Lubbock, TX.--New principles and new technology for efficient
    irrigation of cotton and other crops; improving plant productivity
    under stress conditions (unfavorable environments) in High Plains
    production systems; and improved harvesting and ginning technologies
    for stripper-harvested cottons.
        Temple, TX.--Sustainable production systems to minimize soil
    erosion in clay soils.
        Weslaco, TX.--Insect pest suppression through area-wide integrated
    pest management; development of biological control systems;
    conservation tillage practices for cotton; remote sensing capability
    for resource assessment; and breeding pest-resistant cottons.
        Montpellier, France.--Collection and evaluation of candidate
    biological control organisms from Eurasia for control of insect pests,
    weeds, and pathogens.
        Question. For your overall cotton research program, provide funding
    and staffing by project.
        Answer. Funding and staffing for the overall cotton research
    program are as follows:

    ------------------------------------------------------------------------
                                                      Fiscal year 1997--
                    Project title                ---------------------------
                                                       Funds      Scientists
    ------------------------------------------------------------------------
                       COTTON

    Soil dynamics, plant growth, and organic
     waste for sustainable management of
     degraded  soils............................        $218,900         0.8
    Biology, ecology, sampling and control of
     whiteflies.................................       1,490,500         5.2
    Cotton physiology, genetics, and plant
     insect interactions........................       1,277,300         5.0
    Integrated pest management strategies for
     cotton insect control......................       1,202,900         3.5
    Extrusion processing of insect diets for
     biological control programs................         107,900         0.4
    Irrigated desert research--II...............          48,100  ..........
    Irrigation water and crop management to
     sustain productivity and protect water
     quality....................................          91,800          .2
    Western integrated cropping systems research       1,154,000         4.0
    Preservation of base plant germplasm
     collection.................................         165,300          .1
    Biocontrol through artificial rearing of
     natural enemies and manipulation of host
     plant resistance...........................         120,000          .5
    Behavioral ecology and management of crop
     insect pests with semiochemicals...........         155,200          .3
    Insect biological control through behavioral
     and genetic manipulation...................         300,300          .9
    Chemistry and biochemistry of insect
     behavior, physiology, and ecology..........         195,700          .6
    European based research on biological
     control of sweetpotato whitefly............          89,400          .4
    Microbial treatments to enhance value of
     agricultural crops and products............          34,400          .2
    Genetic approaches for managing the corn
     earworm, helicoverpa zea, and the faw
     spodoptera furgiperda......................          27,300          .1
    Integration of tachinid parasitoids and
     pathogens to suppress insect pests of corn.          55,900          .2
    Development of innovative pest control
     strategies with biological and chemical
     control  agents............................         116,200          .4
    Biology and pathogenicity of noctuidonema
     guyanense on spodoptera frugiperda and S
     exigua.....................................          76,500          .2
    Management of nematodes to reduce crop loss
     and nematicide use on irrigated crops of
     the Southeast..............................          38,200          .1
    Develop weed management alternatives to
     methyl bromide for irrigated Southeastern
     crops......................................          32,500          .1
    Molecular analysis of cotton fiber
     development to improve cotton fiber quality         285,100         1.0
    Treatments for delayed cure applications for
     cotton fabrics.............................         744,300         3.0
    Cotton with improved wear and resiliency by
     facile polymerization reactions............         650,200         2.0
    Improved durability press cottons via a
     multifaceted approach......................         837,400         3.0
    Nonwoven textiles from cotton and other
     natural fibers.............................         586,400         1.1
    Develop technology for producing improved
     and ecologically friendly cotton-rich
     textiles...................................         714,900         2.7
    Correlations between fiber breakage and
     properties, surface modifications and
     textile processing quality.................         856,200         1.9
    Biochemical modification of cotton textiles
     for enhanced performance...................         735,200         5.5
    Variation in structure and performance of
     cotton from variety, growth history, and
     process-  ing..............................       1,157,600         5.4
    Nature and causes of motes and undeveloped
     cotton fibers, as related to dyeing
     imperfec-  tions...........................         661,400         4.0
    Development of improved instrumentation to
     measure cotton maturity and fineness.......         418,800         1.2
    Area-wide management of agricultural pests..         488,800  ..........
    Biochemistry and genetics of host plant
     resistance to insects, diseases, and
     nematodes..................................         190,000         1.0
    Biological control of cotton insects........         437,100         1.5
    Germplasm enhancement in cotton with the
     primitive race stocks of gossupium hirsutum         244,200         1.0
    Genetic enhancement for resistance to
     insects and nematodes in cotton............         539,200         1.1
    Development of model-based decision support
     systems for cotton production management...         822,900         3.0
    Integrated computer-based decision aid for
     cotton pest management.....................         428,800         3.0
    Development of integrated control procedures         883,500         3.0
    Improved erosion control for upland areas
     and reduced sediment production in DEC
     watersheds.................................         101,000          .3
    Farming systems for improved water quality/
     ecology for a Mississippi Delta MSEA.......          49,100          .1
    Development of mass propagation technology
     for beneficial and pest insects............         764,300         1.5
    Develop sustainable integrated weed
     management systems for cotton, soybeans,
     and other crops............................         134,100          .3
    Ginning methods to enhance fiber quality and
     value......................................         594,100         2.5
    Development and implementation of new
     technologies in cotton ginning.............         603,600         2.6
    Development of technology for efficient crop
     production systems.........................         229,400          .8
    Develop innovative technology for more
     efficient pesticide application in field
     crops......................................         647,200         2.7
    Replacement of herbicides and methyl bromide
     by microbiological control of weeds........         137,400          .6
    Reduce herbicide contamination of surface
     water by using alternative management
     systems cotton production 16,400...........  ..............
    Biochemical genetic and ecological effects
     of natural and synthetic herbicides........         137,400          .5
    Soil quality of sustainable agricultural
     systems and impacts on herbicide and
     alternative weed management systems........         256,300         1.0
    Genetic-physiological parameters that
     enhance fiber quality......................         495,800         1.6
    Biological and genetic control of crop pests
     emphasizing heliothis......................         417,100         0.9
    Areawide management of cotton insect pests
     in midsouth development of improved
     surveillance and pest management technology         678,400         3.0
    Control strategies for heliothis/helicoverpa
     spp. and other field crop insects in cotton
     agroecosystem..............................       1,025,900         3.0
    Biochemical genetics of fiber quality and
     its application to the improvement of
     cotton varieties...........................         132,400         1.0
    Development of high yield, high quality, and
     environmentally acceptable cotton
     production systems.........................         459,100         2.1
    National Cotton Variety Test Program........         458,900          .2
    Developmental and genetic factors useful to
     the propagation of beneficial insects for
     biocontrol.................................         242,200          .8
    Development of ginning systems and knowledge
     to enhance value and textile utility of
     Western cottons............................         962,000         2.7
    Biochemical and molecular approaches to the
     development of artificial rearing diets and
     DNA probe..................................         494,100         1.5
    Genes controlling insects development and
     reproduction and methods for insect genetic
     transformation.............................         462,800          .7
    Cotton quality identification and
     measurements affecting processing
     performance and end use quality............       2,179,500         6.0
    Management systems that enhance soil
     productivity in the Southeastern coastal
     plain......................................          99,600          .4
    Cotton germplasm enhancement and production
     systems with higher lint yield and improved
     fiber quality..............................         377,300         1.5
    Development of area-wide management
     strategies for adult corn earworm and other
     crop insect pests..........................         266,300         1.1
    Aerial application technology for crop
     protection.................................         432,400         1.7
    Acquisition, evaluation, maintenance and
     systemization of cotton germplasm..........         412,700         1.2
    Cotton germplasm evaluation and genome
     mapping....................................         389,900          .8
    Identify and develop alternative strategies
     for control of nematode parasites on cotton
     and kenaf..................................         339,600         1.2
    Develop nonchemical strategies for control
     of cotton diseases.........................         979,300         3.7
    Improving plant performance in adverse
     environment................................         369,600          .8
    Development of cotton germplasm with
     improved tolerance to abiotic stresses.....         150,700          .6
    Characterizing plant responses to thermal
     stress and their metabolic and molecular
     basis......................................         264,300          .9
    Harvesting and ginning technologies for
     stripper cotton............................         674,300         3.5
    Managing stress for improved water use
     efficiency and semi-arid crop production...         130,300          .6
    Cotton root systems: genetic diversity and
     response to environmental stress...........         190,600         1.0
    Sustainable agricultural production systems
     for clay soils.............................          62,800          .3
    Mass propagation/augmentation of wasp
     parasites to manage weevils, caterpillars,
     and other pests............................         715,200          .9
    Biology and ecology of crop pests
     emphasizing area-wide suppression of boll
     weevil and corn earworm....................         568,400         1.6
    Spatial information technology and computer-
     aided decision support systems for field
     management.................................          61,400          .1
    Integrated production systems...............         145,400          .4
                                                 ---------------------------
          Total.................................      36,988,900       123.1
                                                 ===========================
                     COTTONSEED

    Development of processes to improve oilseed
     utilization................................         765,100         3.0
    Development of biologically active peptides
     as pesticides..............................          65,600          .2
    Aflatoxin control through targeting gene
     cluster governing aflatoxin synthesis in
     corn and cottonseed........................         519,200         2.1
    Modification of fungal community structure
     to improve food safety.....................         397,900         1.6
    The conversion and utilization of
     agricultural byproducts as adsorbent
     material...................................         103,700          .3
    Aflatoxin control through addition of
     enhancement of antifungal genes in corn and
     cotton.....................................         674,100         3.4
    Preharvest control of aflatoxin.............         219,200  ..........
    Development of ginning systems and knowledge
     to enhance value and textile utility of
     western cottons............................         106,900         0.3
    Conversion of natural glycerides to higher
     valued products............................         214,100          .8
    Harvest and ginning technologies for
     stripper cotton............................          92,000          .5
                                                 ---------------------------
          Total.................................       3,157,800        12.2
                                                 ===========================
          Total for cotton and cotton seed......      40,146,700       135.3
    ------------------------------------------------------------------------

        Question. What recent accomplishments have come from the research?
        Answer. A few recent accomplishments of ARS cotton research are as
    follows:
        New cottons from India available to broaden the genetic base of
    cotton.--An ARS geneticist from Florence, SC, in cooperation with other
    scientists, analyzed the pedigrees of modern cotton varieties to prove
    that the genetic base of modern cotton varieties is narrowing. The
    ``sameness'' of varieties that are supposedly genetically distinct
    increases their vulnerability to a disastrous disease epidemic. Another
    ARS geneticist from College Station, TX, has recently collected more
    than 1100 cotton accessions from India, which will be added to the
    national germplasm collection and made available to breeders. These
    Indian cottons will help to broaden the genetic base of American cotton
    varieties.
        Cotton seedling diseases suppressed.--ARS scientists in College
    Station, TX, identified a fungus that can be applied to cotton planting
    seed as a biological control agent for seedling diseases. In tests
    across the Cotton Belt, the combination of the biological control agent
    and a fungicide was superior to fungicides alone in controlling
    seedling diseases. The biological control agent is being commercialized
    by the private sector.
        Nectariless cotton resists tarnished plant bug damage.--ARS
    genetics research in Stoneville, MS, produced a nectariless cotton
    variety (lacking a gland called the ``nectary''). These plants sustain
    about 50 percent less damage from tarnished plant bugs than do normal
    plants. Seed companies are now breeding the nectariless trait into Bt
    cotton because of it reduces the need for insecticides to control pests
    unaffected by the Bt.
        Artificial diet for rearing predatory green lacewing larvae.--These
    larvae are voracious predators of whiteflies, aphids, and many other
    crop pests, but until now they had to be reared on insect eggs that
    cost more than $600 per kg. On the new artificial diet, developed by
    ARS in Phoenix, AZ, they can be reared for 1/100 the cost, which will
    open the market for their use as biological control agents in cotton
    crops in the field. A patent is pending for the diet.
        ``Moisture-seeking'' cottonseed planter developed.--ARS in Shafter,
    CA, has developed and patented a planter that places the seed in soil
    with constant moisture, despite variation in soil texture or moisture
    distribution. The planter is expected to eliminate the need for
    replanting on virtually all cotton acreage in the West, for a savings
    of $10 million per year.
        Boll weevil management system for South Texas.--ARS in Weslaco, TX,
    demonstrated that Catolaccus grandis, a wasp parasite of the boll
    weevil, killed 96 to 99.6 percent of boll weevils in the field. Wasps
    reared on an artificial diet were effective. The total cost of using
    Catolaccus grandis, including rearing and release, is less than $23 per
    acre per year. A boll weevil management system has been proposed that
    reduces insecticide runoff from the field by \2/3\, increases
    profitability, and creates a new industry (propagation of natural
    enemies of the boll weevil).
        Core-wrapped yarns.--ARS research in New Orleans, LA, has led to
    development of new spinning technology for producing a unique core-wrap
    yarn. The yarn consists of a strong synthetic core fiber with a sheath
    of pure cotton fibers. The core and sheath do not slip or separate
    during use. The synthetic core provides high strength, durable press,
    and other valuable properties, while the sheath provides the comfort of
    pure cotton. The patented spinning process has been licensed to a U.S.
    company for commercial use.
                               screwworm research
        Question. What objectives are currently underway on screwworm
    research?
        Answer. There are seven objectives underway on screwworm research.
    All of these objectives are aimed at supporting the APHIS screwworm
    eradication program in Central America and FAO screwworm efforts in the
    Caribbean region. The ultimate objective is to free Central America and
    the Caribbean from screwworm so that we can either eliminate or
    minimize the possibility of reintroduction of screwworm into the U.S.
    The seven objectives of ARS screwworm research are to develop:
      --a vigorous screwworm strain for mass production of sterile flies;
      --new methods and validate the existing methods for surveillance,
            trapping, and monitoring of screwworm in Central America and
            the Caribbean region;
      --an easy to use, color-based Elisa method to distinguish the primary
            from the secondary screwworm under field conditions;
      --genetic fingerprints of feral screwworm populations of Central
            America and the Caribbean region so that we can trace the
            source of screwworm reinfestation in eradicated areas;
      --improved methods for the study of ecology, biology and population
            dynamics of screwworm populations in their natural habitats.
            This includes study of behavior, specially the habitat
            preferences, and dispersal of sterile and native flies using
            remote sensing and Geographic Information System technologies;
      --economical substitutes for the larval diet and cost effective
            screwworm rearing technologies. This includes development of
            male-only strain; and
      --cryopreservation methods for long-term storage of screwworm eggs to
            reduce the cost of continual screwworm rearing during the
            period of low demand for sterile flies and to increase the
            production of screwworm on short notice in response to high-
            demand and emergency periods.
        Question. At what locations is the research conducted?
        Answer. ARS conducts its screwworm research at four locations.
    These include Beltsville, Maryland; Lincoln, Nebraska; Fargo, North
    Dakota; and Panama City, Panama.
        Question. Provide resources associated with this research by
    location.
        Answer. The funding associated with screwworm research in fiscal
    year 1997 is as follows:
                                                            Fiscal year 1997
            Location                                                   funds
    Beltsville, MD................................................   $60,600
    Lincoln, NE...................................................   612,400
    Fargo, ND.....................................................    78,400
    Panama City, Panama...........................................   998,000
                        --------------------------------------------------------------
                        ____________________________________________________

          Total................................................... 1,749,400

        Question. What work is carried out cooperatively with APHIS?
        Answer. ARS conducts six research projects in cooperation with
    APHIS. These include:
      --development and testing of new vigorous screwworm strains for mass
            production of sterile flies;
      --development of economical substitutes for the larval diet and cost
            effective screwworm rearing technologies. This also includes
            development of a male-only strain;
      --diagnosis and correction of problems that occur in mass production
            of screwworm; such as breeding of house fly populations in the
            mass rearing facility or decline in screwworm pupal weights;
      --field testing of new screwworm trapping technologies developed by
            ARS. This includes the use of remote sensing methods;
      --diagnosis of factors contributing to the lingering screwworm
            infestations in areas under eradication; and
      --collection of feral screwworm samples from areas targeted for
            eradication for genetic fingerprinting.
                            foot-and-mouth research
        Question. Describe your research on Foot-and-Mouth Disease (FMD).
        Answer. All ARS research on FMD is conducted at the Plum Island
    Animal Disease Center (PIADC), Greenport, New York. The first goal of
    the FMD program is to continue development of genetically engineered or
    altered FMD virus that can be used to make vaccines that in the future
    would allow production and safe use outside of biocontainment. A second
    goal is development of diagnostics that can be produced and used
    outside of biocontainment and which can detect and differentiate
    vaccinated from infected animals. No such diagnostics currently exist.
    A third goal is to understand the basic cellular immune response of
    infected cattle in order to optimize vaccines, diagnostics, and
    alternative control measures. A fourth goal is to examine why some
    animals recover from infection but continue to shed virus.
        Question. Provide funding and staffing for fiscal years 1997 and
    1998.
        Answer. In fiscal year 1997, funding of $5,167,900 including 3.9
    SY's was allocated to Plum Island Animal Disease Center. The same
    amount of resources is proposed in the fiscal year 1998 Budget.
        Question. How do we cooperate with foreign countries in FMD
    research?
        Answer. The ARS FMD program continues to maintain a number of
    international research collaborations on a formal and informal basis
    throughout the world. These include cooperative agreements, training
    programs, and participation in international meetings and on
    international committees. PIADC's Foreign Animal Disease Laboratory
    holds the North American FMD vaccine bank for Canada, U.S., and Mexico.
    Scientists meet at least once a year to update emergency preparedness
    plans to make use of this resource in an emergency. Examples of recent
    new international collaborations are a proposed Brazil/U.S. project and
    a proposed Egypt/Israel/U.S. project. These types of programs allow
    international researchers to participate in the development and testing
    of new FMD diagnostics and vaccines. Concurrently, such cooperative
    programs provide PIADC scientists access to field environments to test
    new vaccines and diagnostics that have already been tested in the
    laboratory. This permits ARS to validate a new generation of
    genetically-engineered vaccines since USDA can not test FMD vaccines in
    the U.S. PIADC provides reagents and ideas and shares authorship on
    publications with many international groups. Participation in
    international workshops recently allowed PIADC to share information on
    their molecular expression system used to develop a new generation of
    vaccines, and it has resulted in several new collaborations. This
    technology is believed to be superior to that used by many European
    institutes.
        Question. Describe recent outbreaks of FMD and responses to control
    or eradicate them.
        Answer. The March 1997 outbreak of FMD in Taiwan is one of the most
    dramatic examples of how a livestock industry in a country can be
    totally destroyed in less than 1 month's time. FMD is highly contagious
    and spreads through herds at an alarming rate. More than 700,000 of
    Taiwan's 11 million pigs have died of the disease, and 3.6 million more
    are being slaughtered. This has resulted in environmental concerns
    about how to dispose of the dead swine. This outbreak closed all
    markets for Taiwan except those that already have FMD, and Japan has
    lost an important trading partner. This crisis will or is expected to
    increase total U.S. exports by $.5 billion. Taiwan will have to
    completely restock their swine industry with new animals and they are
    predicted to need a vaccination program for at least 10 years. The loss
    of FMD-free status will completely preclude their export of fresh pork
    products. With the number of international travelers entering the U.S.
    each day and the fact that FMD virus remains viable in pork and beef
    products for long periods of time, the U.S. is constantly concerned
    about accidental or terrorist introduction of FMD into the U.S.
    livestock population. Environmental concerns associated with the
    destruction of large numbers of animals during an FMD eradication
    program also contribute to the vulnerability of the U.S. livestock
    industry.
                             research on narcotics
        Question. Describe ARS's Program in research on drugs and
    narcotics.
        Answer. The Agricultural Research Service (ARS) narcotics research
    program supports the overall narcotic control programs of federal law
    enforcement, foreign affairs, and intelligence agencies.
        ARS currently maintains research programs for the eradication of
    narcotic crops using chemical and biological means, the identification
    of illicit crops using remote sensing, the estimation of narcotic crop
    yields, narcotic plant chemistry, and environmentally sound
    agricultural alternatives to illicit cultivation in narcotics producing
    countries.
        Question. Provide funding and staff years for fiscal years 1996-
    1998.
        Answer. The funding and staffing for ARS narcotics research
    programs are as follows:

    ----------------------------------------------------------------------------------------------------------------
                                           Fiscal year 1996--        Fiscal year 1997--        Fiscal year 1998--
                 Location              -----------------------------------------------------------------------------
                                            Funds     Scientists      Funds     Scientists      Funds     Scientists
    ----------------------------------------------------------------------------------------------------------------
    Beltsville, MD....................    $2,677,800         9.1    $3,053,200         9.4    $3,051,300         9.4
    Weslaco, TX.......................       277,800         1.0  ............  ..........  ............  ..........
    Headquarters......................     1,756,400  ..........     1,658,800  ..........     1,657,700  ..........
                                       -----------------------------------------------------------------------------
          Total.......................     4,712,000        10.1     4,712,000         9.4     4,709,000         9.4
    ----------------------------------------------------------------------------------------------------------------

        Question. List recent accomplishments and benefits from this
    research.
        Answer. During the last year, ARS supported herbicidal, eradication
    programs in Colombia and Panama, implemented by the U.S. Department of
    State. ARS also supported opium crop estimation efforts in Burma,
    India, and Laos, an opium evaluation program in Turkey, and implemented
    cooperative alternative crop research programs with counterpart
    institutions in Mexico, Peru, and the United Nations Drug Control
    Program. In support of these overseas efforts, an additional $250,000
    was received from the intelligence community, $50,000 from the
    Department of State for crop eradication, an additional $265,000
    earmarked from Department of State for the Turkish opium program, and
    $100,000 from the U.S. Embassy, Lima, for alternative crop development.
        ARS is currently in the process of preparing peer reviewed journal
    articles relevant to both bioherbicides for narcotic crop control, and
    integrated pest management for alternative crop initiatives in the
    tropics.
                                soybean research
        Question. What areas of soybean research are you pursuing?
        Answer. ARS conducts soybean research at 28 locations in Federal
    research laboratories and on university campuses. The program is a
    nationally managed, fully coordinated, multidisciplinary approach to
    solving production and postharvest needs of soybeans. The locations
    with objectives for the research follows:
        Albany, CA.--Genetic modification of soybean oil for industrial
    use.
        Ames, IA.--Genetic research for soybean improvement.
        Beltsville, MD.--Develop improved varieties with desired genetic
    traits such as resistance to pathogens and insects, and suppression of
    weeds, and develop management/crop models.
        Brookings, SD.--Integrated crop management systems.
        Columbus, OH.--Production optimization, water quality, and flooding
    tolerance.
        Columbia, MO.--Cropping systems and water management strategies.
        Coshocton, OH.--Management practices for erosion control and water
    quality.
        Florence, SC.--Development of cropping systems to optimize water
    management.
        Fort Collins, CO.--Acquisition, maintenance, and preservation of
    germplasm.
        Frederick, MD.--Molecular characterization of soybean dwarf virus.
        Gainesville, FL.--Environmental, physiological, and genetic
    limitations to production.
        Ithaca, NY.--Genetic enhancement of root development.
        Lincoln, NE.--Management practices to maximize production
    efficiency.
        Madison, WI.--Minimize harmful effects of bacterial pathogens.
        Manhattan, KS.--Grain odor assessment technology.
        Mayaguez, PR.--Winter nursery facilities to accelerate improved
    variety development.
        Morris, MN.--Environmental and crop management limitations to
    production.
        New Orleans, LA.--Biomodification of soybean oil for value-added
    products.
        Oxford, MS.--Develop sustainable cropping systems.
        Peoria, IL.--Product development, conversion of oil and protein for
    food and new industrial uses.
        Raleigh, NC.--Eliminate genetic and physiological limitations to
    production and enhance nitrogen fixation.
        St. Paul, MN.--Management and cropping practices affecting water
    quality.
        Stoneville, MS.--Develop insect resistant germplasm and improve
    weed control techniques, and host resistance to soybean cyst nematodes.
        Tifton, GA.--Develop pesticide technology for control of nematodes,
    weeds, and insects.
        Urbana, IL.--Develop comprehensive soybean production technologies
    and maintain, evaluate, and distribute germplasm.
        West Lafayette, IN.--Management practices for weed and disease
    control, and develop improved germplasm.
        Wooster, OH.--Management practices for pest control and to develop
    germplasm for divergent environments.
        Wyndmoor, PA.--Develop oil products for industrial use.
        Question. List research funding and staff years by location.
        Answer. Current funding and scientific years for each location
    follows:

    ------------------------------------------------------------------------
                      Location                    1997 funding    Scientists
    ------------------------------------------------------------------------
    Albany, CA.................................        $559,300          2.5
    Ames, IA...................................         803,300          2.2
    Beltsville, MD.............................       4,514,600         15.3
    Brookings, SD..............................         148,600          1.0
    Columbus, OH...............................          99,200          0.4
    Columbia, MO...............................         267,700           .8
    Coshocton, OH..............................          69,400           .3
    Florence, SC...............................         198,400           .8
    Ft. Collins, CO............................         279,100           .5
    Frederick, MD..............................          83,900           .1
    Gainesville, FL............................          52,900  ...........
    Ithaca, NY.................................          22,100           .6
    Lincoln, NE................................          63,900           .2
    Madison, WI................................          21,200           .1
    Manhattan, KS..............................         128,200           .6
    Mayaguez, PR...............................         120,200           .1
    Morris, MN.................................         249,700          1.3
    New Orleans, LA............................       1,063,100          4.0
    Oxford, MS.................................         101,000           .3
    Peoria, IL.................................       5,643,200         18.0
    Raleigh, NC................................       1,022,600          6.0
    St. Paul, MN...............................         307,500           .9
    Stoneville, MS.............................       3,515,500         12.0
    Tifton, GA.................................          64,000           .4
    Urbana, IL.................................       2,117,800         11.1
    W. Lafayette, IN...........................         793,900          3.0
    Wooster, OH................................         297,500          1.4
    Wyndmoor, PA...............................         741,300          2.7
                                                ----------------------------
          Total................................      23,349,100         86.6
    ------------------------------------------------------------------------

        Question. List recent accomplishments obtained in your research on
    soybeans.
        Answer. ARS focuses its soybean research on developing new uses for
    soybeans and on increasing soybean production efficiency so that
    production costs are lowered and soybeans are more competitive in the
    global market. Several ink formulations have been developed by
    scientists at Peoria, Illinois. This work resulted in a patent being
    issued for newspaper printing ink and a pending patent for heat-set and
    sheet-fed printing inks. Market potential use of soy or vegetable oil
    in ink formations is estimated at one billion pounds or eight percent
    of domestic soybean oil production and would represent a 300 percent
    increase in current industrial use of soybean oil. Modified soybean oil
    continues to be evaluated as an alternative for diesel fuel by
    developing cost-effective technology for conversion to fatty acid
    esters and commercial testing of performance enhancing additives. Work
    is progressing on use of soy foamed plywood glues. Soybeans could be
    used as a foaming agent for softwood plywood adhesives and replace
    blood protein at a lower cost. Work is also continuing to develop
    soybean-derived lubricants that are biodegradable and friendly when
    lost to the environment such as when used on chainsaws.
        Significant advancement has been made toward broadening the genetic
    base of soybeans by obtaining hundreds of soybean lines from China and
    adding these to the soybean collection maintained at Urbana, Illinois.
    The soybean plant originated in China and adding new lines brings new
    genes for pest resistance and for developing new value-added products.
    The nation's commercial soybean varieties are descended from a small
    number of ancestral lines. Thirty-five lines account for more than 95
    percent of the genes in all commercial varieties grown in the United
    States. Soybean lines also have been developed that are expected to
    have longer shelf-lives without developing rancidity, and other lines
    have less capability of developing off-flavors. The projected cost
    savings for processors is about $200 million per year. A new variety,
    jointly released with the University of Illinois, lacks an enzyme
    inhibitor that interferes with protein digestion by people and animals,
    thus making the meal a higher quality and more nutritious feed. This
    will considerably increase the feeding efficiency of animals fed
    soymeal. Progress continues in identifying new lines with resistance to
    nematode infections and other disease organisms. Drought-resistant
    germplasm is nearing the stage of public release, and lines have been
    identified that will contribute flooding tolerance genes to soybeans. A
    new soyfood variety, ``Pearl,'' has been released and provides a new
    high-value product for export to Japan. Another variety recently
    released demonstrates it is possible to achieve simultaneous increase
    in protein, oil, and yield. The high protein variety ``Prolina'' should
    deliver high protein meal for the poultry and swine feed industries.
                                human nutrition
        Question. ARS now has six human nutrition centers. Please explain
    the mission of each.
        Answer. The mission of each of the six human nutrition centers
    follows:
        Beltsville Human Nutrition Research Center, Beltsville, Maryland.--
    Defines the role of food and its components in optimizing health and
    reducing the risk of nutritionally related disorders in the diverse
    American population. To accomplish this mission, the Center develops
    new methods of food analysis; determines the role of nutrients and
    their interactions in maintaining health; monitors nutritional intakes
    and maintains the database of the nutrient content of foods; studies
    the expenditure of energy by using direct and indirect calorimetry; and
    investigates the consequences of altered nutrient intakes in free-
    living humans.
        Jean Mayer USDA Human Nutrition Research Center on Aging at Tufts
    University, Boston, Massachusetts.--Defines safe and adequate nutrient
    intakes and identifies factors that may contribute to degenerative
    processes associated with aging. To accomplish this mission, the Center
    determines factors related to prevention of age-related loss of bone
    density leading to osteoporosis and fracture, and the preservation of
    muscle strength; identifies dietary factors critical in slowing or
    preventing cataract development; determines the relation of antioxidant
    food components to heart disease and immune function; and explores
    relationships between vitamins and brain function, stroke, and
    dementia.
        Grand Forks Human Nutrition Research Center, Grand Forks, North
    Dakota.--Determines nutrient needs for humans with an emphasis on
    mineral element requirements that prevent disease and promote health
    and optimal function throughout life. To accomplish this mission, the
    Center determines the importance of mineral elements at the molecular
    level with an emphasis on chronic disease; identifies detrimental
    functional changes, especially in bone, brain, cardiovascular and
    reproductive systems, that occur in the U.S. population because of
    improper mineral element nutriture; identifies and validates
    biochemical and physiological status assessment indicators for use in
    the study of populations at risk from inadequate mineral element
    nutrition; and defines the impact of environmental, dietary,
    physiological and psychological stressors on specific mineral
    requirements.
        Children's Nutrition Research Center at Baylor College of Medicine,
    Houston, Texas.--Defines the nutritional needs of pregnant and
    lactating women and of their infants and children from conception
    through adolescence. To accomplish this mission, the Center establishes
    nutrient requirements to prevent low birth weight babies, particularly
    in pregnant adolescents; elucidates nutrient-gene interactions that
    regulate metabolism and disposition of nutrients; determines nutrient
    requirements for growth and development of school-aged and adolescent
    children; and establishes nutritional relationships to acute and
    chronic childhood diseases.
        Western Human Nutrition Research Center, San Francisco,
    California.--Determines the impacts of dietary, environmental,
    behavioral, and genetic factors on nutrient requirements and functions.
    To accomplish this mission, the Center establishes markers of
    nutritional status in relation to maintenance of healthy body weight,
    nutrition, infection and immune disorders; and protective factors in
    foods.
        Arkansas Children's Nutrition Research Center, Little Rock,
    Arkansas.--Determines the role of nutrition in cognitive and behavioral
    function, and the health consequences of infant consumption of dietary
    factors (phytochemicals) such as phytoestrogens on endocrine and
    metabolic development and prevention of chronic diseases.
        Question. Provide existing resources, both funding and staff years,
    for each center. Provide the resources planned for each.
        Answer. The funding and scientific staffing for the ARS Human
    Nutrition Research Centers and other related programs for fiscal year
    1997 and fiscal year 1998 are as follows:

    ------------------------------------------------------------------------
                                        Fiscal year 1997
      Centers and other related   ---------------------------   Fiscal year
               programs                Funding      Staffing   1998 funding
    ------------------------------------------------------------------------
    Beltsville Human Nutrition
     Research Center, Beltsville,
     MD..........................    $18,499,900          43    $19,499,900
    Grand Forks Human Nutrition
     Research Center, Grand
     Forks, ND...................      7,999,700          12      8,999,700
    Human Nutrition Research
     Center on Aging at Tufts....     14,747,900          42     15,747,900
    University, Boston, MA
     (Includes Geriatric
     Nutrition Research,
     Danville, PA)...............       (188,000)  .........       (188,000)
    Children's Nutrition Research
     Center at Baylor College of
     Medicine, Houston, TX.......     10,756,600          26     11,756,600
    Western Human Nutrition
     Research Center, San
     Francisco, CA...............      5,317,600          12      6,317,600
    Arkansas Children' Nutrition
     Research Center, Little
     Rock, Arkansas..............      1,878,800           5      2,878,800
    Lower Mississippi Delta
     Intervention Research
     Initiative (LA, AR, MS).....      3,166,900          16      3,166,900
    National Agricultural Library        693,400           7        693,400
    Headquarters.................  ..............  .........      6,000,000
    Other Locations..............      1,075,600           5      1,089,600
                                  ------------------------------------------
          Totals.................     64,136,400         168     76,150,400
    ------------------------------------------------------------------------
    Of the total staff of 168, 85 are Federal FTE and 83 are cooperator
      employees.

        Question. There appears to be significant overlap in the research
    carried out at the nutrition centers. Can the resources of these
    centers be combined? Explain.
        Answer. Each of the described missions of the USDA/ARS Human
    Nutrition Research Centers are distinct and unique. It would be
    difficult, if not impossible, to combine resources at these Centers
    because of the different populations and nutrients studied and
    approaches used at each that require specific types of skills,
    equipment, and facilities. To best use their limited resources, the six
    USDA/ARS Human Nutrition Research Center Directors meet regularly with
    the National Program Staff for Human Nutrition Research in ARS to
    assure that there is no overlap in research programs and that critical
    and high impact research is carried out at the Center with the
    appropriate staff, equipment and facilities. A specific research
    problem such as the cause of a certain nutritional disorder, or the
    assessment or alleviation of a nutritional problem, may require study
    at more than one Center because of the specific resources and expertise
    available in each.
        Question. How do you integrate human nutrition research with the
    agricultural mission of your agency?
        Answer. Knowledge about health-promoting foods and components of
    foods is used by animal, plant, soil, and post-harvest scientists for
    development of methods that modify food composition both during
    production and processing, expand food choices, and provide more
    options for healthful diets. Examples of nutritional input to the
    agriculture include:
      --Production of meat with less fat.
      --Development of grains with more healthful fatty acid profiles and
            with increased content of health promoting vitamins and
            minerals.
      --Development of fruits and vegetables with increased content of
            beneficial phytochemicals such as vitamin C and carotene--a
            precursor of vitamin A.
      --Identification of components of a healthful diet high in
            phytonutrients and antioxidant substances.
        Nutrition research results can counteract some of the claimed
    negative attributes for some nutritious foods such as meat, milk, and
    eggs which have affected the market for these products.
                                 remote sensing
        Question. What remote sensing research are you pursuing?
        Answer. ARS research on the development of remote sensing
    technologies that can benefit agricultural production, resource
    management, and the environment is conducted at the following
    locations: Phoenix, Arizona; Tucson, Arizona; Shafter, California; Fort
    Collins, Colorado; Beltsville, Maryland; El Reno, Oklahoma; University
    Park, Pennsylvania; and Weslaco, Texas.
        Phoenix, Arizona.--Research is focused on four main areas:
    development of satellite-based remote sensing for assessing large-area
    evapotranspiration rates over croplands and rangelands to assess plant
    vigor, soil moisture conditions, and biomass production; development of
    decision support tools for farm managers using both on-site
    measurements of physical and biological conditions, and geospatial
    information provided by sensors mounted on farm equipment and aircraft;
    use of hand-held radiometers for non-destructive estimation of light
    and water use efficiencies by agricultural crops and native plant
    communities; and improvement of basic sensor design, use, and image
    quality.
        Tucson, Arizona.--Research is targeted toward the scientific and
    inventory needs of the SALSA (Semi-Arid Land-Surface Atmosphere)
    project. The primary goal of this multi-year, multi-disciplinary
    project, involving several agencies and research institutions, is to
    understand, model, and predict the consequences of natural and human-
    induced changes on the basin-wide water balance and ecological
    diversity of semi-arid regions at storm event, seasonal, interannual,
    and decadal time-scales using the San Pedro River Basin. Remotely
    sensed data will be used to determine the rates of evapotranspiration
    from key landscape features, such as riparian corridors, and to
    quantify long-term changes in vegetation for both the U.S. and Mexican
    components of this river basin.
        Shafter, California.--Remote sensing activities are directed toward
    the development and validation of precision farming practices which
    would provide economic benefits to California cotton growers and the
    industry, and environmental benefits to rural communities. Detailed
    ground-based radiometer measurements are being used to develop spectral
    signatures for detecting insects, mites, nematodes, and diseases with
    the aid of high-resolution imagery. An aircraft-based, multi-spectral
    remote sensing system is being developed for scouting early stages of
    pest infestations in cotton fields. Procedures for incorporating this
    remotely-sensed information into ARS cotton production models will
    extend their crop and farm management capabilities.
        Fort Collins, Colorado.--Research is aimed at assessing the
    potential for using readily available soil survey information and
    passive microwave reflectance imagery to map the subsurface hydraulic
    properties of agricultural soils. The methodology will be validated
    using data from the intensively instrumented ARS watershed on the
    Little Washita River in central Oklahoma. The productivity, economic,
    and environmental benefits of incorporating remotely sensed data in
    farm-level decision support models are also being evaluated using data
    from two farms in eastern Colorado.
        Beltsville, Maryland.--The Remote Sensing and Modeling Laboratory
    is evaluating the potential for using actively induced fluorescence to
    determine vegetation condition, retrieve important biophysical
    parameters, and estimate large-area crop yields. Laser induced
    fluorescence techniques are being used to determine changes in leaf
    photosynthesis, and measure water and nutrient stresses. Remotely
    sensed biophysical parameters, such as leaf area index, are being used
    with process-based crop models to assess changes in crop condition and
    predict crop yields at regional scales. Research on the use of spectral
    imagery from satellite-based sensors for improving reliability and
    performance in precision farming is also being pursued.
        The Hydrology Laboratory at Beltsville, Maryland is conducting
    research on remote sensing applications to water resources management
    and agriculture. Techniques are being developed to use existing and
    future satellite-based sensors, with wavelengths in the visible to
    microwave bands, for mapping water, energy, and biogeochemical fluxes
    over large areas. These techniques will provide resource management
    agencies with practical and cost-effective methods for monitoring
    environmental conditions. Techniques for measuring the water equivalent
    of snow cover are being developed and tested in several western U.S.
    basins. ARS is collaborating with the National Aeronautics and Space
    Administration in the development of practical technologies for mapping
    surface soil moisture over large areas using microwave imagery to
    improve both hydrologic and climate forecasts, and agricultural
    management decisions. Airborne laser altimeter data is being used to
    measure topography, gully and stream cross-sections, vegetative cover,
    and other landscape features for large areas. These measurements have
    the potential to improve estimates of soil losses from agricultural
    landscapes and promote more effective management of the nation's water
    resources.
        El Reno, Oklahoma.--Remote sensing research is directed toward
    using digital elevation data and imagery from satellite-and aircraft-
    based sensors to characterize diverse agricultural landscapes at
    watershed and river basin scales. Hydrologic and geomorphic analyses of
    vital landscape features, such as topography, channel networks,
    subdrainage boundaries, and flow paths are being extracted from the
    digital elevation data. Spatial distributions of suspended sediment and
    chlorophyll contaminants in surface water bodies are being estimated
    from low-level, hyperspectral sensor platforms. Soil moisture and
    biophysical properties of vegetation, such as leaf area index, are
    being mapped using remotely sensed data from aircraft-based sensors.
    Future research will include the use of aircraft-and satellite-based
    sensors to provide estimates of forage quantity and quality over large
    areas.
        University Park, Pennsylvania.--Remote sensing research is directed
    toward using aircraft-and satellite-based sensors to evaluate spatial
    and temporal changes in surface soil moisture over northeastern
    landscapes. This information will be used to establish the reliability
    and performance of soil water balance, and natural resource management
    models that incorporate both the temporal and spatial variability of
    the hydraulic properties of soils in agricultural landscapes. The
    National Aeronautics and Space Administration and Pennsylvania State
    University are collaborating in the work.
        Weslaco, Texas.--Remote sensing research includes: development of
    near real-time sensors to identify, quantify, and analyze biological
    and soil variables; data integration from remote sensing, geographic
    information systems, and global positioning systems into technologies
    for agricultural and resource management; methodologies for using
    sensor imagery in developing site-specific strategies for crop and
    pasture land management; and the transfer of spatial information
    systems and technologies to public agencies and the private sector.
    This work is collaborative with several academic institutions, State
    and Federal agencies, and private companies. For example, ARS
    researchers, the Animal Plant Health Inspection Service, farmers, and
    crop insurance representatives are cooperating in the development of
    spatial management systems for monitoring and responding to the impact
    of Mexican fruit flies on citrus production in Texas. In April 1997,
    the location hosted the 16th Biennial Workshop on Color Photography and
    Videography with participants from several companies and 16 foreign and
    domestic research institutions.
        Question. Please list funding and staff years by location.
        Answer. Funding and scientists by location for fiscal year 1997 are
    as follows:

    ------------------------------------------------------------------------
                      Location                        Funding     Scientists
    ------------------------------------------------------------------------
    Phoenix, AZ.................................        $327,300         1.2
    Tucson, AZ..................................          88,600         0.3
    Shafter, CA.................................         115,400          .4
    Ft. Collins, CO.............................          26,100          .1
    Beltsville, MD..............................       2,236,500         8.4
    El Reno, OK.................................         599,600         2.0
    University Park, PA.........................          38,400          .1
    Weslaco, TX.................................       1,042,700         1.8
                                                 ---------------------------
          Total.................................       4,474,600        14.3
    ------------------------------------------------------------------------

        Question. What is your justification for proposing the elimination
    of the ``Remote Sensing Technologies for Crop Production'' project?
        Answer. This Cooperative Research Project, which was established by
    Congressional Directive in 1989, was targeted toward stimulating
    private sector interest in agricultural applications of imagery from
    satellite-and aircraft-based sensors, and expanding the use of ARS
    developments of Remote Sensing Research by resource managers and food
    and fiber producers. In recent years, there has been substantial growth
    in the private sector's interest in applying remote sensing
    technologies to both resource management and food and fiber production
    therefore reducing the need for this project. Because of pressures on
    the ARS budget, several current activities, including this project,
    must be terminated to support new budget initiatives. Every effort will
    be made to insure that the desired inter-action between ARS remote
    sensing specialists, public sector resource management agencies, and
    industry will continue to be promoted through other remote sensing
    initiatives.
                         hazardous waste clean-up (hwc)
        Question. Please list the funds obligated by location for hazardous
    wastes projects for fiscal year 1996 and planned for fiscal year 1997.
        Answer. The funds obligated by location for hazardous waste
    projects for fiscal year 1996 and planned for fiscal year 1997 are as
    follows:

                        Fiscal year 1996 funded projects

    Athens, GA....................................................    $7,500
    Savannah, GA..................................................   375,000
    Ames, IA......................................................   243,863
    Peoria, IL....................................................    63,100
    Beltsville, MD................................................ 2,662,103
    Greenport, NY.................................................   524,569
    El Reno, OK...................................................    70,000
    Mayaguez, PR..................................................    12,000
    Weslaco, TX...................................................    35,775
    St. Croix, VI.................................................    48,890
    Madison, WI...................................................    37,200
                        --------------------------------------------------------------
                        ____________________________________________________

          Total................................................... 4,080,000

                        Fiscal year 1997 planned projects

    Shafter, CA...................................................   $50,000
    Washington, DC................................................   100,000
    Savannah, GA..................................................   100,000
    Ames, IA......................................................    20,000
    Peoria, IL....................................................    50,000
    West Lafayette, IN............................................    50,000
    Beltsville, MD................................................ 2,658,000
    East Lansing, MI..............................................   116,000
    Greenport, NY................................................. 1,030,000
    Coshocton, OH.................................................   150,000
    Weslaco, TX...................................................    15,000
    Temple, TX....................................................    36,000
    Madison, WI...................................................    25,000
                        --------------------------------------------------------------
                        ____________________________________________________

          Total................................................... 4,400,000

        Question. Provide amounts and brief description of each project
    funded from both Agency funds and departmental HWC funds.
        Answer. The amounts and a brief description of each project funded
    from both Agency funds and departmental HWC funds for fiscal year 1996
    and planned for fiscal year 1997 are as follows:

    Fiscal year 1996 Agency Funded Projects:
        Athens, GA: Underground Storage Tank Removal/Replacement..    $7,500
        Beltsville, MD:
            Remedial Investigation/ Feasibility Study at National
              Priorities List Sites............................... 1,400,191
            Removal Actions at National Priorities List Sites.....   436,850
        Greenport, NY:
            RCRA Site Closure Activities..........................   360,017
            Petroleum Contamination Cleanup.......................   164,552
        El Reno, OK: Environmental Site Assessment Phase II/
          Sampling................................................    70,000
        Mayaguez, PR: Underground Storage Tank Removal/Replacement    12,000
        St. Croix, VI: Underground Storage Tanks Removals/
          Replacements............................................    48,890
                        --------------------------------------------------------------
                        ____________________________________________________

            Subtotal.............................................. 2,500,000
                        ==============================================================
                        ____________________________________________________
    Fiscal year 1996 HWC Funded Projects:
        Savannah, GA: RCRA Sampling and Remedial Actions..........   375,000
        Beltsville, MD:
            Biodegradable Site Cleanup............................   574,606
            Remedial Investigation/ Feasibility Study at National
              Priorities List Sites...............................    14,837
            Underground Storage Tanks Removals/Replacements.......   235,619
        Ames, IA: Underground Storage Tanks Removals/Replacements.   243,863
    Peoria, IL: Sampling and Remedial Actions.....................    63,100
        Weslaco, TX:
            Investigate Acid Neutralization Tank..................     7,225
            Investigate Tractor Rinse Station.....................    16,025
            Upgrade Pesticide Rinsewater Underground Storage Tank.    12,525
        Madison, WI: Underground Storage Tanks Removals/
          Replacements............................................    37,200
                        --------------------------------------------------------------
                        ____________________________________________________

            Subtotal.............................................. 1,580,000
                        ==============================================================
                        ____________________________________________________
            Total................................................. 4,080,000
    Fiscal year 1997 Agency Planned Projects
        In fiscal year 1997, it is anticipated that all critical hazardous
    waste cleanup requirements will be funded via the departmental HWC
    central account.

    Fiscal year 1997 HWC Planned Projects:
        Shafter, CA: Drywell Remediation..........................   $50,000
        Washington, DC: Legal Support, Office of General Counsel..   100,000
        Savannah, GA: RCRA Sampling and Remedial Actions..........   100,000
        Ames, IA: Underground Storage Tanks/Remedial Actions......    20,000
        Peoria, IL: Sampling and Remedial Actions.................    50,000
        West Lafayette, IN: Underground Storage Tanks Removals/
          Replace- ments..........................................    50,000
        Beltsville, MD:
            Remedial Investigation/Feasibility Study at National
              Priorities List Sites............................... 1,408,000
            Removal Actions at National Priorities List Sites..... 1,000,000
            Underground Storage Tanks Removals/Replacements.......   250,000
        East Lansing, MI:
            Site Investigation/Additional Sampling................    50,000
            Underground Storage Tank Removal/Replacement..........    66,000
        Greenport, NY:
            RCRA Site Closure Activities..........................   600,000
            Removal Actions at Various Sites......................   400,000
            Underground Storage Tank Removal/Replacement..........    30,000
        Coshocton, OH: Underground Storage Tanks Removals/
          Replacements............................................   150,000
        Weslaco, TX: Underground Storage Tank/Remedial Actions....    15,000
        Temple, TX: Site Assessment and Remedial Actions..........    36,000
        Madison, WI: Underground Storage Tanks/Remedial Actions...    25,000
                        --------------------------------------------------------------
                        ____________________________________________________

            Total................................................. 4,400,000

        Question. Please provide a listing of ARS locations where
    environmental clean-up activities are planned in fiscal years 1997 and
    1998.
        Answer. A listing of ARS locations where environmental clean-up
    activities are planned in fiscal years 1997 and 1998 is provided below:
    Shafter, CA
    Savannah, GA
    Ames, IA
    Peoria, IL
    West Lafayette, IN
    Beltsville, MD
    East Lansing, MI
    Greenport, NY
    Coshocton, OH
    El Reno, OK
    Wyndmoor, PA
    Brownwood, TX
    Temple, TX
    Weslaco, TX
    Madison, WI
        Question. Describe the nature of the work and the estimated cost
    for each site.
        Answer. A description of the nature of the work and the estimated
    cost for each planned site in fiscal years 1997 and 1998 is provided
    below. The costs have been estimated using fiscal year 1996 cost data
    and remediation information. The estimates are subject to increases/
    decreases as the project requirements become better defined through
    investigative and planning activities.

    Shafter, CA: Drywell Remediation..............................   $75,000
    Savannah, GA: RCRA Sampling and Remedial Actions..............   220,000
    Ames, IA:
        Underground Storage Tanks/Remedial Actions................    20,000
        Site Investigation/Additional Sampling....................    30,000
    Peoria, IL:
        Sampling and Remedial Actions.............................    80,000
        Underground Storage Tanks Removals/Replacements...........   225,000
    West Lafayette, IN: Underground Storage Tanks Removals/
        Replace- ments............................................    50,000
    Beltsville, MD:
        Remedial Investigation/Feasibility Study at National
          Priorities List Sites................................... 3,008,000
        Removal Actions at National Priorities List Sites......... 1,750,000
        Underground Storage Tanks Removals/Replacements...........   500,000
    East Lansing, MI:
        Site Investigation/Additional Sampling....................    50,000
        Underground Storage Tank Removal/Replacement..............    66,000
    Greenport, NY:
        RCRA Site Closure Activities.............................. 1,100,000
        Removal Actions at Various Sites..........................   400,000
        Remedial Investigation/ Feasibility Study.................   800,000
        Underground Storage Tank Removal/Replacement..............    30,000
    Coshocton, OH: Underground Storage Tanks Removals/Replacements   150,000
    El Reno, OK: Site Assessment and Remedial Actions.............    50,000
    Wyndmoor, PA: Underground Storage Tank Removal/Replacement....    40,000
    Brownwood, TX: Site Assessment and Remedial Actions...........    75,000
    Temple, TX: Site Assessment and Remedial Actions..............    86,000
    Weslaco, TX: Underground Storage Tank/Remedial Actions........    15,000
    Madison, WI: Underground Storage Tanks/Remedial Actions.......    25,000
                        --------------------------------------------------------------
                        ____________________________________________________

          Total................................................... 8,845,000

        Question. What is your estimate of costs, by location, through
    fiscal year 2002.
        Answer. The estimated cost for each location for fiscal year 1998
    through fiscal year 2002 is provided below:

    Shafter, CA...................................................   $25,000
    Savannah, GA..................................................   250,000
    Ames, IA......................................................    30,000
    Peoria, IL....................................................   305,000
    Beltsville, MD................................................15,300,000
    East Lansing, MI..............................................    30,000
    Clay Center, NE...............................................   300,000
    Greenport, NY................................................. 7,600,000
    El Reno, OK...................................................    75,000
    Wyndmoor, PA..................................................    40,000
    Kearneysville, WV.............................................    75,000
    Temple, TX....................................................   150,000
    Brownwood, TX.................................................    75,000
                        --------------------------------------------------------------
                        ____________________________________________________

          Total...................................................24,255,000
                                     travel
        Question. Please provide the Committee with a breakdown of your
    actual travel costs in fiscal year 1996.
        Answer. fiscal year 1996 travel costs are as follows:

    Common Carrier................................................$5,041,459
    Mileage Allowance.............................................   431,794
    Per Diem Allowance............................................ 3,557,071
    Actual Subsistence............................................ 1,706,823
    Transfer of Station........................................... 1,005,306
    Vehicular Transportation......................................   361,656
    Miscellaneous Travel Expenses.................................   499,889
                        --------------------------------------------------------------
                        ____________________________________________________

          Total...................................................12,603,998

        Question. Please identify foreign travel obligations for fiscal
    years 1994, 1995, and 1996, and estimates for fiscal year 1997.
        Answer. Foreign travel obligations for fiscal years 1994, 1995, and
    1996, and estimates for fiscal year 1997 are as follows:

            Fiscal year
    1994..........................................................$2,030,978
    1995.......................................................... 1,654,038
    1996.......................................................... 2,012,667
    1997 est...................................................... 1,516,300

        Question. How many ARS personnel were engaged in foreign trips in
    these years and for what purposes?
        Answer. The number of employees performing foreign trips for these
    years is as follows: 1,363 in fiscal year 1994; 1,226 in fiscal year
    1995; 995 in fiscal year 1996; and 654 estimated for fiscal year 1997.
        The majority of foreign travel was to present scientific findings
    at international conferences, collaborate and review research at
    international organizations, and collect germplasm and biological
    control organisms in foreign countries.
                                management costs
        Question. How much will ARS expend for Headquarters management
    costs in fiscal year 1997?
        Answer. ARS will expend approximately $56.1 million for
    Headquarters management costs in fiscal year 1997.
        Question. How does this correspond to your 10 percent program
    assessment?
        Answer. The $56.1 million expenditure excludes field management
    costs for the Area Administrative Offices and Area Directors of $15.1
    million. The combination of these two costs correspond to the Agency's
    overhead program assessment.
        Question. Please list your management and FTE's by function e.g.,
    Personnel, Contracting, Accounting etc., and location for fiscal year
    1995 and estimated fiscal year 1996.
        Answer.

                                                  WASHINGTON, DC, AREA
    ----------------------------------------------------------------------------------------------------------------
                                                                     Fiscal year 1995           Fiscal year 1996
                                                               -----------------------------------------------------
                             Function                                             Staff                      Staff
                                                                    Funding       years        Funding       years
    ----------------------------------------------------------------------------------------------------------------
    Management................................................     $34,310,496      249.1     $36,805,495      250.5
    Personnel.................................................       7,201,650      156.0       7,841,923      150.6
    Financial.................................................       1,755,386       29.9       2,069,577       37.2
    Contracts.................................................       1,911,486       44.4       2,265,562       42.2
    Facilities................................................       3,102,685       59.8       2,831,847       42.8
    Computer..................................................       2,944,041       34.4       3,088,864       52.8
                                                               -----------------------------------------------------
          Total...............................................      51,225,744      573.6      54,903,268      576.1
    ----------------------------------------------------------------------------------------------------------------

                                              OUTSIDE WASHINGTON, DC, AREA
    ----------------------------------------------------------------------------------------------------------------
                                                                     Fiscal year 1995           Fiscal year 1996
                                                               -----------------------------------------------------
                             Function                                             Staff                      Staff
                                                                    Funding       years        Funding       years
    ----------------------------------------------------------------------------------------------------------------
    Management................................................      $4,499,899       51.0      $4,033,814       48.0
    Personnel.................................................         838,224       16.0         770,116       15.6
    Financial.................................................       2,691,991       52.1       2,473,262       50.1
    Contracts.................................................       5,365,175       99.8       4,929,245       97.8
    Facilities................................................       1,939,738       38.9       1,782,131       36.1
    Computer..................................................       1,023,601       17.9         940,432       19.1
                                                               -----------------------------------------------------
          Total...............................................      16,358,628      275.7      14,929,000      266.7
    ----------------------------------------------------------------------------------------------------------------

        Question. What are your projected management costs and FTE's for
    fiscal year 1997?
        Answer.

                              WASHINGTON, DC, AREA
    ------------------------------------------------------------------------
                                                                     Staff
                       Function                        Funding       years
    ------------------------------------------------------------------------
    Management...................................     $36,214,716      239.4
    Personnel....................................       8,400,016      150.5
    Financial....................................       1,822,538       30.5
    Contracts....................................       2,224,765       36.7
    Facilities...................................       4,104,630       55.9
    Computer.....................................       3,363,581       48.6
                                                  --------------------------
          Total..................................      56,130,246      561.6
    ------------------------------------------------------------------------

                          OUTSIDE WASHINGTON, DC, AREA
    ------------------------------------------------------------------------
                                                                     Staff
                       Function                        Funding       years
    ------------------------------------------------------------------------
    Management...................................      $4,087,600       48.3
    Personnel....................................         598,163       15.0
    Financial....................................       2,580,371       53.2
    Contracts....................................       3,653,333       78.2
    Facilities...................................       2,876,769       43.5
    Computer.....................................       1,361,564       24.1
                                                  --------------------------
          Total..................................     $15,157,800      261.8
    ------------------------------------------------------------------------

        According to your responses to Committee questions last year, ARS
    planned to spend $69,833,000 for management costs in 1996 and 1997--
    about 10 per cent.
        Question. ARS proposes to reduce headquarters management by
    $550,000 in 1998. This amounts to 2 per cent of the ARS proposed
    reductions of $23 million in 1998. It appears that research is being
    reduced at a much greater rate than management. What is your rationale?
        Answer. The Agency had, in the past, received reductions in its
    administrative overhead activities. These administrative savings were,
    however, offset by corresponding increases for pay and inflation costs
    thereby eliminating the need for showing actual reductions in these
    activities. In the fiscal year 1998 Budget, the Agency proposed more
    specific reductions for administrative activities carried out at
    Headquarters with follow up reductions in fiscal year 1999 for both
    Headquarters and field administrative activities. This action is in
    line with the Agency's policy to reverse the continuing reduction in
    its scientific force by protecting research related dollars at every
    opportunity.
        Question. According to your response last year, ARS reported as a
    result of REE management reorganization effective April 30, 1995,
    combining resources of ARS, CSREES, ERS, and NASS, of over 460 FTE's,
    you achieved savings of only 3.7 FTE's. This is a negligible savings.
    Please explain this result.
        Answer. The limited savings in FTE were due to a commitment to
    place all administrative and financial management staff in the new
    organization.
        Question. A major reason for reorganization was to achieve savings
    in costs and FTE's. By Agency and in total dollar resources, how much
    money was allocated for management services before the reorganization
    and subsequently allocated by them.
        Answer. The following table reflects the resources allocated to
    management services before and after the reorganization by Agency:

                             [Dollars in thousands]
    ------------------------------------------------------------------------
                                                  Before           After
    ------------------------------------------------------------------------
    ARS.....................................       $20,272.3       $19,999.4
    ERS.....................................         3,306.5         2,783.7
    NASS....................................         3,306.5         3,200.1
    CSREES..................................         2,223.1         2,972.9
                                             -------------------------------
          Total.............................        29,108.4        28,956.1
    ------------------------------------------------------------------------

        Question. How much money has been saved through this reorganization
    effort?
        Answer. We achieved savings of $152,300 through this
    reorganization.
        Question. How will ARS implement its $550,000 Headquarters
    reductions in fiscal year 1998?
        Answer. The reduction of $550,000 in management costs in fiscal
    year 1998 is tentatively planned to be applied proportionally to the
    ARS Headquarters program and administrative support staffs.
        Question. How will it achieve proposed management reductions in
    fiscal year 1999?
        Answer. Alternatives to achieve efficiencies in Headquarters and in
    the field management activities are currently under review and
    assessment by the Agency leadership.
                                  panama city
        Question. ARS Explanatory Notes indicates $898,300 and 4 FTE's
    located at Panama City, Panama. Describe the programs carried out at
    this location.
        Answer. ARS screwworm research is carried out in Panama City. This
    program is focused on three principal activities in support of APHIS
    and FAO screwworm eradication efforts in Central America and the
    Caribbean region respectively. These include: characterization of
    screwworm habitats in Panama using remote sensing technology;
    improvement of screwworm surveillance, trapping and monitoring methods
    which includes development of an ``Artificial Wound'' technology for
    survey and trapping of feral screwworm populations; and conducting
    studies on ecology, biology and population dynamics of screwworm
    populations in the Caribbean region.
                              montpellier, france
        Question. The ARS Montpellier, France location estimates a program
    level of $1,728,700. Please describe the program carried out here.
        Answer. United States agriculture is subjected to a constant
    invasion of foreign insect and weed pests which gain entry through
    human immigration and accelerated agricultural trade of diverse
    commodities. Many of these foreign insect and weed pests enter the
    United States without any of the natural enemies which keep them at
    nondamaging levels in their native lands. To combat this threat to U.S.
    agriculture, forestry, and the environment, the USDA-ARS laboratory in
    France was established in 1919 to collect and evaluate beneficial
    natural enemies for eventual import to the U.S. The USDA-ARS
    laboratory, although located in France, serves as an extension of the
    ARS domestic program in biological control of invasive insects and
    weeds. Operationally, the laboratory staff searches for natural enemies
    of pests in appropriate areas of origin ranging from Europe, Central
    Asia, and Africa. In cooperation with scientists and quarantine
    officials in the United States, the ARS staff in France conducts
    carefully planned tests of natural enemies to ensure that they are safe
    to U.S. agriculture according to established quarantine procedures. The
    USDA-ARS laboratory in France provides about 70 percent of all
    biological control organisms to researchers and cooperators in the
    United States.
        Question. What is the SY capacity of the proposed laboratory? Do
    you have funds to operate the proposed laboratory at capacity?
        Answer. The proposed laboratory is architecturally designed to
    accommodate the current staff of three ARS scientists which includes
    one vacancy. The laboratory also will accommodate visiting U.S.
    scientists, cooperators from U.S. action and regulatory groups, as well
    as cooperators from foreign research institutions. With present funding
    levels of $1,728,700, the research program is adequately funded to
    operate the laboratory at its full capacity and to accommodate
    successive TDY visitors of state-side cooperators.
        Question. What is the total cost of this laboratory?
        Answer. At present, the USDA-ARS laboratory in France is housed in
    facilities leased from French institutions. To establish the laboratory
    in Montpellier, two hectares of land were purchased by USDA in 1993 and
    an architectural design was completed in 1995. The total cost for
    construction of the permanent facility, at the prevailing Franc/Dollar
    exchange rate, is $3.7 million, of which $.3 million of the necessary
    funding will come from anticipated French financial assistance toward
    USDA-ARS implantation in Montpellier.
        Question. What kind of lease cost comparison has the Agency
    completed in determining the need for another U.S. laboratory in
    France?
        Answer. The Agency is proposing that a permanent laboratory
    facility be constructed to relocate present research activities from
    temporary leased facilities at a savings to U.S. taxpayers. The current
    short term lease cost is $197,000 annually including operation and
    maintenance costs. The facilities being leased are temporary
    laboratories with minimal quarantine and office space, and inadequate
    safety features that do not meet the Agency's minimum facility
    requirements. The proposed new laboratory facility after construction
    will cost $130,000 annually to operate and maintain. The proposed
    facility is necessary to provide adequate laboratory and quarantine
    space which would otherwise be more costly to lease.
        Question. What is the long-term plan for biocontrol research
    activities in France?
        Answer. This USDA laboratory in France has been utilized for 78
    years by ARS scientists and state-side cooperators to provide
    biocontrol agents for immigrant insect and weed pests and thus to
    protect U.S. Agriculture. As foreign pests continually enter the United
    States, this ARS laboratory will be a key element for the foreseeable
    future in the USDA biological control strategy for the long term well-
    being of U.S. agriculture.
                               foreign locations
                              montpellier, france
        Question. Your request for construction is $3.4 million in the 1998
    budget. If the Congress provides these funds, will this be sufficient
    to meet your program requirements?
        Answer. The total fiscal year 1998 appropriation need of $3.4
    million for the new USDA-ARS laboratory in France will be sufficient to
    meet program needs. It is expected that French subventions totaling
    $300,000 will be made available in view of the overall project cost of
    $3.7 million.
        Question. Does the Agency have plans to add or expand laboratory
    and related facilities?
        Answer. The new USDA-ARS laboratory in France will provide 850
    gross square meters of office, laboratory, and headhouse/greenhouse
    space to operate in an efficient and effective manner. While the Agency
    has no plans to add to the facilities, the project, as designed has the
    capability of being expanded in out years if future domestic pest
    problems were to require an accelerated program for discovery and
    evaluation of beneficial biological control organisms.
                            buenos aires, argentina
        Question. ARS is also located at Buenos Aires, Argentina. Describe
    the program carried out here.
        Answer. The Buenos Aires location primarily serves as a support
    facility for insect and weed control programs significant to the United
    States. The primary scientific area of emphasis is the biological
    control of exotic insect and weed pests from South America. Several
    weed species common to Florida and the American Southwest have their
    source of origin in Patagonia, the Pampas, or the tropical regions of
    Brazil and the tropical Parana River Basin of Brazil, Argentina and
    Paraguay.
        Among the primary target insect species are fire ants, corn
    rootworm, corn earworm and sweet potato/silverleaf whitefly. Among the
    economically important weeds are water hyacinth, tropical soda apple,
    snakeweed, itchgrass and hydrilla.
        In addition to funding support from participating ARS laboratories
    in the U.S., particularly Gainesville, Florida, the ARS Buenos Aires
    Laboratory (SABCL) maintains cooperative relationships with the
    University of Arkansas, the Army Corps of Engineers, South Florida
    Water Management District, APHIS (USDA), and international research
    institutions.
        Question. List accomplishments resulting from the work at this
    location.
        Answer. Currently, fire ant is the primary Target insect of the ARS
    Buenos Aires research program (SABCL). Promising beneficial parasitic
    wasps and pathogens of the ant have been discovered by SABCL personnel
    in Central Brazil. A parasitic wasp has been identified and evaluated
    under quarantine conditions and is in the final stage of clearance for
    field release in Florida.
        Increasingly, water hyacinth, an exotic weed introduced from the
    Parana Basin of Brazil, has created major water management problems in
    the Gulf States and Florida. Similar infestations in Africa have gained
    major international attention. In March 1997, the World Bank hosted an
    international Water Hyacinth Conference in Washington, D.C. As a
    consequence of these proceedings, SABCL, in cooperation with other
    Federal agencies, universities and research institutions will be
    involved in a coordinated effort to attack this problem. SABCL, with a
    permanent institutional base at the source of origin of hyacinth, is
    ideally situated to take the lead in exploratory activities designed
    for biological control. Several herbivorous beetles have been collected
    and are now under evaluation for use as biological control agents in
    the U.S.
                            buildings and facilities
        Question. Please provide the Committee with costs and projects
    completed and planned for the modernization of each of ARS' Regional
    Research Centers.
        Answer. The Department has established a Facility Task Force to
    investigate the utilization of Agricultural research facilities.
    Pending the results of this Task Force, the status of modernization
    efforts at the four Regional Research Centers is as follows:
        Southern Regional Research Center (SRRC).--The SRRC Modernization
    involved a complete renovation of the surrounding site and Chemical
    Wing and included such items as asbestos abatement, new and upgraded
    drainage, landscaping, equipment pads, pavement repairs, retaining
    walls, and handicapped ramps. Work to the interior of the building will
    include replacement of HVAC systems, reconfiguring each laboratory
    module, new stairwell to comply with safety codes, replacement of floor
    finishes, new windows and complete patched, primed, and painted walls
    and ceilings as necessary. Total cost is estimated at $17.8 million,
    phased over 9 years.
        The design of the Chemical Wing project is complete. Construction
    for Phase I was awarded in fiscal year 1991 for $1.4 million. Phase II
    was awarded in fiscal year 1992 for $2.4 million using Agency funds.
    Phases III, IV, and V were awarded in fiscal year 1992 for $5 million.
    (In fiscal year 1992, $1,950,000 was specifically appropriated for
    Phase II. However, this budget line item amount was not sufficient to
    pay the cost of Phase II which totals $2.7 million for construction,
    contingency, and architect-engineer inspection services. The $1,950,000
    was used to award Phase V.) In fiscal year 1994, $2.667 million was
    appropriated for Phase VI of the Chemical Wing and in fiscal year 1995,
    $2.934 million was appropriated for construction of Phase VII. These
    phases were awarded in fiscal year 1996. Design and construction of
    Phase I site repair work was funded using $1,651,000 in fiscal year
    1993 appropriations. The fiscal year 1996 appropriation of $900,000 was
    used to award Phase 2 of the site repair work.
        The remaining elements of SRRC that need to be modernized are the
    Administration Wing, Textile Wing, and the Industrial Wing. It is
    estimated the completion of the SRRC modernization program will require
    an additional $22.65 million.
        Eastern Regional Research Center (ERRC).--In fiscal year 1993, ARS
    completed the facility modernization study begun in fiscal year 1992.
    The findings indicate that the utilities and building infrastructures
    have reached the end of their useful lives, and the facility itself has
    been overtaken by the evolution of codes, Agency criteria, and research
    needs over the past 50 years.
        The proposed modernization program will occur in 9 phases with a
    total planning, design, and construction budget of $39 million over 9
    years.
        In fiscal year 1994, ARS funded design of Phase I (Service
    Building) and Phase II (Engineering Research Laboratory in Pilot Plant)
    with $595,000 in Repair and Maintenance funds. In fiscal year 1995, ARS
    funded construction of Phase I, and design of Phases III through VII,
    using $4,175,000 in Repair and Maintenance funds. In fiscal year 1996,
    ARS funded construction of Phase II using $4,100,000 in Repair and
    Maintenance funds. In fiscal year 1997, $4,700,000 was needed to fund
    construction of Phase III, and $4 million was appropriated.
        In fiscal year 1988, $5,2000,000 is needed to complete funding of
    Phase III and fund construction of Phase IV leaving a balance of
    $20,851,000 to complete modernization. This additional modernization
    need will be met with a combination of Repair and Maintenance and
    Building and Facility funds.
    Western Regional Research Center (WRRC):
        1. WRRC modernization includes the upgrade of outside utilities and
    complete renovation of the North Wing. The renovation includes asbestos
    and lead abatement, upgrade of existing HVAC system, laboratory
    reconfiguration to comply with safety and accessibility codes,
    replacement of all laboratory counters and tops, replacement of floor
    and windows, and completely patch, prime, and paint walls and ceilings
    as necessary. Total cost is $29.6 million phased over a 7-year period.
        2. The design is complete for all phases. Phases I and II were
    awarded in fiscal year 1990 for $5.9 million. Phase III was awarded in
    fiscal year 1991 in the amount of $3.4 million. Phase IV was awarded in
    fiscal year 1993 in the amount of $3.0 million. Phases V and VI were
    awarded in fiscal year 1993 in the amount of $4.4 million and $3.2
    million. Construction for Phase VI is expected to be complete by the
    third quarter of fiscal year 1997.
        3. Total construction funds committed to date for 6 phases--$23.5
    million.
        4. In fiscal year 1997, $6.08 million is available to award Phase
    VII construction and A-E support services. In fiscal year 1994, fiscal
    year 1995, and fiscal year 1997 $1.161 million, $.919 million, and $4.0
    million were appropriated for construction of Phase VII. The Area
    funded all necessary fine tuning costs. Construction for Phase VII is
    expected to be complete by the fourth quarter of fiscal year 1998.
        5. The Small Animal Facility (West Annex Building) planning,
    design, and construction is complete for Phase I. Design of Phases II
    and III was completed in the third quarter of fiscal year 1994. The
    construction of Phases II and III was awarded in the fourth quarter of
    fiscal year 1994. Construction was completed in the fourth quarter of
    fiscal year 1996. The design and construction costs for all three
    phases is approximately $5.0 million.
        6. A construction contract was awarded in September 1995 using
    Agency funds in the amount of $800,000 to upgrade the building envelope
    of the Research and Development Facility (RDF) (Pilot Plant) which
    includes Food Processing Laboratory and Industrial Processing
    Laboratory. Concurrently, a program of requirements is being developed
    using Agency funds, $180,000, for the modernization of RDF. This
    facility occupies the south wing of WRRC encompassing approximately
    21,000 square feet of space. The estimated design and construction cost
    for this project is $15,000,000.
    National Center for Agricultural Utilization Research (NCAUR):
        1. The National Center for Agricultural Utilization Research is
    currently proceeding with a facilities upgrade design and construction
    program, as follows:
        Phase IA--Utility Tunnel, Steam Lines, and Boiler: Construction
    contract was awarded in the fourth quarter of fiscal year 1991.
    Construction was completed in the second quarter of fiscal year 1995.
    Total project cost of $2.5 million is for construction.
        Phase IB--Electrical and Drain System Upgrade: Construction
    contract was awarded in the third quarter of fiscal year 1992. Total
    cost of $.9 million is for construction. Construction was completed in
    the first quarter of fiscal year 1994.
        Phase IID--Pilot Plant and Semi-Works Building Upgrades: Total cost
    for design is $1,825,000 which was appropriated in fiscal year 1992.
    The design for Phase II was awarded in fiscal year 1992 and is
    complete.
        2. Appropriations to Date: fiscal year 1992--$1,825,000 Planning
    and Design for Phase II Pilot Plant; fiscal year 1993--$1,545,000
    Planning and Design for Phase III Chemical Wing.
        3. In fiscal year 1996 and fiscal year 1997, $3.9 and $1.5 million
    has been appropriated instead of $11.7 million requested to implement
    modernization efforts. A revised phasing plan was necessary to renovate
    the Pilot Plant and Semi-Works Building. A phased renovation plan was
    developed in fiscal year 1996 and recommended a three-phase renovation
    plan for the North Wing. The initial phase (Segment I of Phase IID)
    will renovate four modules of the Pilot Plant, add mechanical rooms and
    an exterior stairway. Estimated planning, design, and construction cost
    is $5.4 million for this segment. Construction will be awarded in the
    fourth quarter of fiscal year 1997.
        4. The remaining two segments are: Segment 2 of Phase IID: This
    segment will renovate adjoining areas in the North Wing. General
    laboratory, support space, and testing facilities will be provided to
    support the Pilot Plant modules. The Semi-Works Building will be
    renovated to support infrastructure of the Center. Estimated planning,
    design, and construction cost of $8.0 million is needed in fiscal year
    1998. Segment 3 of Phase IID: This segment will renovate additional
    laboratory, support space, and testing facilities will be provided to
    support the Pilot Plant modules. Estimated planning, design, and
    construction cost is $8.4 million (escalated to 1999).
        5. Additional funding needed which has been escalated to the
    planned year of implementation is $70.2 million. This will complete
    planned modernization efforts at the Center.
        Question. Please provide the Committee with an update of the costs
    and projects completed and planned for the modernization of the
    Beltsville Agricultural Research Center.
        Answer. Beltsville Agricultural Research Center (BARC):
        Through fiscal year 1997, a total of $103,416,792 has been expended
    on the modernization of BARC. The attached is a listing of projects
    that have been completed, initiated, or are proposed for fiscal year
    1998. The funding source for these projects is the Building and
    Facility Modernization funding.
        Projects currently underway include the construction of a
    Controlled Environment Facility. This will consolidate plant growth
    chambers in one building which will reduce staffing needs to monitor
    the chambers as well as increase energy efficiency. Construction of the
    gut and rebuild of Building 004 (Plant Sciences) is scheduled to begin
    in July 1997.
        In fiscal year 1998, BARC plans to utilize the limited funding to
    upgrade the infrastructure of the Center Road Building Complex Area.
    This will prepare the area for the proposed construction of the Human
    Nutrition Wing (70,000 square feet), as well as the gut and rebuild of
    the existing Human Nutrition Building--Building 308 (69,300 square
    feet). Future work in this area includes the gut and rebuild of the
    adjacent Buildings 306 and 307; these facilities are needed for
    modernization of the Livestock and Poultry Sciences Institute. The
    design of the Human Nutrition Wing is scheduled to begin in late fiscal
    year 1997, in anticipation of construction funds in fiscal year 1999.
        The clustering of animal buildings is another priority of BARC. A
    site plan for all animal buildings has been completed. As funds become
    available, design and construction will begin. This will ensure that
    BARC's animal buildings satisfy all animal care guidelines. In fiscal
    year 1998, a new Feed Center will be built near the Dairy Complex. This
    will replace the existing out-dated granary facility. In future years,
    BARC plans on gutting and rebuilding Building 200 (52,000 square feet)
    which is used for research on livestock and poultry-related issues. We
    anticipate that the design of a new swine parasitology barn will be
    awarded by early fiscal year 1998 with construction scheduled
    immediately after the design is complete. The design of two new poultry
    barns is also scheduled for award during fiscal year 1998. Funds for
    construction of the new poultry buildings will be included in future
    budget requests. This will advance the clustering of animal buildings
    which is needed for security reasons. Additional infrastructure
    upgrades will be needed to support renovated buildings and additional
    research facilities on the east side of BARC.

      Beltsville Agricultural Research Center (BARC) Modernization--Fiscal
                                    year 1988

    Renovate Building 007...................................      $2,000,000
    Design Building 003.....................................         660,859
    Renovate Abattoir, Building 204.........................          57,446
    Renovate Building 303...................................         506,877
    Modify HVAC, Building 306...............................         372,270
    Water Lines.............................................       1,402,195
    Miscellaneous Projects, BARC (under $100,000)...........         374,234
    Repair Building 307.....................................          88,064
    Repair Building 467.....................................          10,835
    Repair Building 264.....................................           5,480
    Small Animal Facility Contingency.......................         271,740
                        --------------------------------------------------------
                        ____________________________________________________
          Total.............................................       5,750,000

                                Fiscal year 1989

    U.S. National Arboretum Roof Repairs....................        $300,852
    U.S. National Arboretum Greenhouse Electrical Repairs...         273,200
    Steam Lines, Phase IV...................................       1,100,000
    Oil to Gas Conversion...................................         328,237
    Renovate Building 203 (Boar Facility)...................         529,026
    U.S. National Arboretum, Relocate Service Road..........          87,643
    Hazardous Waste Marshalling Facilities..................          79,662
    Waste Water Treatment Study.............................         194,864
    Renovate Building 204...................................         354,335
    Beltsville Area Security................................          91,806
    Pesticide Handling Facilities...........................         441,793
    Swing Space.............................................         274,100
    Miscellaneous Projects..................................          44,482
    USNA Brickyard..........................................       2,000,000
                        --------------------------------------------------------
                        ____________________________________________________
          Total.............................................       6,100,000

                                Fiscal year 1990

    Steam Lines, Building 169-179...........................        $568,752
    Steam Lines, Buildings 001-011A.........................       1,407,084
    Range 2 Modernization...................................         690,574
    Waste Water Treatment Facility..........................       1,100,056
    Electrical Distribution System..........................         574,157
    BARC Roads..............................................         361,027
    Animal Parasitology Unit Planning.......................          30,282
    HVAC System, Building 050...............................          44,598
    Repair Embankment Failure...............................         211,135
    Powder Mill Road........................................       1,547,588
    Swing Space.............................................         103,685
    Brooder House...........................................         230,000
    Renovate Building 043, 046, 047.........................         148,591
    Annual Painting.........................................         200,098
    Annual Roofing..........................................         247,582
    U.S. National Arboretum Storage Building................          90,402
    U.S. National Arboretum Plastic Greenhouses (3).........         235,687
    Demolition of Facilities................................          27,985
    Replace Chiller, Building 006...........................         103,965
    Renovate Building 209...................................          71,693
    Renovate Headhouse 16...................................          35,124
    Repairs Building 177B...................................          12,465
    Repairs Building 211....................................           7,965
    Renovate Building 1120..................................          18,391
    Elevator, Building 449/Gas Cyl..........................          50,954
    Renovate Building 449...................................           4,865
    Key Card Security Gate..................................          37,002
    Small Miscellaneous Projects............................         625,031
    Repairs, Building.......................................          15,000
    Contingency Steam Lines.................................         297,170
    Contingency.............................................         197,604
    Replace Roof, Building 012..............................         139,000
    Contingency.............................................         194,488
                        --------------------------------------------------------
                        ____________________________________________________
          Total.............................................       9,860,000

                                Fiscal year 1991

    Addition, Building 426..................................         $65,000
    Conference Room, Building 005...........................         435,000
    Electrical..............................................       1,500,000
    Building 001............................................         735,000
    Plant Sciences Building.................................       1,100,000
    Dairy Research Facility.................................       2,186,330
    Central Hay Storage.....................................         803,670
    Repair Building 201.....................................          50,000
    BARC-East Waste Water Treatment.........................       6,534,000
    Building 200 Modernization..............................          60,000
    Renovate Building 007...................................       1,290,000
    Demolition..............................................         198,904
    Swing Space.............................................         991,888
    Contingency.............................................          50,000
                        --------------------------------------------------------
                        ____________________________________________________
          Total.............................................      15,999,792

                                Fiscal year 1992

    Renovate Range 2 Greenhouse Complex.....................      $3,100,000
    Repair/Replace Waste Water Treatment Facility...........         300,000
    Construct Plant Sciences Building.......................      12,600,000
                        --------------------------------------------------------
                        ____________________________________________________
          Total.............................................      16,000,000

                                Fiscal year 1993

    Range 2 Greenhouse Complex..............................      $7,400,000
    BARC-West Waste Water Treatment Plant...................       4,000,000
    BARC-East Water System..................................         600,000
    Controlled Environmental Chamber Facility...............         586,000
    Office/Laboratory Economic Analysis.....................         200,000
    Animal Space Economic Analysis..........................         230,000
    Contingencies...........................................         531,000
                        --------------------------------------------------------
                        ____________________________________________________
          Total.............................................      13,547,000

                                Fiscal year 1994

    Modernize Building 001..................................      $9,700,000
    Modernize East Potable Water System.....................       7,400,000
    Design New Animal Building..............................         530,000
    Upgrade West Electrical System..........................       1,500,000
    Design to Modernize Building 004........................         450,000
    Contingencies...........................................         120,000
                        --------------------------------------------------------
                        ____________________________________________________
          Total.............................................      19,700,000

                                Fiscal year 1995

    Modernize Building 004..................................      $3,960,000
                        --------------------------------------------------------
                        ____________________________________________________
          Total.............................................       3,960,000

                                Fiscal year 1996

    Construct Controlled Environment Facility...............      $4,700,000
    Design/Construct Infrastructure in 300 Area.............       2,000,000
    Contingencies...........................................         310,000
    New Animal Building Design..............................         615,000
    Cooling Tower for Building 004..........................         375,000
    Renovate Building 001...................................         250,000
                        --------------------------------------------------------
                        ____________________________________________________
          Total.............................................       8,000,000

                                Fiscal year 1997

    Design New BHNRC Building...............................      $1,700,000
    Infrastructure Upgrades BARC-East.......................       1,400,000
    Fiber Optic Backbone Cabling............................         700,000
    Contingencies...........................................         700,000
                        --------------------------------------------------------
                        ____________________________________________________
          Total.............................................       4,500,000
                        --------------------------------------------------------
                        ____________________________________________________
          Total for fiscal year 1988 through fiscal year
          1997..............................................     103,416,792

                            Proposed fiscal year 1998

    Construct New Feed Center...............................      $1,970,000
    Fiber Optic Backbone Cable..............................         850,000
    Contingencies...........................................         380,000
                        --------------------------------------------------------
                        ____________________________________________________
          Total.............................................       3,200,000
                            buildings and facilities
        Question. Please provide the Committee with costs and projects
    completed and planned for the modernization of the Plum Island Animal
    Disease Center.
        Answer. Plum Island Animal Disease Center (PIADC): Modernization
    projects at PIADC are as follows:

                                Fiscal year 1992

    Consolidation (C).......................................     $18,400,000

                                Fiscal year 1993

    Underground Storage Tank Removal/Replacement (C)........        $443,000
    Wastewater Treatment Plant (C)..........................         185,000
    Boiler Rental (C).......................................         304,000
    Incinerator Repair (C)..................................          74,000
    Environmental Assessment (S)............................          33,000
    Chiller Plant (C).......................................       1,400,000
    Sludge Removal (C)......................................         500,000
    Miscellaneous Projects..................................         784,000
                        --------------------------------------------------------
                        ____________________________________________________
          Total.............................................       3,723,000

                                Fiscal year 1994

    Wastewater Treatment Plant (C)..........................      $1,250,000
    Miscellaneous Projects..................................         741,250
                        --------------------------------------------------------
                        ____________________________________________________
          Total.............................................       1,991,250

                                Fiscal year 1995

    Above-Ground Fuel Tanks (Phase I) (C)...................      $1,168,000
    Miscellaneous Projects..................................         747,000
                        --------------------------------------------------------
                        ____________________________________________________
          Total.............................................       1,915,000

                                Fiscal year 1996

    Upgrade Fire Alarm System B-101 (D/C)...................      $1,000,000
    Above-Ground Fuel Tanks (Phase 2) (C)...................       1,000,000
    Wastewater Treatment Plant Closure (C)..................       1,500,000
    Boiler Plant Design.....................................         500,000
    PCB Transformer Replacement (D/C).......................          51,000
    Miscellaneous Projects..................................       1,006,000
    Renovate B-102 (D)......................................         250,000
    DOE-National Renewable Energy Lab Support...............         280,000
    Plum Island Harbor Repairs (D/C)........................       1,514,000
    Install Chiller (D/C)...................................         900,000
    Electric/Telephone Distribution System (D)..............         199,000
                        --------------------------------------------------------
                        ____________________________________________________
          Total.............................................       8,200,000

                                Fiscal year 1997

    Above-Ground Fuel Tanks (Phase 3) (C)...................      $1,400,000
    Underwater Electric Cable (C)...........................       2,000,000
    Sewage Decon Plant (D)..................................         500,000
    Miscellaneous Projects..................................         500,000
    Upgrade Pathological Incinerators (D)...................         400,000
    Electric/Telephone Distribution System (C)..............       2,800,000
    Energy Savings Performance Contract Windmill Proposal(s)         600,000
                        --------------------------------------------------------
                        ____________________________________________________
          Total.............................................       8,200,000
                        --------------------------------------------------------
                        ____________________________________________________
          Total for fiscal year 1992 through fiscal year
          1997..............................................      42,429,250

        Future modernization efforts at PIADC will address numerous
    infrastructure and physical plant repair and improvements. While the
    original modernization plan was estimated at $81 million in fiscal year
    1995 dollars, inconsistent funding levels have resulted in a higher
    cost.
        Question. Please provide the Committee with costs and projects
    completed and planned for the modernization of the Subtropical
    Agricultural Research Laboratory at Weslaco, Texas.
        Answer. The Modernization Plan for the Subtropical Agricultural
    Research Laboratory in Weslaco, Texas, established six phases for
    execution as listed below:
        Phase 1: Planning and Design--This phase completed the
    Environmental Assessment for the entire modernization effort and
    initiated the Program of Requirements for Phases 2 and 3. Demolition of
    some existing dilapidated buildings was accomplished during this phase.
        Construction Cost--$93,000
        Planning and Design Cost--$322,000
        Status--Design and construction was completed in the first quarter
    of fiscal year 1996.
        Phase 2: Site Preparation and Utility System Upgrade--Projects in
    this phase upgrade the water, sanitary, electrical, and storm drainage
    systems at the main laboratory campus. Recently acquired property is
    cleared of existing structures in preparation for a new laboratory
    facility to be constructed in Phase 3. Some grading and landscaping
    work is accomplished as well as construction of a new entrance road
    serving the site.
        Construction Cost--$1,278,000
        Planning and Design Cost--$69,800
        Status--Design efforts for the Phase 2 projects are completed.
        Construction contract was awarded in July 1996.
        Phase 3: Construct New Laboratory Facility, Building N-01--This
    phase constructs a new laboratory and office building of approximately
    24,700 gross square feet. The new facility will house the Crop Quality
    and Fruit Insect Research Unit as well as the Laboratory Director and
    administrative support staff. Also included in this phase is renovation
    of two existing greenhouses and construction of four new greenhouses.
        Construction Cost--$6,773,000
        Planning and Design Cost--$570,400
        Status--Design for the new laboratory is complete. Construction
    contract award is anticipated in July 1997. Design for the renovation
    of two greenhouses and construction of two greenhouses is completed. A
    construction contract was awarded in April 1997. Design for the
    remaining two greenhouses has not started. The construction of these
    facilities is partially funded.
        Phase 4: Construct Operations Support Facilities and Renovate
    Research Facilities--This phase constructs a pesticide storage and
    handling facility, farm implement storage facility, and a shipping and
    receiving facility. It includes renovation of the primary existing
    research building as well as headhouse and greenhouse space on the main
    research campus, Highway 83 site.
        Construction Cost--$4,290,300
        Planning and Design Cost--$377,200
        Status--Design for the operations support facilities has been
    completed, construction is scheduled for fiscal year 1998. The design
    for renovation of the research facilities began in fiscal year 1997 and
    award of a construction contract is scheduled in fiscal year 1998.
    These construction projects are not currently funded.
        Phase 5: Renovation of Existing Laboratory Facilities--This phase
    renovates existing headhouse and laboratory space in Buildings 205,
    221, 414, and 202 located at both the Highway 83 campus and the FM1015
    site.
        Construction Cost--$2,890,400
        Planning and Design Cost--$218,300
        Status--The design for renovation of these research facilities is
    scheduled to begin in fiscal year 1998 and award of a construction
    contract in fiscal year 1999. The design and construction of these
    projects is not currently funded.
        Phase 6: Renovation of Existing Laboratory Facilities--This phase
    completes renovation of the existing laboratory facilities in Buildings
    203 and 204 located at the Highway 83 campus. It also accomplishes
    demolition of existing facilities which have been retained as swing
    space during the modernization effort.
        Construction Cost--$3,218,900
        Planning and Design Cost--$328,100
        Status--The design for renovation of these research facilities is
    scheduled to begin in fiscal year 1998 and award of a construction
    contract in fiscal year 1999. The design and construction of these
    projects is not currently funded. The total estimated planned, design,
    and construction costs for the modernization at this facility is $20.5
    million.
        Question. Please provide obligations to date and projected funding
    requirements for major modernization projects planned by ARS.
        Answer. Obligations and projected funding requirements are as
    follows:

    ------------------------------------------------------------------------
                                                                Balance of
             Modernization location           Obligations to      funding
                                                   date          required
    ------------------------------------------------------------------------
    California--Albany......................     $38,270,227     $15,000,000
    Illinois--Peoria........................       4,780,600      70,200,000
    Iowa--Ames..............................       1,620,550     139,000,000
    Louisiana--New Orleans..................      17,836,000      22,650,000
    Maryland:
        Beltsville..........................      73,072,837     102,000,000
        NAL.................................  ..............      18,000,000
    Michigan--East Lansing..................         462,000      18,100,000
    New York--Plum Island...................      15,829,000      66,000,000
    Pennsylvania--Wyndmoor..................       4,870,000      25,700,000
    ------------------------------------------------------------------------

        The ``Balance'' represents remaining modernization project funding
    requirements that were either originally identified via facility
    condition studies, the development of Program of Requirement documents,
    in-house estimates, or design drawings. Obligations to date for these
    projects was either congressionally funded through the Agency's
    Buildings and Facilities account, or through the Agency's Annual Repair
    and Maintenance budget line item appropriation.
        Question. Please provide obligations and projected funding
    requirements for each major new construction project.
        Answer. Obligations and projected funding requirements for each
    major new construction project are as follows:

    ------------------------------------------------------------------------
                                                                Balance of
             Construction locations           Obligations to      funding
                                                   date          required
    ------------------------------------------------------------------------
    California--Parlier.....................      $1,503,716     $23,400,000
    Florida--Ft. Lauderdale.................          43,000       4,000,000
    France--Montpellier.....................         500,000       3,400,000
    South Carolina--Charleston..............       1,176,570      14,030,000
    Texas--Lubbock..........................       1,367,079  ..............
    ------------------------------------------------------------------------

        The ``Balance of Funding Required'' represents remaining
    construction project funding requirements that were either originally
    identified via the development of Program of Requirement documents, in-
    house estimates, or design drawings. Funding to date for these projects
    was either congressionally funded through the Agency's Buildings and
    Facilities account, or through the Agency's Annual appropriation.
        Question. The Committee appropriated $18.3 million to ARS for
    Repairs and Maintenance of Facilities in fiscal year 1996. How were
    these funds used?
        Answer. The fiscal year 1996 repair and maintenance budget was
    $18.262 million. This amount includes $14.246 million in Agency funds,
    $900,000 for the National Agricultural Library, $740,000 for the USNA,
    and $2.376 million in BARC Renaissance 1993 funds. Some of the types of
    repair and maintenance projects funded in fiscal year 1996 include:
    bridge repairs, roof repair, HVAC repair, plumbing repairs, upgrade to
    sewage lines, electrical repairs, fencing replacement, painting,
    pavement repair, asbestos and lead abatement, accessibility projects,
    and replacement of fire alarm systems.
        Question. What are the planned use of these funds in fiscal year
    1997?
        Answer. Some of the types of repair and maintenance projects
    scheduled in fiscal year 1997 include: upgrades to building systems
    such as HVAC, plumbing, sewage lines, water treatment facilities,
    electrical, roof repairs, accessibility requirements, CFC replacement,
    asbestos, and lead abatement; removal of underground storage tanks;
    correcting building and life safety code deficiencies; repair of
    pavement; energy surveys and retrofits, and harbor repairs.
        Question. The Budget Appendix reflects year-end 1995 unobligated
    balances for $105 million for Building and Facilities. Identify these
    balances by project.
        Answer. The Budget Appendix reflects a year-end 1996 (September 30,
    1996) unobligated balance of $79.1 million for Building and Facilities.
    The balance by project is as follows:

            Location                                                 Balance
    Arizona, Maricopa--Water Conservation Laboratory........       $396,000
    Arkansas, Stuttgart--Rice Center........................      1,064,604
    California:
        Albany--Western Regional Research Center............      3,370,443
        Parlier--Horticultural Crop Research Laboratory.....      2,630,000
        Riverside--U.S. Salinity Laboratory.................        881,353
    Colorado, Ft. Collins--Storage Laboratory...............        117,648
    District of Columbia, National Arboretum................         (9,896)
    Florida, Ft. Pierce--Horticultural Laboratory...........      4,524,982
    France, Parlier California, Florida.....................        470,001
    Hurricane Andrew/Iniki--Florida, Hawaii, Louisiana......     13,053,794
    Georgia, Athens--Poultry Disease Laboratory.............        935,665
    Illinois, Peoria--National Center for Agriculture
        Utilization Research................................      5,165,176
    Indiana, Lafayette--Purdue University...................          9,892
    Iowa, Ames--
        Swine Center........................................      2,111,664
        National Animal Disease Center......................        411,745
    Kansas, Manhattan--Grain Marketing Research Laboratory..      1,201,641
    Louisiana, New Orleans--Southern Regional Research
        Laboratory..........................................        889,293
    Maryland, Beltsville--Modernization.....................     16,272,258
    Massachusetts, Boston--Nutrition Center.................         33,031
    Michigan, East Lansing--Regional Poultry Research
        Laboratory..........................................          2,327
    Minnesota, Morris--Soil and Water Laboratory............         43,454
    Nebraska, Clay--Meat Animal Research Center.............         19,985
    New York, Greenport--PIADC..............................      4,693,853
    North Dakota, Fargo--
        Research Laboratory, North Dakota State University
          (NDSU)............................................         14,561
        Greenhouse, NDSU....................................          4,781
    Oklahoma:
        Lane--Farm Experiment Station.......................            231
        Lane--Agricultural Research Facility................         44,860
        Woodward--Greenhouse................................            355
    Oregon, Corvallis--Northwest Small Fruit Center.........          5,198
    South Carolina, Charleston--
        Feasibility Study...................................            635
        Construction Vegetable Laboratory...................      9,460,795
    Texas:
        Lubbock--Plant Stress Laboratory....................      5,534,207
        Lubbock--Cons Moisture Laboratory...................          1,714
        Weslaco--Plan ARS Bee Laboratory....................         71,287
        Weslaco--Southern Agricultural Research Center
          Modernization.....................................      3,788,340
    Washington, Yakima--Fruit/Vegetable Laboratory..........            321
    West Virginia--National Aquaculture Center..............      1,821,651
    Wisconsin, Madison--Greenhouse..........................         12,176
                        --------------------------------------------------------
                        ____________________________________________________
          Total.............................................     79,050,025

        It is expected that the unobligated balance at the end of fiscal
    year 1997 will be $53,400,000.
        Question. Congress appropriated $3.9 million in fiscal year 1994 to
    complete the construction of the Necropsy incinerator and at the
    National Animal Disease Center. In fiscal year 1996, Congress agreed to
    the department reprogramming request providing an additional $700,000
    to complete this project. When will this project be completed?
        Answer. The contract completion date is June 30, 1997. However, due
    to delays in shipping, the high efficiency particulate air (HEPA)
    filters, which are critical to the overall biocontainment, the
    Necropsy/Incinerator building may not be completed until August 29,
    1997.
        Question. The Committee understands that once the Necropsy
    incinerator facility is complete, there will remain serious
    biocontainment problems. Is this true? Please explain? How much more
    money will be required to remedy this problem and how will it be
    financed?
        Answer. Currently the NADC does high-level biocontainment work in
    Buildings 3 and 4. Pathological waste generated in these buildings is
    incinerated in the Building 4 incinerator (the incinerator in Building
    3 is only used on an emergency or backup basis because of its
    deteriorating condition). After the Necropsy Incinerator facility is
    completed and operating, high-level biocontainment waste will be
    incinerated in this facility and in Building 4.
        However, there will be a need for an animal transport vehicle to
    transport live infectious, or potentially infectious animals from the
    area where the research is conducted to the Necropsy Incinerator
    facility. Materials from other containment buildings, including
    Building 3, will have to be transported to either Building 4 or the
    Necropsy Incinerator facility for disposal. This animal transport
    vehicle must be able to connect via a containment air seal to both the
    source containment building and the Necropsy Incinerator facility, and
    be able to maintain Biosafety Level 3-Ag containment security while
    transporting the animal from the research building to the appropriate
    incinerator building.
        The cost of a Biosafety Level 3-Ag transport vehicle for large
    animals and associated work to the existing buildings has not yet been
    determined. It is anticipated that additional Building and Facilities
    funds will be required for construction of this specialized vehicle.
        In the preliminary design, the Necropsy Incinerator facility was to
    be connected to Building 3 in order to address this transportation
    problem. However, due to limited funding, and other technical and
    logistical problems associated with relocation of existing Center
    utilities and the feasibility of upgrading containment of Building 3,
    the facility was constructed as a stand-alone building. This decision
    was consistent with the NADC needs identified in the Facility Condition
    Study being completed at that time.
        The NADC has other existing biocontainment problems that have been
    identified in the 1992 Facility Condition Study. This fiscal year, the
    Agency plans to fund the development of a Master Plan that will provide
    the roadmap for the process by which existing facilities at NADC will
    be modernized to meet current requirements and standards.
        Question. Your justification for BARC modernization states costs in
    excess of $190 million, yet the fiscal year 1998 request is only $3.2
    million toward this effort. Which is realistic, the $190 million
    requirement or the 1.5 percent increase requested to meet this need?
        Answer. The $190 million plus requirement is a realistic estimate
    of the cost to modernize BARC. The limited increase requested in fiscal
    year 1998 is due to other higher priority ARS facility project needs.
    Each year every project must compete with other Agency and Department
    projects for funding, and decisions are made accordingly.
        Question. Each year modernization funds are requested for various
    phases of ARS utilization centers. Provide for each center, phases
    completed and the work and costs involved. Also, provide the remaining
    phase, cost and work to be done.
        Answer. The Department has established the Strategic Planning Task
    Force as required by the 1996 Farm Bill to investigate the utilization
    of Agricultural research facilities. Pending the results of this Task
    Force, modernization plans at the four ARS utilization centers are as
    follows:
        Southern Regional Research Center (SRRC).--The SRRC Modernization
    involved a complete renovation of the surrounding site and Chemical
    Wing and included such items as asbestos abatement, new and upgraded
    drainage, landscaping, equipment pads, pavement repairs, retaining
    walls, and handicapped ramps. Work to the interior of the building will
    include replacement of HVAC systems, reconfiguring each laboratory
    module, new stairwell to comply with safety codes, replacement of floor
    finishes, new windows and complete patched, primed, and painted walls
    and ceilings as necessary. Total cost is estimated at $17.8 million,
    phased over 9 years.
        The design of the Chemical Wing project is complete. Construction
    for Phase I was awarded in fiscal year 1991 for $1.4 million. Phase II
    was awarded in fiscal year 1992 for $2.4 million using Agency funds.
    Phases III, IV, and V were awarded in fiscal year 1992 for $5 million.
    (In fiscal year 1992, $1,950,000 was specifically appropriated for
    Phase II. However, this budget line item amount was not sufficient to
    pay the cost of Phase II which totals $2.7 million for construction,
    contingency, and architect-engineer inspection services. The $1,950,000
    was used to award Phase V.) In fiscal year 1994, $2.667 million was
    appropriated for Phase VI of the Chemical Wing and in fiscal year 1995,
    $2.934 million was appropriated for construction of Phase VII. These
    phases were awarded in fiscal year 1996. Design and construction of
    Phase I site repair work was funded using $1,651,000 in fiscal year
    1993 appropriations. The fiscal year 1996 appropriation of $900,000 was
    used to award Phase 2 of the site repair work.
        The remaining elements of SRRC that need to be modernized are the
    Administration Wing, Textile Wing, and the Industrial Wing. It is
    estimated the completion of the SRRC modernization program will require
    an additional $22.65 million.
        Eastern Regional Research Center (ERRC).--In fiscal year 1993, ARS
    completed the facility modernization study begun in fiscal year 1992.
    The findings indicate that the utilities and building infrastructures
    have reached the end of their useful lives, and the facility itself has
    been overtaken by the evolution of codes, Agency criteria, and research
    needs over the past 50 years.
        The proposed modernization program will occur in 9 phases with a
    total planning, design, and construction budget of $39 million over 9
    years.
        In fiscal year 1994, ARS funded design of Phase I (Service
    Building) and Phase II (Engineering Research Laboratory in Pilot Plant)
    with $595,000 in Repair and Maintenance funds. In fiscal year 1995, ARS
    funded construction of Phase I, and design of Phases III through VII,
    using $4,175,000 in Repair and Maintenance funds. In fiscal year 1996,
    ARS funded construction of Phase II using $4,100,000 in Repair and
    Maintenance funds. In fiscal year 1997, $4,700,000 was needed to fund
    construction of Phase III, but only $4 million was appropriated. In
    fiscal year 1998, $5,200,000 is needed to complete funding of Phase III
    and construction of Phase IV leaving a balance of $20,851,000 to
    complete Phases V through IX modernization. These phases will complete
    work in the Chemical and Pilot Plant wings. This additional
    modernization need will be met with a combination of Repair and
    Maintenance and Building and Facility funds.
    Western Regional Research Center (WRRC):
        1. WRRC modernization includes the upgrade of outside utilities and
    complete renovation of the North Wing. The renovation includes asbestos
    and lead abatement, upgrade of existing HVAC system, laboratory
    reconfiguration to comply with safety and accessibility codes,
    replacement of all laboratory counters and tops, replacement of floor
    and windows, and completely patch, prime, and paint walls and ceilings
    as necessary. Total cost is $29.6 million phased over a 7-year period.
        2. The design is complete for all phases. Phases I and II were
    awarded in fiscal year 1990 for $5.9 million. Phase III was awarded in
    fiscal year 1991 in the amount of $3.4 million. Phase IV was awarded in
    fiscal year 1993 in the amount of $3.0 million. Phases V and VI were
    awarded in fiscal year 1993 in the amount of $4.4 million and $3.2
    million. Construction for Phase VI is expected to be complete by the
    third quarter of fiscal year 1997.
        3. Total construction funds committed to date for 6 phases--$23.5
    million.
        4. In fiscal year 1997 $6.08 million is available to award Phase
    VII construction and A-E support services. In fiscal year 1994, fiscal
    year 1995, and fiscal year 1997 $1.161 million, $.919 million, and $4.0
    million were appropriated for construction of Phase VII. The Area
    funded all necessary fine tuning costs. Construction is expected to be
    complete by the fourth quarter of fiscal year 1998.
        5. The Small Animal Facility (West Annex Building) planning,
    design, and construction is complete for Phase I. Design of Phases II
    and III was completed in the third quarter of fiscal year 1994. The
    construction of Phases II and III was awarded in the fourth quarter of
    fiscal year 1994. Construction was completed in the fourth quarter of
    fiscal year 1996. The design and construction costs for all three
    phases is approximately $5.0 million.
        6. A construction contract was awarded in September 1995 using
    Agency funds of $.800 million to upgrade the building envelope of the
    Research and Development Facility (RDF) (Pilot Plant) which includes
    Food Processing Laboratory and Industrial Processing Laboratory.
    Concurrently, a program of requirements is being developed using Agency
    funds, $.180 million, for the modernization of RDF. This facility
    occupies the south wing of WRRC encompassing approximately 21,000
    square feet of space. The estimated design and construction for this
    project is $15 million.
    National Center for Agricultural Utilization Research (NCAUR):
        1. The National Center for Agricultural Utilization Research is
    currently proceeding with a facilities upgrade design and construction
    program, as follows:
        Phase IA--Utility Tunnel, Steam Lines, and Boiler: Construction
    contract was awarded in the fourth quarter of fiscal year 1991.
    Construction was completed in the second quarter of fiscal year 1995.
    Total project cost of $2.5 million is for construction.
        Phase IB--Electrical and Drain System Upgrade: Construction
    contract was awarded in the third quarter of fiscal year 1992. Total
    cost of $.9 million is for construction. Construction was completed in
    the first quarter of fiscal year 1994.
        Phase IID--Pilot Plant and Semi-Works Building Upgrades: Total cost
    for design is $1,825,000 which was appropriated in fiscal year 1992.
    The design for Phase II was awarded in fiscal year 1992 and is
    complete.
        2. Appropriations to Date: fiscal year 1992--$1,825,000 Planning
    and Design for Phase II Pilot Plant; fiscal year 1993--$1,545,000
    Planning and Design for Phase III Chemical Wing.
        3. In fiscal year 1996 and fiscal year 1997, $3.9 million and $1.5
    million have been appropriated instead of $11.7 million requested to
    implement modernization efforts. A revised phasing plan was necessary
    to renovate the Pilot Plant and Semi-Works Building. A phased
    renovation plan was developed in fiscal year 1996 and recommended a
    three-phase renovation plan for the North Wing. The initial phase
    (Segment I of Phase IID) will renovate four modules of the Pilot Plant,
    add mechanical rooms, and an exterior stairway. Estimated planning,
    design, and construction cost is $5.4 million for this segment.
    Construction will be awarded in the fourth quarter of fiscal year 1997.
        4. The remaining two segments are: Segment 2 of Phase IID: This
    segment will renovate adjoining areas in the North Wing. General
    laboratory, support space, and testing facilities will be provided to
    support the Pilot Plant modules. The Semi-Works Building will be
    renovated to support infrastructure of the Center. Estimated planning,
    design, and construction cost of $8.0 million is needed in fiscal year
    1998. Segment 3 of Phase IID: This segment will renovate additional
    laboratory, support space, and testing facilities will be provided to
    support the Pilot Plant modules. Estimated planning, design, and
    construction cost is $8.4 million (escalated to 1999).
        5. Additional funding needed which has been escalated to the
    planned year of implementation is $70.2 million. This will complete
    planned modernization efforts at the Center.
        Question. Funding of $3.4 million is requested for fiscal year 1998
    to construct a new biocontrol laboratory in Montpelier, France. Funding
    for this facility has been proposed in the President's budget in
    previous years but was not approved by the Congress.
        The testimony indicates that site acquisition and planning and
    design work has been completed. When was this funding made available
    and when was this work completed?
        Answer. Two hectares of land for a new laboratory in Montpellier,
    France, were purchased on September 10, 1992 for $331,290. Fiscal year
    1992 Agency funds were used for this purchase. The architectural design
    was completed in the fourth quarter of fiscal year 1995. Funding for
    planning and design was appropriated in fiscal year 1993 in the amount
    of $500,000 from miscellaneous appropriations of $1,200,000.
        Question. Why was construction funding for this laboratory not
    included in the President's fiscal year 1997 request?
        Answer. Each year, every project must compete with other Agency and
    Department projects for funding, and decisions were made accordingly.
        Question. What is the total construction cost of this facility?
        Answer. The total construction cost for this facility is $3.7
    million of which $300,000 is expected from French subventions. The
    fiscal year 1998 appropriation need is $3.4 million.
        Question. Have you determined that ownership is less costly than
    leasing?
        Answer. The Agency has determined that the proposed permanent
    facility in France will, in the long term operation of the Agency's
    biological control program, represent a cost savings to U.S. taxpayers.
    The current short term lease, with inadequate space and facilities, is
    $197,000 annually which includes operation and maintenance. The
    proposed permanent facility, with appropriate quarantine facilities and
    adequate laboratories, will cost $130,000 annually to operate and
    maintain. This cost savings, over the long term will offset the cost of
    construction and provide superior facilities to conduct an exemplary
    biological control program.
        Question. Why can't research planned for this laboratory be carried
    out more efficiently by contractors already located in France and
    Switzerland?
        Answer. Montpellier is a major center for agricultural research in
    Europe and hosts the consortium AGROPOLIS of which ARS is a member.
    Benefits derived from carefully nurtured relationships with individual
    scientists and institutions at this location are very important to the
    Agency's research programs. Yet, this research can be carried out more
    efficiently by permanent ARS staff than by contractors because ARS
    Headquarters and NPS maintain direct control of the Agency's program
    and can respond to emerging and shifting priorities in the United
    States. ARS has the mandate to meet changing national needs, which
    contractors are not able. Research funds maintained by a permanent ARS
    facility contribute to developing a far sighted cost effective,
    institutional capability which cannot be achieved by contractors who
    have their own institutional goals. In particular, contractors in
    Switzerland are geographically located far from the natural range of
    most ARS target pests, and cannot effectively conduct a research
    program to meet the needs of the Agency.
        The fiscal year 1998 request includes $4 million for a new
    quarantine facility at Fort Lauderdale, Florida, for research on the
    control of Melaleuca.
        Question. The U.S. Army Corps of Engineers planned and designed
    this facility. Why isn't the project being completed by the Corps? Why
    should the USDA pick up the construction cost of this facility?
        Answer. The planning and design of the facility by the U.S. Army
    Corps of Engineers (COE) was actually undertaken at the request of the
    Agricultural Research Service (ARS). The Administration determined that
    USDA should pay for the construction cost of this facility since ARS
    will operate, maintain, and provide leadership for biological control
    research on Melaleuca and other aquatic weeds or exotic plant species
    in Florida.
        Question. There is an excellent, modern quarantine facility at
    Stoneville, MS, that is grossly underutilized at the present time. Why
    is another facility needed for this program?
        Answer. The Stoneville quarantine facility is not adequate to
    conduct Melaleuca biological control studies because: 1) the facility
    is not, and in all likelihood never will be, quarantine certified for
    pests that are not in Mississippi or adjacent states; 2) the facility
    is not designed to hold trees like Melaleuca which is necessary for
    testing and cultivation; 3) since Melaleuca is not found in
    Mississippi, all host plants would have to be produced inside the
    quarantine which is not practical and may not even be possible; 4) even
    if it would be legal to grow Melaleuca outside of the quarantine
    facility, it would not be feasible as this subtropical tree would not
    be able to survive the cold winters; and 5) the cooperating research
    staffs of ARS, COE, South Florida Water Management District, and the
    University of Florida are not located in Mississippi.
        Question. In fiscal year 1996, the Agency recommended a
    consolidation of research programs by transferring the Bozeman program
    to the Sidney, Montana, location. I understand that a new facility (to
    include Lab/Office, Greenhouse/Headhouses, and a Biocontainment
    Facility) is now needed to accommodate this consolidation of research
    programs and that $600,000 in planning and design funds are needed in
    fiscal year 1998 for this purpose. Does the Agency agree that this
    additional facility is needed as a result of this?
        Answer. The consolidated programs will preserve the high priority
    research of current programs and allow for the development of an
    Integrated Pest Management Center. This is enhanced by (1) the strong
    grass roots regional support of producers, agribusiness, and
    researchers organized in a rural development effort; (2) the region is
    destined to grow agriculturally as it is one of the remaining parts of
    the Western U.S. with available water resources to significantly
    increase irrigated acres; and (3) research is viewed by producers and
    agribusiness as a key to the region's rural development efforts.
                         termination of kenaf research
        One of the projects proposed for termination is kenaf research
    which is carried out through an extramural agreement with the
    Mississippi Agricultural and Forestry Experiment Station (MAFES). MAFES
    believes that kenaf holds much potential for economic development in
    Mississippi and the southeastern United States. In recent months,
    considerable interest in kenaf has been expressed by major corporations
    in the United States and Japan. Continued research support is vital to
    stimulate private sector investment which could result in significant
    acreage of kenaf. With the commercial interest, it would be very poor
    timing to discontinue the research program.
        Question. What is your justification for proposing to terminate the
    kenaf research program at the Mississippi Agricultural and Forestry
    Experiment Station?
        Answer. Kenaf has long been proposed as a source of fiber for
    production of newsprint. Nonetheless, it has not gained a foothold in
    the newsprint market, and at current low newsprint prices kenaf is
    unlikely to be produced at a suitable cost. Major newsprint producers
    are committed to wood feedstock, and recycling is increasing in
    importance, so the future of kenaf for this market is speculative.
        The project at the Mississippi Agricultural and Forestry Experiment
    Station (MAFES), funded through an extramural agreement with ARS,
    focuses largely on how to produce and harvest kenaf in Mississippi for
    fiber. Soft commercial interest and market demand, however, does not
    justify Federal investment in production research for kenaf fiber at
    this time. Redirection of these funds to various pest management
    research programs in Mississippi are expected to have a much greater
    beneficial impact on the agriculture industries and market economies in
    the mid-south.
        Commercialization of kenaf products has taken place as a result of
    the ARS funded kenaf program at the Mississippi Agricultural and
    Forestry Experiment Station (MAFES). Products currently manufactured at
    the Charleston, MS complex include:
        (a) Bio-Sorb, an industrial sorbent and bioremediation agent,
    distributed by Delta Environmental Services, McComb, MS;
        (b) Delta-Dri, a high quality bedding for the animal research
    industry, distributed by Shepherd Specialty Paper, Kalamazoo, MI;
        (c) Lizard Litter, a high quality terrarium ground cover for the
    retail pet trade, distributed by Energy Savers, Frampton, CA;
        (d) Kenaf bark fiber for the interior automotive panels, used by
    Findlay Industries, Troy, MI;
        (e) Kenaf bark fiber for other nonwovens applications, used by
    Danforth International, Point Pleasant, NJ;
        (f) Kenaf bark fiber for pulp/paper applications, used by Ecusta,
    Pisgah Forest, NC.
        Question. Shouldn't kenaf research continue in order to improve
    efficiency in production, processing, and marketing to assist in
    further expansion of existing markets?
        Answer. With the failure of kenaf to make inroads in the wood pulp
    market, attention has turned to other uses of the plant, especially the
    use of the core (not the fiber) as an absorbent. Several commercial
    applications exist, such as animal bedding, but these are not high-
    volume applications requiring large acreage of kenaf to be grown. ARS
    believes that uses of kenaf other than newsprint have limited
    commercial potential and that the research funding now available for
    kenaf would have much greater short and long-range impact on market
    economies if applied to various pest control programs. These include
    the development of mass propagation technologies for biological control
    organisms which could lead to the establishment of new, locally-based
    industries to serve mid-south agriculture.
        Funding and support by the Southern U.S. Trade Association has
    found a significant demand in Japan for kenaf pulp and composite panel
    products. The report and trade missions suggests that major paper
    companies in Japan will require over 100,000 mt of kenaf pulp by the
    year 2000. These same companies have shown interest in investing in
    pulp mills and composite plants in Mississippi in order to economically
    transport value-added products to Japan. These include companies such
    as Oji Paper, Mishima Paper, Yamaha Livingtec, OG Corporation and
    Marubeni. Senior executives are impressed with the agricultural
    infrastructure available in Mississippi and the comprehensive kenaf
    research program at MAFES.
        Question. If the kenaf research program is eliminated, don't you
    believe it would significantly alter the perception of these potential
    major investors and cripple the opportunity for major economic
    development in Mississippi and the Southeast?
        Answer. ARS believes funding now available for kenaf would have
    much greater short and long-range impact on market economies in
    Mississippi and the Southeast if applied to various pest control
    programs. These include the development of mass propagation
    technologies for biological control organisms which could lead to the
    establishment of new, locally-based industries to support agriculture
    in Mississippi and the Southeast.
        The kenaf research and development team hosted and/or provided
    information to numerous corporations in 1996. These companies are
    evaluating the technical, economic and environmental advantages of
    kenaf in their respective industries. Many of these companies are quite
    impressed with the potential advantages of kenaf and are seriously
    evaluating commercial use. With a research and development team of some
    twenty-two scientists at the MAFES, the industrial clients can find the
    appropriate expert to provide the information required. There is no
    other public institution in the United States that has this capability.
        Question. Without reliable, up-to-date information provided by the
    public sector, do you believe further kenaf developments are likely?
        Answer. Further commercial developments of kenaf using available
    research information and technology are very likely if a real market
    demand develops for kenaf products. Good communication between public
    and private sectors is vital for proper targeting of public research.
    Considerable information from ARS in-house and sponsored research on
    kenaf is available to the industry. ARS will work with the industry to
    transfer technology to industry to foster the development of
    commercially feasible products and markets. However, kenaf production
    and processing costs remain high. For a market to develop, the use of
    kenaf fiber must add considerable value to products, compared to other
    fibers.
        Interest in kenaf commercialization in other states is increasing.
    Besides Mississippi, commercial developments are in process or planned
    in Arkansas, Alabama, Georgia, Florida, Texas and Delaware. Investors
    and university personnel utilize MAFES scientists extensively to aid
    commercialization in the states mentioned.
        Question. Without this support from MAFES, don't you believe the
    momentum for commercialization in other states would be limited?
        Answer. MAFES and ARS scientists always have a continuing role to
    transfer available information and technology arising from past
    research. Such activities will assist future commercial developments.
    In Texas, ARS fulfilled its mission by developing and transferring
    nematode-resistant varieties. Entrepreneurs there are satisfied with
    the varieties, and are now concentrating on establishing a vertically-
    integrated industry to reduce costs and improve efficiency.
    Commercialization will succeed or fail based primarily on the economics
    of kenaf production and use.
        Question. Where else does ARS perform research on kenaf?
        Answer. Kenaf research carried out in fiscal year 1997 is conducted
    at the following locations: College Station and Weslaco, TX; Lane, OK;
    New Orleans, LA; Stoneville, MS; and Athens, GA.
                           insect rearing facilities
        ARS recently submitted an assessment of its insect rearing
    facilities to the Committee. That report indicates the need for two new
    insect mass rearing facilities within ARS to support research and
    control efforts. It proposes that two old and inadequate facilities in
    Mississippi be combined into a single new facility at Stoneville to
    enable ARS to develop and support USDA and grower action program in
    field crop pest control (projected cost of $10 million); and a Fruit
    Fly Rearing Research Laboratory in Hawaii to address research needs for
    fruit fly control in fruit and vegetable crops supporting
    implementation programs conducted by the States of California and
    Hawaii, and APHIS (estimated cost of $5 million).
        Question. When does the Administration intend to propose funding
    for the two new insect rearing facilities the report indicates are
    needed?
        Answer. ARS will continue to consider insect rearing needs as we
    develop budget proposals for buildings and facilities over the next
    several fiscal years. ARS will also be guided by recommendations of the
    Strategic Planning Task Force which has been established in accordance
    with the 1996 FAIR Act. This Task Force will be making a national
    assessment of future federal investments for agricultural research
    facilities.
        Question. Was there any planning money for either of these
    facilities in the Agency's original fiscal year 1998 budget submission
    to OMB?
        Answer. No, the Agency did not request funding for either the
    Mississippi or the Hawaii insect rearing facilities in the fiscal year
    1998 budget submission to OMB.
        Question. What amount of planning funds are needed for each of
    these facilities?
        Answer. The estimated amount required to conduct planning and
    design efforts for the Waimanalo, Hawaii, insect rearing facility is
    $500,000, and the amount needed for the Stoneville, Mississippi,
    rearing facility is $1,000,000.
        With respect to the ARS insect rearing facility planned for
    Stoneville, MS:
        Question. Can the biological control program continue to advance on
    a major scale without the new facility?
        Answer. ARS has identified the area of augmentation biological
    control as a major new area of technology that needs to be developed to
    support the USDA Initiative on Integrated Pest Management (IPM) and
    agrees with the findings of the National Research Council report that
    research and development on mass propagation of biological control
    agents needs to be expanded. In anticipation of these needs, ARS has
    conducted substantial supporting research in this area and has
    developed new cost effective artificial diets capable of producing
    large numbers of effective biological control agents. Unfortunately,
    neither ARS nor any other research and development organization (public
    or private) has adequate facilities to conduct the necessary scale-up
    research to develop and demonstrate the technical and economic
    feasibility of mass rearing these new biologically-based pest control
    agents. Without new facilities to conduct research on technology scale-
    up and pilot scale production for field testing, augmentative
    biological control can not effectively advance.
        Question. How many jobs will the proposed new facility bring to the
    Mississippi Delta?
        Answer. An ARS planning document developed cooperatively by the
    Midsouth Area Office and the National Program Staff estimated that the
    proposed National Augmentative Biological Control Laboratory at the
    Jamie Whitten Delta States Research Center in Stoneville, Mississippi,
    would need to be staffed by 65 to 70 employees.
        Question. Who are the expected customers of the output of this
    facility?
        Answer. Direct customers of this facility, may include agricultural
    producers interested in managing insect and weed pests in a number of
    different crop, commodity and rangeland/pasture situations, private
    companies interested in the production of biological control agents,
    USDA, APHIS and FS who are interested in using augmentative biological
    control agents to control pests of agriculture and forestry, and other
    federal and state land managers who are interested in non-pesticidal
    methods to control insect and weed pests. Other possible indirect
    customers include research and development personnel interested in new
    mass production technologies, private agricultural consultants that may
    recommend the use of these new biologically-based pest control
    technologies, and the general public that are expected to benefit
    through the reduced use of chemical pesticides.
        Question. What is industry's role now in biological control of
    pests and what is it expected to be in the future?
        Answer. Currently, the biological control industry is in a
    fledgling state as it relates to the commercialization of biologically-
    based technology for large-scale pest control. Although some major
    industrial groups such as Ciba-Geigy have invested in this industry
    through subsidiary companies such as Ciba-Bunting, the majority of
    companies are small, family owned and operated businesses that exploit
    small niche markets rather than large-scale agricultural production
    markets. ARS feels that the primary bottleneck in using this technology
    for commercial agriculture is the development of scale-up mass rearing
    technology and other supporting research that can only be accomplished
    in a pilot production facility as is being proposed at the Stoneville
    location. Through research and development activities at this facility,
    ARS believes that large and small businesses alike can be assisted
    through Cooperative Research and Development Agreements and joint
    patents to further develop and commercialize new biologically-based
    pest control alternatives for major agricultural commodities and
    production systems.
                                     ______

                     Questions Submitted by Senator Bumpers
                                human nutrition
        Question. Would you offer your views of why the Human Nutrition
    research initiative is important?
        Answer. The human nutrition research initiative is important
    because it will provide information to (1) better define the
    relationship between diet, genetic inheritance, and lifestyle and the
    risk for chronic disease such as obesity, diabetes, ischemic heart
    disease, and cancer; (2) improve the resistance to acute infections and
    immune disorders by investigating the interaction between nutrition and
    immune function; (3) enhance the capacity to promote changes in dietary
    habits by basic research on neural processes, memory and learning,
    appetite regulation, and physiological factors influencing food habits;
    (4) improve the scientific basis for more effective Federal food
    assistance programs by better defining nutrient requirements and
    monitoring food and nutrient consumption and identifying socio-
    economic, cultural, and environmental forces that influence eating
    habits; (5) extend dietary guidance to nutritionally-vulnerable groups
    within the U.S. by determining how food consumption at critical points
    in the life cycle affects normal development and risk of disease; (6)
    generate a more nutritious food supply by defining the basis for
    modifying the health promoting properties of plant and animal foods,
    and making beneficial changes in the composition of foods.
        Specific benefits of the Human Nutrition Research Initiative will
    include: 1) a delineation of the roles of phytonutrients, e.g.,
    beneficial substances found in fruits, vegetables and grains--in
    preventing chronic diseases such as cancer, cataracts, and heart
    disease; in maintaining healthy body weight to avoid diabetes and other
    diseases; in the role of nutrition in brain function and the resistance
    to mental decline; 2) determination of factors assuring good bone
    growth and the protection from osteoporosis; and 3) identification of
    foods that help in the fight against infectious diseases. The
    Initiative also provides for a supplemental survey on the food
    consumption patterns of infants and children so that the Environmental
    Protection Agency can be provided with the statistically valid sample
    size for estimating the pesticide residue intakes of children as
    required by the Food Quality Protection Act.
        Question. In what ways will this initiative be applicable to
    production agriculture?
        Answer. Knowledge about health-promoting foods and components of
    foods can be used by animal, plant, soil, and post-harvest scientists
    to develop methods to modify food composition both during production
    and processing, expand food choices, and provide more options for
    healthful diets. Plant foods have over 600 phytochemicals that have
    antioxidant, immune-stimulating, sex hormone-modifying, and
    detoxification properties. Human nutrition research is needed to
    determine which of these phytochemicals can prevent disease associated
    with aging such as cancer, cataracts, and heart disease, and enhance
    the ability to resist infectious disease.
        Knowledge from human nutrition research indicates that a group of
    chemicals known as carotenoids, which have antioxidant and immune
    stimulating properties, help prevent specific diseases such as cancer.
    This knowledge has been a stimulus for researchers in plant genetics
    and breeding to significantly increase carotene availability in the
    food supply. Through genetic research, the total carotene content in
    tomatoes, sweet potatoes, corn, carrots, and cantaloupes has been
    increased. Genetic selection has also yielded germplasm that initiates
    carotene production in such typically carotene-free vegetables as
    cauliflower, yams, cucumbers, and potatoes. Similar research is needed
    to exploit the isoflavonoids and lignans, phytoestrogens found in
    soybeans, and fiber-rich foods such as flax, rye, and legumes, to help
    prevent sex hormone-related diseases such as breast and prostrate
    cancer.
        Other examples of nutritional input to modify food consumption
    include the production of meat with less fat and the development of
    grains with more healthful fatty acid profiles and with increased
    content of health promoting vitamins and minerals.
        Nutrition research results can counteract some of the claimed
    negative attributes for some nutritious foods such as meat, milk, and
    eggs which have affected the market for these products.
                                  aquaculture
        Question. Would you provide your views about the future of
    aquaculture generally and in terms of activities at Stuttgart and Pine
    Bluff, Arkansas?
        Answer. Aquaculture is poised to become a major growth industry of
    the 21st century. With increasing seafood demand and declining capture
    fisheries, global aquaculture production will have to increase some 500
    percent by the year 2025 to meet projected needs. Although the United
    States is the world's largest exporter of seafood, the annual U.S.
    trade deficit in fisheries products has been $4.5 billion to $7 billion
    since 1987. This trade deficit is the largest for any agricultural
    commodity. The expansion of domestic aquaculture could help offset this
    deficit and reduce pressure on threatened capture fisheries. Led by
    catfish farming, U.S. aquaculture has expanded steadily in the 1980's
    and 1990's. Production increased from 308.4 million ponds in 1980 to
    665.6 million pounds in 1994, while farm-gate value increased from
    $260.8 million to $751.1 million during the same period.
        Aquaculture accounts for approximately 181,000 jobs in the U.S.
    with a total economic impact estimated at $5.6 billion annually.
        Despite recent growth, the U.S. presently ranks only tenth in the
    world in the value of its aquaculture production and many sectors of
    the U.S. aquaculture industry are challenged to compete in the global
    marketplace. Other nations, including China, Japan, Thailand, the
    Philippines, and Norway, have made aquaculture a national priority with
    substantial government investments in research and development. Farm-
    raised seafood from foreign nations is capturing a growing share of the
    U.S. seafood market. The U.S. has an important opportunity to develop
    an aquaculture industry to serve national needs and the global
    marketplace with high quality, safe, and wholesome aquaculture
    products.
        The continued growth and competitive position of the U.S.
    aquaculture industry in a global marketplace will be directly related
    to the resources invested in research and technology development. A
    strong ARS aquaculture research and technology development program
    offers significant benefits to both producers and consumers of aquatic
    products by enhancing the production efficiency and quality of aquatic
    organisms cultivated for both food and non-food purposes.
        ARS aquaculture research at Stuttgart and Pine Bluff, Arkansas,
    contributes substantially to the Agency's national aquaculture research
    program. Research at Stuttgart is aimed toward improving production
    efficiency, health management, product quality, and value of a variety
    of important U.S. aquaculture species. ARS research at Pine Bluff,
    carried out in cooperation with the University of Arkansas at Pine
    Bluff, focuses on development and evaluation of new or alternative
    components of aquaculture systems to improve production efficiency and
    quality of freshwater fish.
                               rice germplasm lab
        Question. What plans does USDA have to bring the rice germplasm lab
    into full operation?
        Answer. The National Rice Germplasm Evaluation and Enhancement
    center has been designed and planned to include an expansion of
    existing research efforts to include new programmatic thrusts as
    follow:
        Molecular Genetics.--To apply modern techniques of molecular
    marking of rice genes to keep pace with technologies being developed in
    the Japanese Rice Genome Project.
        Cereal Chemistry.--To focus upon basic factors affecting
    traditional long grain rice quality, especially sensory factors of
    taste and aroma and to help develop aromatic rice varieties for U.S.
    production. Ten percent of current U.S. consumption is aromatic rice
    from Asia. There is also a need to develop medium grain varieties
    suited to the Japanese market.
        Molecular Plant Pathology.--To utilize modern biological tools to
    incorporate diverse resistance in improved varieties. Major diseases
    include sheath blight, blast, and a new fusarium-type disease.
        Molecular Cytogenetics.--To transfer useful genetic
    characteristics, such as disease resistance and improved quality from
    20 species of wild relatives of rice and apomixis, which allow cloning
    of plants through seeds for production of true breeding hybrids.
        Plant Physiology.--To determine basic factors affecting yields and
    raise the present yield ceiling. The goal is to bring high yielding
    traits into new varieties, while maintaining desirable grain quality.
        Question. What will the operational cost requirements be in the
    short term?
        Answer. The operational cost for the new facility is estimated at
    $8 per square foot. This translates to an annual cost for this 46,000
    sq. ft. facility of $368,000.
        Question. What are the long term goals for the lab?
        Answer. The long-term goal is to conduct germplasm based research
    directed of the needs at the U.S. rice industry; high yields, superior
    grain quality, and pest resistance. In order to keep the U.S. industry
    competitive in the world marketplace, we need to be at the forefront in
    the development of new technology.
                             ars facility closures
    Background
        The prepared statement of Secretary Woteki states that ARS is
    moving ahead with the Strategic Planning Task Force, mandated by the
    1996 Farm Bill to determine which, if any, ARS facilities should be
    closed. Still, the fiscal year 1998 budget proposes to close four
    facilities next year.
        Question. Why did you not wait until completion of your Task Force
    review to make the decisions to close facilities?
        Answer. The question of which programs and locations to maintain
    and which ones to phase out involved many complex issues. Although the
    ARS budget has grown gradually over the last 20 years, in real terms
    there has been little if any growth. Because of inflation, the rising
    costs of high technology scientific equipment, unfunded increases in
    personnel costs, and the expense of maintaining an aging infrastructure
    ARS has seen its scientific work force shrink from 3,400 to 1,900
    scientists. In addition, new programmatic demands are constantly being
    made on the agency as the high priority needs of American agriculture
    change. In this tight budget environment, the agency has to constantly
    reevaluate what it is doing and what it needs to be doing. That process
    makes us identify and discontinue areas of good and useful research
    that are deemed to be of lower priority at the present time. Where
    several projects at a given location are terminated, it impacts on the
    agencies's ability to maintain that location. In such situations the
    cost of keeping a location open cannot be borne by the remaining
    programs. Regarding Prosser and Mandan, those projects that are to be
    retained will be moved to other suitable locations. The facility
    closures contained in the President's fiscal year 1998 budget are
    driven by programmatic and budgetary considerations and not by issues
    related primarily to the facilities themselves.
        Question. Did you not think that Congress should have the benefit
    of your Task Force recommendations before acting on your request to
    close facilities?
        Answer. The Strategic Planning Task Force will explore a host of
    issues over the next several years regarding ARS and other federally
    funded research facilities before it submits its recommendations to
    Congress and the Department. We anticipate that Congress, USDA, and the
    Land Grant University system will all benefit from the work of this
    task force. But in the interim, we will have to continue working within
    the limits of the resources available to us as we adjust and redirect
    over research program to address emerging problems and initiatives
    established by the Administration, the Department, and by Congress.
                              update on ars items
        Question. Would you provide me an update on the following ARS
    items: Endophyte research at the University of Arkansas and the
    University of Missouri.
        Answer. Endophyte research at the University of Arkansas and the
    University of Missouri is continuing as follows:
        At the University of Arkansas (Fayetteville), ARS is providing
    funding for cooperative research on reducing the effects of tall fescue
    toxicosis through development of persistent nontoxic populations of
    tall fescue, identifying the toxins, identifying beef cattle with
    genetic tolerance of the toxins, determining the effect of toxins on
    reproduction in cattle, and development of grazing management to
    minimize the effects of the toxins.
        At the University of Missouri (Columbia), ARS is providing funding
    for cooperative research on effective management practices to enhance
    tall fescue field persistence and to determine methods to reduce the
    effects of tall fescue-fungal endophyte toxicosis. Funding will
    continue at the current level to the fullest extent possible for the
    Center of Excellence in Endophyte/Grass Research at the University of
    Missouri and the University of Arkansas. Endophyte Grass (Univ. of MO/
    AR): Fiscal year 1996 gross, $200,000; fiscal year 1997 gross,
    $198,400; and fiscal year 1998 gross, $198,400.
        Extramural Agreements with University of Missouri ($81,456) and
    University of Arkansas ($80,152) in fiscal year 1997.
        Question. Would you provide me an update on the following ARS
    items: Lower Mississippi Delta Nutrition Intervention Project.
        Answer. This nutrition project is a fully participatory consortium
    of seven diverse partners organized to address the problems and needs
    of the population of the Lower Mississippi Delta. The seven partners
    are: Alcorn State University, Arkansas Children's Hospital Research
    Institute, Pennington Biomedical Research Center, Southern University
    and A&M College, University of Arkansas at Pine Bluff, University of
    Southern Mississippi, and the Agricultural Research Service (USDA/ARS).
    An electronic communication system among the partners (including
    electronic mail, fax, and video conferencing) was implemented and is in
    regular use. The consortium is publishing a monograph of existing data
    relative to the nutritional status and health of people in the Delta of
    Arkansas, Louisiana, and Mississippi. Advisory Groups have been
    established in each State. A pilot/validation study of food consumption
    and food security was developed. All partners participated in three
    capacity building workshops focused on nutritional and dietary
    assessment methods, community assessment methods, and nutrition
    intervention methodology. Thirty-six counties (10 in Arkansas, 12 in
    Louisiana, 14 in Mississippi) have been selected for the research based
    on rates of unemployment, population, and percent of population below
    the poverty level. A key informant survey has been piloted and the main
    survey will be implemented in the 36 counties in May/June, 1997. With
    direction from a USDA Scientific Review Board, a pilot/validation study
    to determine the feasibility of using telephone interview methodology
    to obtain food consumption and food security data will be underway
    during the summer of 1997. This information will be used as baseline
    data to evaluate the impact of welfare reform in the area at a later
    time. Other research protocols are being developed including a
    community assessment survey and a longitudinal study of nutritional
    status of select segments of the population.
         national center for agricultural law research and information
        Question. Would you provide me an update on the following ARS
    items:
        The National Center for Agricultural Law Research and Information.
        Answer. The National Agricultural Library (NAL) administers funding
    for the National Center for Agricultural Law Research and Information
    (NCALRI) through a grant to the University of Arkansas School of Law.
    NAL assists NCALRI in the dissemination of information on agricultural
    law; operation of the Center's information programs; training of Center
    staff; implementation of compatible cataloging and indexing methods;
    and addition of the Center's records to NAL's AGRICOLA database and
    online catalog.
        The NAL home page on the Internet provides a link to the NCALRI
    home page, and NCALRI links to the USDA home page. Potential users may
    identify NCALRI publications using INFOLINKS, the University of
    Arkansas online library catalog, NAL's AGRICOLA database and ISIS
    online catalog, and catalogs of other libraries. Users may obtain many
    of these publications through interlibrary loan departments at the NAL,
    the University of Arkansas Mullins Library, and other libraries. Order
    information for many NCALRI publications is provided on the NCALRI home
    page.
                                     ______

                      Question Submitted by Senator Harkin
        I have reviewed the draft strategic plan for the Agricultural
    Research Service and applaud the effort expended in developing this
    document. I am concerned about the measurement of performance mainly on
    the basis of peer-reviewed journals articles. We all want excellent
    science from our national labs, but we also want science that is
    relevant to the problems faced by farmers in the field. Producers want
    answers to critical problems of agricultural production.
        Question. How will you incorporate the needs of producers for
    answers to specific problems such as wheat/barley scab, the need for
    new crops, insect infestations and the need for increasing yield of
    crops and livestock into your strategic plan? What specific
    measurements in addition to scientific articles, will you employ to
    ensure that you are meeting yield goals? pest resistance goals?
    environmental goals? food safety goals? development of new product
    goals?
        Answer. Let me stress that we have a long history of working
    closely with our customers to determine their research needs. Our
    customers range from USDA action and regulatory agencies, other Federal
    and State agencies, commodity groups, processors, farmers, ranchers, to
    scientists around the world. We try to track ``emerging problems''
    (diseases, weeds, insects, pathogens, and so forth) before they begin
    to affect American agriculture. In the case of Karnal bunt for example,
    our scientists followed its movement northward through Mexico and,
    before it infected American wheat fields, were searching for ways to
    control and eradicate the fungi. In addition, we were already searching
    world-wide for Karnal bunt resistant wheat that might become the bases
    for a long-term solution to this problem. We respond with similar speed
    and vigor to any threat that could jeopardize the safety and security
    of U.S. agricultural production systems
        Before we started to draft the ARS strategic plan, we held five
    regional visioning conferences specifically to obtain input from our
    customers on what they saw as the future needs of American agriculture.
    When we begin or renew a research project, conduct a program review at
    a research location or center, or establish a new National Program we
    involve customers in the process to ensure that our research is
    relevant to their needs. In part as a result of our customer outreach
    efforts, all of the issues you noted in your question, yields,
    environmental protection, food safety, and pest resistance, are covered
    in the ARS strategic plan.
                                     ______

                      Questions Submitted by Senator Kohl
        Recently I wrote you with questions regarding the ARS commitment to
    the new Integrated Farming Systems program initiated by the agency, and
    funded by Congress, in fiscal year 1997. I greatly appreciated your
    prompt written response to my questions, which has been very helpful in
    clarifying some of my concerns. However, a few of your written
    responses raise additional questions, which I would like to have
    clarified for the record. Specifically,
        Question. In your letter, you state that the $1 million provided in
    fiscal year 1997 for the IFS program has been ``institutionalized into
    ARS' base research program on IFS which agency-wide is proposed to
    total $7,517,800 in fiscal year 1998.'' Could you please provide me
    with an accounting of the full $7,517,800 request. Specifically, what
    activities does ARS intend to conduct with this funding, and where
    would these activities take place?
        Answer. The ARS base funding for Integrated Farming Systems (IFS)
    research is currently at $7,597,800 and is proposed to become
    $7,517,800 in fiscal year 1998. The focus of integrated farming systems
    research is two-fold: 1) Develop farming systems that are sustainable,
    economically viable and environmentally friendly; and 2) Provide
    management decision aid and information systems that enable farmers and
    their consultants to evaluate alternatives, both strategically and
    tactically, so that they may make informed decisions about farming
    operations in the context of a large number of variables.
        The following ARS locations are conducting research relative to the
    development of farming systems: Athens, GA; Ames, IA; St. Paul, MN;
    Columbia, MO; Oxford, MS; Lincoln, NE; Columbus, OH; University Park,
    PA; Florence, SC; and Madison, WI.
        The following ARS locations are conducting research on decision aid
    and information systems: Tucson, AZ; Ft. Collins, CO; Morris, MN; and
    Madison, WI.
        Question. Last year, it had been my impression that the IFS
    program, as described in the fiscal year 1997 budget request, was a new
    program. Now, I am getting the impression that the agency is viewing
    the IFS program as an ongoing program that existed prior to fiscal year
    1997. Could you clarify any confusion with regard to this matter?
        Answer. IFS is a designation for a new research emphasis rather
    than for a new program of research. As a result of a presidential
    initiative in 1990, ARS and other federal agencies embarked upon an
    agricultural water quality initiative, one aim of which was the same as
    focus number 1 above. The first seven locations conducting research on
    farming systems are also involved in the USDA Water Quality Program
    where a systems approach is being taken to create harmony between
    agriculture and the environment. Concurrently, other ARS units were
    developing models, expert systems, and other types of decision
    assistance tools to help farmers make complex decisions about their
    farm operations. Those units are included in the second part of the
    above list.
        Several years ago, the U.S. scientific community realized the
    benefits of a systems approach, and scientists began characterizing
    some of their work as being oriented towards IFS. ARS began
    unofficially recognizing and tracking IFS about three years ago. In
    fiscal year 1997, however, a first attempt has been made at an official
    designation and tracking of this area of research. In common with the
    rest of the scientific community, ARS has not come to a final decision
    about establishing boundaries around what is to be called IFS research.
    Such boundaries are usually indistinct. The list of locations given
    above may change in the future.
                                     ______

                      Questions Submitted by Senator Byrd
              national center for cool and cold water aquaculture
        Question. Please detail the progress in developing the National
    Center for Cool and Cold Water Aquaculture.
        Answer. A detailed progress report follows:
      --Senate Report No. 101-468, 1991, directed ARS to report on the
            feasibility for establishing a National Fresh Water Aquaculture
            Research Center (subsequently named the National Center for
            Cool and Cold Water Aquaculture [NCCCWA]) in Appalachia. ARS
            submitted the report in March 1991.
      --Senate Report 102-116, 1992, directed ARS to report on the program
            and site requirements for the NCCCWA. The report was submitted
            in March, 1992.
      --Senate Report 103-102, 1994 directed ARS to proceed with the
            environmental assessment required to make final recommendations
            on a suitable site for the NCCCWA. A report was submitted in
            June 1993. Since then an additional site in Leetown, WV, was
            identified. An environmental assessment for that site is
            underway.
      --ARS received $1.9 million in fiscal year 1995 for land purchase and
            laboratory planning and design. ARS received $6 million in
            fiscal year 1997 for construction of the NCCCWA. An additional
            $6 million will be required for construction.
      --ARS held a program planning workshop in March 1996 to define the
            research program and criteria for laboratory site and
            facilities needs.
      --Through a September 1996 Memorandum Of Understanding, ARS will co-
            locate the NCCCWA with the U.S. Department of the Interior's
            (USDI) Leetown, WV, Science Center. This site, already
            federally owned, will enable ARS to develop a cooperative
            program with the USDI Fish Health Laboratory at Leetown, WV,
            and to share ARS administrative overhead with the ARS
            Appalachian Fruit Research Station, Kearneysville, West
            Virginia, within a mile of the Leetown site.
      --In December 1996, ARS selected an A-E firm to carry out the design
            for the NCCCWA. The design is expected to be completed by
            September 1998.
      --ARS is presently negotiating for the purchase of a 215-acre farm
            adjacent to the Leetown site, to provide for additional
            watershed protection.
      --The projected research program will require a modern laboratory
            complex, comprising approximately 30,000 square feet, with 12
            scientists, and require an annual operating budget of
            approximately $4 million. No funds have yet been appropriated
            for the research program.
      --A staffed research facility to address cool and cold water
            aquaculture production problems could be operational as early
            as the year 2000.
        Question. While the center is under construction, what actions will
    the USDA take to expand cool and cold water aquaculture opportunities
    in the state? Through the land-grant university research, extension,
    and higher education system? Through the Freshwater Institute at
    Shepherdstown, West Virginia?
        Answer. While the National Center for Cool and Cold Water
    Aquaculture (NCCCWA) is under construction, the Agricultural Research
    Service (ARS) will continue its ongoing cool and cold water aquaculture
    research programs through the ARS Appalachian Fruit Research
    Laboratory, Kearneysville, WV. ARS has conducted an in-house research
    program in cooperation to develop means to remove with the Freshwater
    Institute in Shepherdstown, West Virginia, wastes and dissolved
    nutrients from the water used for aquaculture before it is returned to
    streams or rivers. The water used in this research comes from the
    intensive culture research tanks of the Freshwater Institute.
        Most of the ARS research has been focused on removing the nutrients
    through the technique of thin-film hydroponics, and using the nutrients
    to grow commercially valuable crops such as lettuce, sweet basil,
    strawberries, and turf grass. Research also has been done on artificial
    wetlands, that efficiently remove nutrients, but do not produce
    commercially valuable crops.
        ARS has recognized the strong potential for cooperation in
    aquaculture with the University of West Virginia, and has had
    preliminary discussions with the University to identify opportunities
    for collaborative aquaculture research and technology transfer programs
    while the NCCCWA is under development and after it has been
    constructed.
        As soon as program funding for the NCCCWA has been appropriated,
    ARS will initiate hiring of aquaculture scientists so that research
    programs can be undertaken, even before the NCCCWA is constructed. The
    Leetown Science Center has offered the use of research facilities and
    space during the interim period.
                              freshwater institute
        Question. Please provide an update on the programs being carried
    out through your cooperative research arrangement with the Freshwater
    Institute. Detail the specific research projects and problems currently
    being addressed.
        Answer. Through a cooperative research arrangement with the
    Freshwater Institute, ARS has provided funds to the Freshwater
    Institute to support a portion of its research program on aquaculture
    in Appalachia. The research problems to be studied have been developed
    jointly by ARS and the Freshwater Institute, and the research proposals
    have been developed by the Freshwater Institute.
        The cooperative research arrangement between ARS and the Freshwater
    Institute is consolidated under a cooperative program entitled,
    ``Development of Aquacultural Systems for Appalachia,'' and has
    resulted in two highly productive, ongoing research projects. The first
    project is ``Water Quality Control in Intensive Recycle/Reuse
    Aquaculture Production Systems.'' This project is focusing on
    developing new or improved technologies for intensive recycle/reuse
    aquaculture systems, including modifications to and evaluations of
    fluidized sand-bed filter design, application of ozone with low-head
    oxygenator technology, new carbon dioxide control techniques, waste
    feed detection technology, control of bacterial and nodular gill
    disease, economic modeling, and quality control. The second project is
    ``Arctic Char: Development of Production Technologies Suited to Water
    Resources in Appalachia.'' This project is identifying, studying, and
    addressing the constraints to Arctic char egg, fry, and fingerling
    production using the water resources of Appalachia. Arctic char
    production is new and rapidly expanding in the aquaculture industry of
    the northern hemisphere, but there is a very limited research base to
    support domestic production in the U.S. Research from this project will
    develop and evaluate optimal production technologies and engineered
    systems that will be required for producing Arctic char seedstock.
        Question. What progress and/or accomplishments have been achieved
    through this cooperative research arrangement? What are the funding
    levels provided for these efforts in fiscal year 1997 and 1998?
        Answer. Noteworthy recent progress and accomplishments for the
    programs carried out through our cooperative research arrangements with
    the Freshwater Institute are as follows: Scientists at the Freshwater
    Institute have developed an improved ultrasonic waste feed monitor
    through a cooperative arrangement with the University of Mississippi's
    National Center for Physical Acoustics. This device efficiently detects
    waste feed, while ignoring fecal material, and represents an
    improvement over earlier technology developed by these scientists. The
    device is currently being commercialized through a computer company.
    Arctic char were successfully hatched and reared to the fry/fingerling
    stage in recirculating systems conditions. Hatching success was from 95
    to 97 percent and post-hatch survivorship was from 80 to 90 percent.
    This is an important accomplishment for this difficult-to-culture
    species.
        Funding levels provided for the cooperative research program with
    the Freshwater Institute are estimated at $1,447,200 in both fiscal
    year 1997 and fiscal year 1998.
          appalachian soil and water conservation research laboratory
        Question. Please describe research being conducted for
    agroforestry.
        Answer. The agroforestry research conducted by ARS is focused on
    increasing income to small family farms in forested Appalachia and the
    mid-South, where rainfall is abundant but intensive agriculture can
    occupy only a small proportion of the land because of steep slopes and
    infertile and shallow soils. Agroforestry has been highly successful in
    other parts of the world, but it has not been widely adapted to our
    economy and environment, or to the kinds of small-farm enterprises
    common in the eastern U.S. The basic objective is to develop
    diversified and value-added production systems, including crops and/or
    livestock, which provide income during the 25 to 30 years required for
    growth of merchantable trees. In part, this involves the planting of
    genetically improved trees which provide products other than lumber,
    such as nuts, but spaced so that forages, niche-market or specialty
    crops like herbs, or other marketable crops can be produced between and
    beneath the trees. This research identifies compatible tree and
    understory species, develops integrated pest and weed management
    practices, and provides efficient management of inputs such as
    fertilizer. In addition, the research provides basic knowledge
    concerning the ways desirable trees and understory plants interact,
    either competing with each other or synergistically promoting greater
    growth by sharing the sun's energy, water, and nutrients, so that more
    efficient systems can be designed and evaluated. The integration of
    livestock, such as cattle, sheep and goats, into this land-use is also
    studied. ARS research is focused more on management of crops and
    livestock components than on forestry issues. The U.S. Forest Service
    is also involved in agroforestry research through its Agroforestry
    Center in Lincoln, Nebraska. ARS scientists maintain close ties with
    the Agroforestry Center through communications, cooperation and
    collaborations. The ARS unit in Booneville, Arkansas has both a
    Memorandum of Understanding (MOU) and a interagency agreement (IAG)
    with the Forest Service unit in Pineville, Louisiana regarding tree
    growth research and data. The ARS unit in Beckley, West Virginia
    although not a formal participant in the MOU and IAG, is knowledgeable
    of these activities and also utilizes this information. The ARS
    agroforestry program also explores ways that trees, shrub, and grass
    plantings can be used in soil and water conservation efforts, to
    stabilize streambanks, stop erosion, and improve water quality by
    capturing runoff water and sediment.
        Question. Please advise the committee of the potential of the
    agroforestry industry in stimulating economic development in the
    Appalachian region and describe research progress being made in this
    area.
        Answer. Twenty-eight percent of Appalachia's approximately 197,000
    square miles is currently in agricultural production. Of this, the
    dominant agricultural enterprise is livestock grazing by beef cattle
    and sheep, although production of poultry, swine, dairy, fruit and
    vegetable, and tobacco are also important. The typical Appalachian farm
    is less than 150 acres in size, includes one or more hilly wooded
    acres, and requires off-farm income for economic survival. Agroforestry
    systems, which allow production of two or more complementary crops on
    the same land base, have the potential for diversifying and increasing
    total income on such farms. One example of an agroforestry system is
    forage production within black walnut plantations. Research at the
    University of Missouri has demonstrated a 5-fold increase in value over
    a 20-year period on a black walnut/forage system versus on a similar
    acreage used for forage alone. In this example, the largest increase in
    value was from annual nut production income, although under this tree
    species forage production also remained high. Additional value was
    accrued as a future high-value veneer harvest. Research is needed to
    develop sacomparable agroforestry systems for Appalachia. These systems
    should emphasize species-diverse, sustainable production and include
    high-value specialty crops and products that provide raw materials for
    novel, value-added rural enterprises. The Appalachian Region's
    proximity to major eastern population centers provides access to
    markets for such niche products. Research to develop agroforestry
    systems specifically suited to Appalachia was initiated at the
    Appalachian Soil and Water Conservation Research Laboratory in Beckley,
    West Virginia. In fiscal year 1993, funds were appropriated for
    agroforestry research at Beckley, West Virginia. In fiscal year 1995,
    funds were appropriated to purchase land and initiate a program on
    agroforestry at Beckley, West Virginia. One area of emphasis includes
    adding tree components to existing grazing enterprises; a second new
    area examines production of high-value understory crops in managed
    woodlots. Anticipated benefits from this research include; 1)
    diversifying and improving the economic status of small, hill-land
    farms; 2) development of innovative production systems which are
    sustainable and ecologically compatible with the region; 3) increasing
    the provision of raw materials to supply small, locally owned, value-
    added enterprises; and 4) making a positive contribution to the
    survival of small rural communities.
        At Beckley, black walnut and honey locust were planted in
    experimental spacings with various forage species on instrumented
    watersheds, on a very steep hillside with varying soil depth, typical
    of the region, for studies of productivity, water requirements, and
    nutrient cycling. Improved strains of black walnut, honey locust, and
    other trees with potential value for multiple-use plantings were
    selected and planted for evaluation within forage production systems. A
    modeling effort has begun on partitioning of solar radiation, water,
    and nutrients between trees and understory for use as a tool to
    generalize research findings for a wide range of production conditions
    found in Appalachia. The objective is to find the most efficient and
    cost effective plant established strategies. Other work being
    implemented in this new program addresses the use of desirable trees in
    the management of new varieties of chestnut and hazelnut which produce
    high-carbohydrate nuts very soon after planting, as an early source of
    income.
        Agroforestry research began at Booneville, Arkansas, in fiscal year
    1992. There, ARS scientists developed the practice of harvesting the
    plentiful supplies of pinestraw for sale to homeowners and landscapers
    as mulch. This provides cash flow averaging about $440.00 per acre
    annually, while pine plantings mature. ARS scientists at Booneville
    have demonstrated that various forages can be produced profitably
    within timber plantations of various spacings, and are defining the
    optimum numbers of trees and orientation of tree rows for maximizing
    production of forage in the tree understory. Working with cooperators
    from universities and other Federal agencies, Booneville scientists are
    adapting the New Zealand Forest Research Initiative's Agroforestry
    Estate Model to U.S. conditions and requirements. This model is a
    decision aid which provides yields and profits for any specific
    situation. It is being evaluated in the field by agroforestry
    cooperators across the U.S. Booneville scientists and their cooperators
    at Langston University in Oklahoma also demonstrated that goats can be
    used profitably and effectively in place of herbicides to clear the
    vegetation from land to control weeds and shrubs that would compete
    with tree seedlings.
        Question. Please identify additional program and resource
    requirements to enhance the productivity of this facility.
    Specifically, please provide the committee with an analysis on
    constructed biosystems for disturbed hill lands.
        Answer. The Appalachian region is experiencing the following
    activities that potentially threaten its natural resources. Accelerated
    harvesting of forests for chips and pulp and continued extraction of
    minerals are creating an increasing number of disturbed sites. Because
    of low population density, Appalachia is being targeted by surrounding
    regions as a site for disposal of wastes. Industrial activities such as
    coal power plant production in the Appalachian region are also creating
    large quantities of by-products requiring disposal. A program focusing
    on constructed biosystems for disturbed hill lands would benefit
    Appalachia by developing management strategies for these activities.
        The constructed biosystems program would focus on research in which
    best management practices are developed for the integration of animal,
    industrial, and municipal by-products in the development of
    nontraditions agricultural with the selection of new plant materials
    systems. The goals are to improve disturbed areas, develop new
    agricultural enterprise and promote rural economic development.
    Projected benefits include: new environmentally sound technologies for
    management of disturbed lands; maintained or improved environmental
    quality and enhanced standard of living; and opportunities for
    cooperation with industry and other Federal and State agencies.
        Question. Please describe research being done regarding the
    utilization of coal combustion by-products, which are generated
    abundantly in West Virginia, as a means of managing acidic hill-land
    soils for improved growth of forage and crop plants.
        Answer. Plant growth on acidic soils is limited by the deficit in
    both magnesium and calcium. Coal combustion by-products from the flue
    gas desulfurization process pose a disposal problem, but contain
    significant amounts of calcium. A Cooperative Research and Development
    Agreement (CRADA) has been developed between ARS scientists at Beckley,
    WV, and Dravo Lime Company of Pittsburgh, PA, to produce a magnesium
    enhanced local combustion and gypsum by-product. This now patented by-
    product improved yields of forage and row crop species in acid soils.
    Other research has shown that some coal combustion by-products are of
    concern because trace elements, such as boron, may accumulate in
    plants. Research has shown, however, that plants showed no excessive
    accumulation of heavy metals. Gypsum enhanced by-products have also
    been shown to raise subsoil pH and improve root growth. Another
    approach under investigation is combining coal combustion by-products
    with animal manures to create a nutrient source and acidic soil
    conditioner.
        Fluidized bed combustion residue along with polyacrylamide also
    reduced erosion on tilled hillsides. This coal combustion by-product
    combined at a moderate rate with phosphate rock and dolomitic lime
    improved phosphorus, calcium and magnesium levels in infertile acid
    soils while reducing levels of phytotoxic aluminum.
        Question. Please identify the department's current research
    efforts, including funding and scientific support of each project at
    the Appalachian Soil and Water Conservation Laboratory.
        Answer. The fiscal year 1997 funding and scientific support for
    each project at the Appalachian Soil and Water Conservation Laboratory
    are shown below:

    ------------------------------------------------------------------------
                    Project title                 Scientists      Funding
    ------------------------------------------------------------------------
    Potentials for Agroforestry.................         1.6        $396,900
    Alleviation of Acid Soil Constraints to
     Plant Growth...............................         2.5       1,006,200
    Selection and Improvement of Plants for
     Infertile Acid Soils.......................         3.5         912,100
    Livestock Grazing Systems and Water Quality
     in Appalachia..............................         2.5         744,700
    Management and Ecology of Pastures in the
     Appalachian Region.........................         2.5         763,800
    Forage Legume Breeding for the Appalachian
     Region.....................................         1.4         400,200
                                                 ---------------------------
          Total.................................        14.0       4,223,900
    ------------------------------------------------------------------------

        Question. Please provide significant accomplishments attributed to
    each project.
        Answer. Potentials for Agroforestry--The use of black locust, honey
    locust and black walnut within forage pastures appears to be
    beneficial. The trees provide shade for the livestock and their seed
    pods are a good source of nutrients for the livestock. The growth of
    shade tolerant forage species among the trees also may allow the
    pastures to be grazed for a longer time during the summer.
        Alleviation of Acid Soil Constraints to Plant Growth--The
    application of a coal combustion power plant residue, a flue gas
    desulfurization (FGD) by-product, to an Appalachian acid soil resulted
    in increased crop yields. This gypsum quality by-product was effective
    in raising calcium levels and reducing phytotoxic soil aluminum
    concentrations. When this by-product was combined with phosphate rock
    and dolomitic lime, improved soil phosphorus and magnesium levels and
    higher soil pH also resulted. The development of this combined product
    is being pursued through a Cooperative Agreement and Development Act
    (CRADA) activity. The FGD by-product combined with polyacrylamide was
    also shown to reduce soil erosion from tilled hillsides.
        Selection and Improvement of Plants for Infertile Acids Soils--Poor
    plant growth in acid soils is most often caused by excessive aluminum
    adsorption by plant roots. This toxic effect of aluminum on plants is
    dependent upon the form or species of aluminum in soil, which in turn
    is dependent upon the other minerals present in a soil. The form or
    species of aluminum in acid soils toxic to plants has been reevaluated
    based on new information. These data were used to develop a
    mathematical model that describes the interaction between aluminum and
    other soil minerals that can relieve the aluminum toxicity. This model
    also describes the adsorption of aluminum and other minerals by plant
    root membranes. It can be used to predict the likely toxicity of
    various acid soils to plants. Not only do soils differ in their
    toxicity, but plants and varieties of plants differ in their tolerance
    to acid soil toxicity. The Alfagraze alfalfa variety was shown to be
    more tolerant and thus produce higher yields than the Vernal variety at
    a soil pH of 4.6.
        Livestock Grazing Systems and Water Quality in Appalachia--Grazing
    studies in the Beckley area show that a balance of fiber, energy, and
    protein improves nitrogen (N) use efficiency in grazing livestock. If
    fiber energy and protein are in proper balance, less N will be excreted
    and the reduction in manure nitrogen will improve the quality of water
    leaving the watershed. A predictive energy model for grasses has been
    developed that will help managers decide how to stock or utilize a
    pasture to meet the energy demands of livestock. Water resource
    management practices, grazing techniques, and pasture management
    strategies were tested and shown to improve and preserve water quality
    in highly agriculturalized karst landscapes.
        Management and Ecology of Pastures in the Appalachian Region--
    Different types of plants are being evaluated for use in Appalachia to
    lead to improved production efficiency. The composition of new and
    nontraditional plants is being examined as is the potential for
    production of bioactive compounds that may serve as herbivore
    deterrents. Some grasses infected with a beneficial mycorrhizal fungal
    symbiont were shown to have improved nutrient uptake ability and
    enhanced competitive ability, important features for low-input pasture
    systems in Appalachia.
        Forage Legume Breeding for the Appalachian Region--The capability
    of legumes, such as clover and alfalfa, to fix atmospheric nitrogen in
    combination with a bacterial rhizobia symbiont and; thus, help the
    plant meet its requirement for this major nutrient as well as their
    digestibility makes legumes highly desirable forage plants.
    Unfortunately, most legumes are sensitive to acid soils. White clover
    cultivars currently used in Appalachia were found to be less acid soil
    resistant than those available from New Zealand and elsewhere. These
    more resistant cultivars are now being used to develop white clover
    varieties more suitable to Appalachian soils and conditions.
                       appalachian fruit research station
        Question. Please identify the department's research projects being
    carried out by the Appalachian Fruit Research Station and identify the
    funding and scientific support for each.
        Answer. There are twelve base funded research projects at the
    Appalachian Fruit Research Station in Kearneysville, West Virginia. The
    individual projects, funding and scientific support for each project
    are provided for the record.
        Molecular Biology and Genetic Engineering of Fruit Trees--$835,500,
    2.8 scientist years.
        Genetics and Cultivar Development of Pear and Peach--$536,000, 1.5
    scientist years.
        Cold Hardiness and Stress Adaptation in Fruit Trees--$271,500, 1.0
    scientist years.
        Related Costs for Apple Research--$201,300. In consultation with
    industry these funds have been redirected to high priority research on
    assessment of apple quality ($100,000 to East Lansing, Michigan) and in
    support of apple rootstock breeding and development ($100,000 to
    Geneva, New York).
        Biological Management of Deciduous Tree Fruit Insect Pests--
    $371,100, 1.7 scientist years.
        Utilization of Waste & Byproducts from Aquaculture to Enhance
    Economic . . . Sustainability--$482,800, 1.4 scientist years.
        Mechanization for Deciduous Tree Fruits and Small Fruits--$301,200,
    1.2 scientist years.
        Vegetation and Soil Management in Fruit Production--$568,200, 2.2
    scientist years.
        Improved Deciduous Tree Fruit Product, Efficiency and Fruit Quality
    Through Integrated Cultural Management--$606,200, 1.7 scientist years.
        Deciduous Fruit Crop Diseases--$438,700, 2.0 scientist years.
        Nondestructive Sensors Measuring the Postharvest Quality of
    Apples--$415,000, 1.1 scientist years.
        Development of Aquacultural Systems for Appalachia--$1,302,700,
    extramural project.
        Question. Please provide the accomplishments made by the station in
    developing naturally based products that can be used by the fruit
    industry as alternatives to pesticide control of post-harvest rotting.
        Answer. A significant discovery has been made in pest and disease
    control with the observation that a naturally occurring hydrophobic
    clay material when applied to foliage will greatly reduce the severity
    of insect attack and severity of disease on susceptible fruit trees.
        Question. Significant losses are occurring each year in the
    production of peaches due to plant stress. Please advise the committee
    of the progress being made by the Appalachian Fruit Research Station in
    identifying stress-resistant genes which would enhance peach quality
    and production.
        Answer. ARS scientists at the Appalachian Fruit Research Laboratory
    in Kearneysville, West Virginia have identified genes that may provide
    resistance to plant stress in peaches, specifically freezing stress. A
    gene has been isolated from peach tree bark that encodes a protein
    known as a ``dehydrin.'' Similar proteins have been identified from
    other plants, and they seem to protect plant cells against damage from
    freezing and drying. In peaches, either drought or fall dormancy caused
    the dehydrin to accumulate, and the amount in a tissue closely followed
    the degree of cold hardiness. This long-term research, when combined
    with other research underway at the laboratory, is expected to lead to
    more frost-tolerant peach trees.
        Question. Please identify recent research accomplishments by the
    Appalachian Fruit Research Station of significance to the fruit
    industry.
        Answer.
        Molecular Biology and Genetic Engineering of Fruit Trees.--
    Transgenic plums showing immunity to plum pox virus were obtained via
    genetic engineering.
        Genetic and Cultivar Development of Pear and Peach.--Genes for
    resistance to viral and bacterial diseases that have devastating
    economic impact on grape production each year were transferred into
    ``Thompson Seedless'' grapes by genetic engineering. The same gene
    transfer techniques are being used to develop pear and peach cultivars
    resistant to viral and bacterial diseases.
        Cold Hardiness and Stress Adaptation in Fruit.--A gene encoding a
    ``cryoprotective'' protein was isolated from peach bark; manipulation
    of the expression of this gene could potentially decrease current tree
    fruit losses due to cold temperatures and expand the range of temperate
    tree fruits.
        Related Costs for Apple Research.--Nine specific cooperative
    agreements were initiated with university researchers to address
    problems of fruit storage and pesticide reduction.
        Utilization of Waste and Byproducts from Aquaculture to Enhance
    Economic and Environmental Sustainability.--Hydroponic plant production
    cleaned aquaculture wastewater to water quality standards equal to the
    original water in the spring source. Hydroponic plant production of
    lettuce, strawberry, and basil also generated a gross additional gross
    income of $4/ft of greenhouse area while removing a waste product.
        Mechanization for Deciduous Tree Fruits and Small Fruits.--In 1995,
    a mechanical harvester for fresh market blueberries was developed,
    tested, and licensed to a Michigan firm. This same harvesting concept
    was used to build a mechanical harvester for processing citrus. The
    citrus harvester was built, tested, and shown to be highly effective in
    removing various citrus fruits without damage to fruit, tree, or
    developing fruit. A unique trellis system for eastern thornless
    blackberries was developed that separates fruiting canes from
    vegetative canes. This trellis system together with the mechanical
    blackberry harvester are able to harvest fresh-market quality
    blackberries.
        Vegetation and Soil Management in Fruit Production.--A tensiometer
    irrigation valve was designed, tested, and patented in 1993. In 1995, a
    cooperative research and development agreement was in place with a
    Virginia company to commercialize this invention. The tensiometer valve
    senses the water content of the soil and opens an irrigation valve when
    the soil needs water and closes the valve when wet. It operates without
    electricity and only one moving part. It will have application in
    horticulture greenhouses, landscape settings, nurseries, and home
    gardens. Inert and non-toxic hydrophobic particles reduced disease
    incidence and repelled major insect pests of apple and pear.
        These reflective particles also reduced water stress. A cooperative
    research and development agreement is being negotiated to commercialize
    this broad spectrum, non-toxic pest control product.
        Improved Deciduous Tree Fruit Production Efficiency and Fruit
    Quality Through Integrated Cultural Management.--Selected ground cover
    systems or a new plant growth regulator reduced vegetative growth in
    apple trees and the number of shoots exhibiting fire blight symptoms.
    These findings could lead to improved fruit productivity and reduced
    tree losses from fire blight, a major problem in the Appalachian
    Region.
        Nondestructive Sensors Measuring the Postharvest Quality of
    Apples.--A prototype on-line system that non-destructively measures
    apple quality has been developed and is being evaluated in cooperation
    with an industry partner.
        Water Quality Control In Intensive Recycle/Reuse Aquaculture
    Production Systems.--Results of a field trial of the ultrasonic waste
    feed controller (UWFC) showed that satiation feeding with the UWFC or
    by hand produced the same feed conversion and 30-50 percent faster
    growth than ration feeding produced. A tagging experiment showed that
    growth of rainbow trout stocked at 8-12 cm (within a mixed cohort
    system) and harvested at 340 g was not strongly dependent upon initial
    length. Adding ozone to the water within a recirculating system was
    found to improve microscreen filtration, water quality, and reduce
    bacterial gill disease problems.
        Question. Please identify additional program and resource
    requirements to enhance the productivity of this facility.
        Answer. Pest and disease control is the single greatest cost in
    fruit production. The impact and productivity of the Kearneysville
    research group would be enhanced by strengthening the following areas
    of research. (1) Identify, characterize and implement the development
    and utilization of natural compounds and microorganisms as biocontrol
    agents in preventing or suppressing diseases and pests in pre- and
    post-harvest crop production. (2) Expand activities in biotechnology
    and the application of genetic engineering technologies in the
    development of transgenic plants with improved product quality and
    resistance to pests and diseases. (3) Investigate pesticide degradation
    and movement in orchard soils under various ground cover management
    systems to reduce ground water contamination.
                                     ______

                      Questions Submitted by Senator Leahy
                              foodborne illnesses
        Question. Under the draft research agenda for the Office of Food
    Safety and Inspection Services, there are a number of recommendations
    for food borne illnesses in humans. What research is the Agriculture
    Department currently conducting to address this issue and what level of
    funding would be necessary to implement the recommendations for further
    research?
        Answer. The Agriculture Department is not addressing those
    questions from the draft research agenda of the Food Safety and
    Inspection Service which relate to food borne illness in humans, that
    is, such questions relating to the epidemiology and incidence of human
    disease related to food borne pathogens, and the sensitivity of
    specific human populations to these pathogens. The minimum funding
    necessary to implement these recommendations for further research would
    be $10 million.
                            asian long-horned beetle
        Question. Without immediate attention, spread of the Asian Long-
    Horned beetle into forested areas of New York, Vermont and
    Massachusetts could threaten the important maple sugar and fall foliage
    industries of the northeast. Has the Agriculture Department proposed a
    research program to investigate and develop potential control
    mechanisms for this pest?
        Answer. Currently, the State Departments of Agriculture are
    attempting to eradicate this insect pest by felling, chopping up, and
    burning trees in which the beetle has been found. For example,
    contractors hired by New York State started cutting down the first of
    up to about 50 trees in February of 1997, from backyards and streets in
    infested communities. New York plans to replace the trees with
    varieties the beetle doesn't eat and conduct periodic surveys to see if
    the insect is in other locales. Other states that may become infested
    could use similar tactics. USDA will add $500,000 to efforts in New
    York to replace trees being removed and destroyed because of the
    beetle. The state and city will each expend $1 million. USDA Animal and
    Plant Health Inspection Service and Forest Service have requested that
    the public contact them if they suspect an infestation in their area.
    USDA Animal and Plant Health Inspection Service (APHIS) and Forest
    Service have also requested that ARS determine what natural enemies
    might exist in the pest's native habitats of Japan, Korea and Southern
    China through its European Biological Control Laboratory in
    Montpellier, France. Cornell University scientists are also studying
    the situation. No large scale research effort has been formulated as
    yet.
        Question. What level of funding is necessary to undertake such a
    research project?
        Answer. If the pest cannot be prevented from spreading and
    eradicated, then a research project that would include studies on the
    biology and ecology of the pest, as well as development of effective
    IPM tactics, should be initiated. Such a project should be funded at a
    minimum of $600,000.
        Question. Would the Department include and/or delegate the project
    to a university research program?
        Answer. The Department would include appropriate university
    research scientists as partners in addressing this pest.
        Question. Will some of the $2.5 million requested increase in
    support of emerging disease and exotic pests be used to address the
    Asian Long-Horned beetle?
        Answer. ARS has requested a $5,000,000 increase to address emerging
    diseases and exotic pests in fiscal year 1998. Of the $5,000,000
    requested, ARS plans to allocate $2,500,000 for studies on emerging
    plant diseases, $1,100,000 for studies on emerging exotic diseases of
    livestock, and $1,400,000 for studies on emerging domestic and zoonotic
    diseases of livestock. ARS has not planned to use these funds for
    research on the Asian longhorn beetle.
        Question. Outside of the U.S. Forest Service, please list the
    research projects being conducted by the Department on forestry issues.
        Answer. ARS does not conduct forestry research per se. ARS does,
    however, conduct some research that can be related to forestry issues
    as follows: Agroforestry Systems for the Family Farm--Booneville, AR;
    Potentials for Agroforestry--Beckley, WV; Systematics of Flies of
    Importance in Biocontrol, Agricultural Crops, and Forests--Beltsville,
    MD; Genetic Improvement of Trees for Soil and Water--Mandan, ND;
    Genetics and Germplasm Evaluation of Landscape Woody Plants--
    Washington, D.C.; The Development of Pest-Resistant Landscape Trees to
    Enhance Environment and Reduce Use of Pesticides--Washington, D.C.;
    Development of Sustainable Urban Agro-Systems and Biocontrol Strategies
    for Gypsy Moth and Turf Pests--Beltsville, MD. Agroforestry is a land-
    use system that attempts to optimize the benefits from the interactions
    created when trees and/or shrubs are deliberately combined with crops
    and/or livestock. ARS agroforestry research is focused more on the crop
    and livestock components than on trees and shrubs. Less directly, but
    still potentially related to forestry, is ARS' research on trees for
    windbreaks, arboretums, and horticultural applications. Some of the
    research findings on genetics, diseases, and biocontrol may be
    applicable to forestry issues. Colleges of Agriculture at many land
    grant and other universities include Forestry Departments and;
    therefore, CSREES conducts research on forestry related issues.
    Individual researchers in ARS cooperate with CSREES scientists on
    specific topics related to tree and forestry issues, but ARS is not in
    a position to address the CSREES forestry research program.
        Question. The President's budget request includes an increase of $1
    million to support the Grazing Lands Initiative. What will this
    additional funding be used for? How will the funding be dispersed? Are
    there research projects proposed for specific regions?
        Answer. The increase of $1 million to support grazing lands
    research will be utilized to strengthen the ARS rangeland and pasture
    research program in the areas of utilization and natural resource
    conservation. This funding will be directed to the ARS laboratories at
    El Reno, Oklahoma ($400,000) and University Park, Pennsylvania
    ($300,000) for research to determine the impact of pasture design and
    grazing animals on the quality of water emerging from watersheds, and
    to develop pasture management systems that will optimize water quality
    and pasture productivity. In addition, $300,000 will be directed to ARS
    research at Las Cruces, New Mexico, to develop low-input technology for
    seeding native grasses and shrubs on degraded rangelands and riparian
    areas. Current methods of reseeding rangeland require mechanical
    seedbed preparation, which is costly and encourages erosion. Methods of
    distribution of seed which do not disturb soils or require expensive
    equipment include overland water flow during rainfall events, wind
    dispersal, and distribution by cattle themselves after passing through
    the digestive tract.
        Question. The President's request includes an increase of $2.5
    million for research in support of emerging exotic diseases in
    livestock. The focus of this increase is on limiting the introduction
    of exotic disease. What activities has the Department undertaken to
    develop a tracking system for livestock to address the spread of
    disease once it has been introduced?
        Answer. The ARS animal health research program develops diagnostic
    tests and vaccines for monitoring or tracking livestock disease. ARS
    works closely with APHIS and producer groups to use new diagnostic
    tests to track spread of disease. This type of research has been
    particularly important recently in detecting new domestic strains of
    bovine viral diarrhea and porcine reproductive respiratory syndrome.
                                ozone standards
        Question. In response to the U.S. Environmental Protection Agency's
    proposed tighter ozone and fine particulate standards, agriculture
    groups have asserted that the new standards would have a detrimental
    impact on farm operations. Has the Department undertaken any research
    projects to assess these claims?
        Answer. ARS is pursuing an aggressive research program to assist
    U.S. farmers in meeting air quality standards, but is not doing
    research on claims that new air quality standards would adversely
    affect farm operations.
                           integrated pest management
        Question. How much funding is the Department directing towards
    Integrated Pest Management and environmentally-friendly techniques?
        Answer. The information on the funding for Integrated Pest
    Management and related programs by USDA agencies is provided for the
    record.

            Agency                                          Fiscal year 1997
    AMS.....................................................      $2,556,000
    APHIS...................................................      34,493,000
    ARS.....................................................      75,612,000
    CSREES:RES..............................................      58,441,000
    CSREES:EXT..............................................      13,997,000
    ERS.....................................................       2,500,000
    FS......................................................      16,117,000
    NASS....................................................       5,700,000
    NRCS....................................................       6,617,000
                        --------------------------------------------------------
                        ____________________________________________________
          Total.............................................     216,033,000

        Question. What is the status of the USDA goal to have 75 percent of
    U.S. agriculture using IPM?
        Answer. Upon the commencement of USDA's Integrated Pest Management
    (IPM) initiative in 1994, the Department's Economic Research Service
    estimated that American farmers have adopted IPM methods on nearly half
    of all fruit and nut, vegetable, and major field crop acreage. Total
    land used for crops in the United States is estimated at 332 million
    acres. The level of use of IPM practices depends on the crop, the
    region and the pest problem. The National Agricultural Statistical
    Service is currently conducting national surveys of major field crops,
    and selected fruits and vegetables to ascertain levels of IPM adoption
    and chemical use. The results of the first of these surveys will be
    available in early 1998. Much more work is needed to refine and
    implement a sound measurement methodology. After the Economic Research
    Service (ERS) report was published in 1994, additional studies have
    been completed by Department analysts and outside experts, and most
    support ERS' conclusion that 50 percent or more of the nation's crop
    acreage is currently managed under at least a ``low'' level of IPM.
    However, several analyses, including the one published by Consumers
    Union in Pest Management at the Crossroads, have concluded that
    considerable more work is needed to help producers move along the IPM
    continuum to the ``medium'' and ``high'' levels. We believe that an
    accelerated effort is needed, and warranted, to help growers reduce
    reliance on high-risk pesticides and enhance the sustainability of farm
    operations.
        Question. What research activities are being undertaken to help
    farmers reach this goal?
        Answer. A variety of interagency partnership research activities
    are being undertaken to provide the necessary components for adoption
    by farmers into an integrated pest management systems approach.
    Practices and methods being developed vary among crops and among
    different regions of the country. For example, in some regions, the
    introduction of parasites or predators, which naturally prey on
    particular pests are being developed for introduction into infested
    areas. In other areas, crop rotation and planting date tactics,
    resistant crop varieties, and cultural practices are being developed
    for use in combination with other methods, such as microbial
    biocontrol, mating disruption, and sterile insect technology, to manage
    pests before they reach damaging levels. The pests that are targeted by
    these studies include insects and mites, plant pathogens and nematodes,
    and weeds. The control tactics may be used in greenhouse, on crop
    acreage, and in urban gardening settings.
        Under the USDA IPM initiative all the activities of the agencies
    and the land-grant system State Agricultural Experiment Stations have
    been pulled together into a coordinated effort that is more efficient
    and more effective in getting new knowledge and technology resulting
    from the research activities into the hands of the farmers. The
    priority needs identified by state and regional IPM teams are being
    used to orient area-wide IPM programs conducted by the Agricultural
    Research Service, IPM research conducted at State Exp. Stations and
    Extension IPM programs. All of these activities are being directed to
    meet the educational needs of farmers and their advisors for IPM
    adoption.
        Question. What research activities is USDA undertaking to develop
    alternatives to comply with the Food Quality Protection Act?
        Answer. The USDA recognizes the critical need to develop
    alternatives as the Food Quality Protection Act is implemented and
    needs for pest management alternatives are identified. The USDA IPM
    Initiative is a critical activity for addressing pest management needs
    identified by farmers and others through a comprehensive needs
    identification and priority process involving every state. A number of
    major research and education programs are currently underway to develop
    and deliver alternative management methods to producers as increasing
    broad restrictions on pesticide use and continuing development of pest
    resistance occur. For example, the ARS area-wide IPM program, in
    partnership with CSREES and the land-grant university system, other
    state and federal agencies, and the private sector are undertaking
    research on sustainable systems including biological, cultural and
    other biorational technologies. CSREES provides funds to support
    mission-linked research that is focused on biological control, host
    resistance, cultural control and applied ecology, and management of
    resistance. CSREES also supports IPM education and training programs
    needed to transfer pest control alternatives to farmers, crop
    consultants, and other IPM end-users via Cooperative Extension Service
    programs in every state. The Food Quality Protection Act includes
    language requiring the Secretary of Agriculture to ensure support for
    minor-use pesticide research. ARS and CSREES in partnership with the
    Land Grant Universities carry out research under the IR-4 program which
    supports the use of registered pesticides and biological control agents
    for minor crops where there are no economic incentives to do so by
    private industry. Regulatory action prompted by the Food Quality
    Protection Act has increased the burden on this program in terms of
    alternative control materials compatible with IPM systems.
                              pear thrips research
        Question. The fiscal year 1997 Senate Agriculture Appropriations
    report provides $78,000 for Pear Thrips research in Vermont and
    includes the following report language: ``ARS application of project
    funds for overhead expenses are not to exceed 10 percent of the amount
    appropriated for the project.'' How much of the original $78,000 award
    has ARS directly granted to the research institution? Please provide a
    breakdown of how the balance of the $78,000 award has been used by ARS.
        Answer. The fiscal year 1997 funding level for pear thrips research
    in the northeastern U.S. is $80,300. Of the $80,300 provided to ARS,
    $45,000 is provided under a cooperative agreement to the University of
    Vermont. The emphasis of the Vermont program has been to use
    entomopathogenic fungi to control pear thrips in sugar maple
    plantations. The remaining $35,300 is allocated to Ithaca, NY to
    directly support activities conducted by the pear thrips program in
    Vermont and has included the cryogenic storage of fungal pathogen
    isolates important to the program, the taxonomic identification of
    collected isolates, molecular systematics research on associated fungal
    pathogen species, assistance with fungal pathogen isolation and
    culturing techniques, and other similar support services.
                                     ______

                      Question Submitted Senator Faircloth
                              project termination
        Question. The White House budget proposal eliminates 71
    Agricultural Research positions. I just learned that the Agriculture
    Department contacted some of those researchers and, in essence,
    directed them to accept new posts. I understand that the Department
    told these researchers that a failure to accept the new posts will
    result in possible unemployment if Congress fails to restore their
    current positions in the appropriations process. I am informed, in
    fact, that several of these researchers were told that reluctance to
    accept the new posts will jeopardize their careers. I am thus concerned
    that some of these scientists construed these job ``offers'' as an
    effort to ensure that their current posts are vacated prior to
    congressional action on the budget and possible restoration of these
    positions (these researchers were told that these posts will not be
    left open through the fiscal year). However, if these people accept the
    new positions, they will be unavailable to return to their current
    posts if Congress opts to restore funds for the positions. Their
    decisions will appear voluntary, but, as you know, these circumstances
    paint a rather different situation. As you know, these decisions are
    the province of the Congress, and it appears that the Department is in
    the midst of an effort to undermine the congressional prerogative. How
    does the Department justify these actions?
        Answer. The proposed fiscal year 1998 budget for ARS identifies 71
    research projects to be terminated to help fund several new research
    initiatives. New positions associated with the new research initiatives
    will be established that will offset those positions associated with
    projects that will be terminating. In addition, there are a number of
    available unencumbered positions currently in the Agency as a normal
    process of attrition. Managing the transition from positions associated
    with project terminations to new or existing positions poses many
    challenges. There is no provision for an orderly transition because we
    will not know what the content of our fiscal year 1998 budget will be
    until final legislative and executive approvals occur, usually in
    September. We are very sensitive to the effect these actions are having
    on the specific projects and personnel involved. We are making every
    attempt to plan for the reassignment of these impacted employees to
    other available positions. To the greatest extent feasible, we are
    attempting to coincide the timing of the relocation of our researchers
    with the beginning of the 1998 fiscal year so that in those situations
    where Congress restores projects, those decisions can be reversed. No
    employee was told that their job would be in jeopardy. Whether an
    employee voluntarily elects to transfer to another position in the
    Agency is independent of the Agency's commitment to maintaining a given
    project. As long as appropriated funds are in the ARS budget for the
    project, however, ARS is obligated to maintain the program. If
    placement within the local area is not possible, we will be offering
    reassignments to vacant positions at other ARS locations to all
    permanent employees. For those who are unable to relocate, we will
    provide counseling and assistance in finding jobs in the local area.
    Unfortunately, this uncertainty and inability to develop definitive
    plans presents many dilemmas for our impacted employees from a personal
    perspective. Most of them will not know what ultimately will happen to
    them until final action is taken on the budget.
                                     ______

                    Questions Submitted by Senator Grassley
                                    biofuels
        Question. How has your relationship with the Department of Energy
    progressed during the past year with regard to biofuels? What new areas
    are being researched in science and economics? What are the
    Department's plans for this coming year to increase cooperation with
    DOE on biofuels? What is the status of the Memorandum of Understanding?
        Answer. During the past year ARS has had 2 workshops with DOE and
    its laboratories. The areas covered were fuel ethanol research and
    biodiesel research. The participants also set up a joint steering
    committee to plan for future coordination at the research level, began
    sharing materials, and agreed to implement a scientist exchange. DOE's
    National Renewable Energy Laboratory (NREL) has provided their new
    biomass fermenting organism to 2 ARS Research Centers, both of which
    are concerned with applying that technology to making ethanol from corn
    biomass. The steering committee will also facilitate sharing plans.
        ARS also has a CRADA with NREL and the Fats and Protein Research
    Foundation to examine the use of biodiesel feedstocks such as animal
    fats and restaurant grease, enzymatic hydrolysis, and using branched
    chain alcohols as biodiesel fuel.
        Question. Has the Department designated a single person to
    coordinate ethanol, and separately biodiesel, research Department-wide?
    Who is that person? If not, why has the Department chosen that course
    of action?
        Answer. The Associate Deputy Administrator for Crop Production,
    Product Value, and Safety coordinates ethanol and biodiesel research
    for ARS. The Director, ERS-Office of Energy and New Uses has
    responsibility for the Department.
                                    biofuels
        Question. Will the Office of Energy receive the same amount of
    funding as last year, or has the Department asked for increased
    funding? Does the Office of Energy still have the ability to contract
    out for special studies? How much money has been allocated for this
    purpose? If not, why has the Department curtailed funding and activity
    in this area?
        Answer. In fiscal year 1996, the Office of Energy and New Uses was
    funded for $849,000. In fiscal year 1997, the estimated funding is
    $499,000. The Office, as a part of ERS, does have the authority to
    contract out for special studies. Thirteen thousand has been allocated
    for nonsalary expenses. Funding has been reduced in this area for two
    reasons: First, ERS is moving and must pay some of the moving expenses
    out of its nonsalary expenses. Second, the budget allocation process
    was redesigned by me to establish a central, flexible pool of funds
    from the Agency's nonsalary expenses to be allocated by collective
    management decisions, rather than portioning out the entire Agency
    allocation to ERS divisions and office at the start of the year.
        Question. Will the Department maintain, at least, level funding for
    ethanol research at ARS and CSREES? If not, why not?
        Answer. ARS proposes level funding for ethanol research at $5.2
    million. CSREES estimates a decline from a current estimate of $2.9 in
    fiscal year 1997 to $1.8 in fiscal year 1998 due to reductions proposed
    for special research grants.
        Question. Has the Department assisted the biodiesel industry in
    their efforts to achieve alternative fuel status in Department of
    Energy regulations? In what way? Will the Department increase these
    efforts? If needed, will the Department support changes in EPACT
    favorable to biodiesel?
        Answer. ARS has and continues to foster biodiesel development from
    the early 1980's to its present programs in fiscal year 1997. Specific
    research that has been conducted includes the following: feedstocks,
    e.g., soy oil, tallow, recycled greases and soap stocks; fuel quality
    assessment to demonstrate that biodiesel and blends of biodiesel (B20)
    are energy equivalent to petrodiesel, substantially similar (sub sim)
    regulations; and engine testing as well as emission testing of neat
    biodiesel and B20. ARS plans to maintain its current level of effort on
    this issue. DOE is the lead agency determining implementation of EPACT
    rules and regulations. USDA is prepared to provide whatever information
    it has to DOE on the net benefits of biodiesel to facilitate its use.
    If the changes considered in EPACT are legislative, then an
    Administration position would need to be developed depending upon the
    nature of the change.
        Question. What USDA agencies are involved in value added research?
    What is the proposed budget for new uses? How does this differ from the
    previous budget request?
        Answer. The USDA agencies involved in value added research and
    their proposed budgets for new uses are follows:

                             [Dollars in thousands]
    ------------------------------------------------------------------------
                                                          Fiscal year--
                        Agency                     -------------------------
                                                     1997 funds   1998 funds
    ------------------------------------------------------------------------
    Agricultural Research Service.................      $82,368      $76,326
    Alt. Agric. Research and Comm. Corp...........        7,000       10,000
    Cooperative State Research, Education, and
     Extension Service............................       28,701       18,885
    Economic Research Service.....................        1,274        1,274
    Forest Service................................        9,482        9,482
    Office of Operations..........................           49           51
                                                   -------------------------
          Total...................................      128,874      116,018
    ------------------------------------------------------------------------

        The fiscal year 1998 budget for USDA reflects a decrease of $12.9M
    in new uses research.
                office of energy and new uses biofuels function
        Question. Will the Office of Energy be capable of fulfilling its
    function of advocating for biofuels under this budget request?
        Answer. The Office of Energy and New Uses is responsible for
    assisting the Secretary in developing departmental energy policy and
    coordinating departmental energy programs and strategies. Secretary
    Glickman has made clear that he has a policy of encouraging the
    development of an agriculturally-based biofuels industry. The Office
    will continue to support the policy position of the Secretary of
    Agriculture under the current budget request.
                                     ______

                     Questions Submitted by Senator Dorgan
                              project termination
        In its evaluation of research projects, ARS used a subjective point
    system to screen which projects to consider and subsequently recommend
    for termination. The data collected through this subjective review has
    not been made available to Congress. In fact, Congress has been told
    that the data developed through this screening process has been
    destroyed because it was part of a ``pre-decision'' review. Congress
    must have such information available not only to determine the
    effectiveness of the screening process, but also to consider whether
    ARS priorities are consistent with the public policy objectives
    established by Congress.
        Question. Since the screening process was an essential component of
    determining which projects would be considered for termination, what is
    the purpose of withholding this data from Congressional review as it
    considers budget and research priorities for USDA?
        Answer. Our intent was not to withhold information; the initial
    ratings of research projects based on the ARS Project Evaluation Guide
    were only the first step in the process to identify projects for
    proposed termination. All projects that fell into the lower quartile
    were further scrutinized and evaluated by the ARS top management team.
    This collection of information which included the consensus scores plus
    the scientific and programmatic knowledge and experience of the ARS
    management team, was then used to select those projects that were
    judged to be less critical to agriculture from a national perspective
    at this point in time, in relation to all other research ongoing in the
    Agency. The initial data, without the benefit of the followup analysis,
    debate, and judgmental inputs that occurred to develop the final list
    of proposed project terminations could be misinterpreted and therefore
    be potentially detrimental to those individual employees and programs
    implicated.
        The original project scores were not conscientiously destroyed but
    simply were not retained in computer files after they had served their
    purpose in the initial part of the overall evaluation process.
        The 1996 farm law established a ``Strategic Planning Task Force''
    which was given the responsibility of reviewing ``all currently
    operating agricultural research facilities constructed in whole or in
    part with Federal funds,'' as well as proposed future research
    facilities. These facilities were to be reviewed in the context of the
    development of a ten-year strategic plan which reflects ``both national
    and regional perspectives for development, modernization, construction,
    consolidation, and closure of Federal agricultural research
    facilities.''
        The fiscal year 1998 recommendation by ARS to close four research
    facilities, does not in my view give equal consideration to the
    importance of research from both national and regional perspectives.
    The ARS fiscal year 1998 budget proposal precludes the ``Strategic
    Planning Task Force'' from considering these four facilities in its
    review, thereby prejudging the outcome of this process.
        Question. Based on the 1996 farm law directive, would it not be
    more appropriate for ARS to postpone any facility closures until the
    Strategic Planning Task Force is able to consider all currently
    operating agricultural research facilities from both national and
    regional perspectives and make its recommendations to the Secretary and
    Congress?
        Answer. The Federal Agriculture Improvement Act of 1996 established
    a Strategic Planning Task Force to explore a host of issues, over the
    next several years, regarding ARS and other Federally funded research
    facilities. It will be approximately two years before the task force
    submits its recommendations to Congress and the Department. We hope
    that Congress, USDA, ARS, and the Land Grant University system will all
    benefit from the work of this task force. But in the interim, we will
    have to continue working within the limits of the resources available
    to adjust and redirect our research program to address emerging
    problems and new initiatives established by the Administration, the
    Department, and by Congress.
        The question of which programs and locations to maintain and which
    ones to phase out involved many complex issues. Although the ARS budget
    has increased gradually over the last 20 years, in real terms there has
    been little if any growth. In addition, new programmatic demands are
    constantly being made on the agency as the high priority needs of
    American agriculture change. In this tight budget environment, the
    agency has to constantly reevaluate what it is doing and what it needs
    to be doing. That process makes us identify and discontinue areas of
    research that are deemed to be less critical at the present time. One
    of the factors we keep in mind when making these decisions is our
    desire to maintain research capabilities in all regions of the country.
    The facility closures contained in the President's fiscal year 1998
    budget are driven by programmatic and budgetary considerations and not
    by issues related primarily to the facilities themselves.
        There appears to be a shift in emphasis within USDA away from basic
    production-related agricultural research. Currently, production
    agriculture is being called upon to be more environmentally sensitive
    and sustainable, while also being internationally competitive. In order
    to achieve these objectives, basic production research needs to pay
    particular attention to the specific regional ecosystems in which
    farmers and ranchers operate.
        Question. To what extent were these objectives particularly as they
    relate to regional ecosystems considered in the project evaluation
    process by USDA in its recommendation to terminate 71 projects and four
    ARS facilities and specifically, the Mandan, North Dakota ARS facility?
        Answer. ARS research priorities continue to reflect the
    sustainability, environmental harmony and international competitiveness
    aspects of production agriculture. The process used by ARS to evaluate
    research projects included a consideration of similar research being
    conducted elsewhere in the Agency that would have applicability to
    those regions or areas where research projects would be terminated. For
    example, the three projects proposed for termination at Mandan focus on
    water management systems, soil management, and forage germplasm.
    Similar research on water management is being conducted at ARS
    locations in Akron, Colorado; Sidney, Montana; and Bushland, Texas.
    Research related to soil management is conducted at Lubbock, Temple,
    and Weslaco, Texas; and Morris, Minnesota, and research to improve
    forage germplasm is carried out at ARS in Lincoln, Nebraska, and Logan,
    Utah. ARS researchers at these locations have the capacity to extend
    and apply their work on a broad regional basis to include the Northern
    Great Plains.
        USDA is in the process of terminating ARS projects and facilities,
    as well as embarking upon a study of research capacity through the
    Strategic Planning Task Force. At the same time funds from prior
    appropriations and other sources have been set aside or held in reserve
    for the modernization, expansion, refurbishing, etc. of ARS offices and
    facilities.
        Question. Please identify the amount of funding which is being held
    by USDA for such purposes, the sources of such funding, and the ARS
    facilities for which such funding is being held. Also, please
    distinguish between the funding held for administrative offices and
    laboratory facilities.
        Answer. The agency is currently holding in reserve a total of
    $25,480,000 of prior appropriations to the Buildings and Facilities
    account. These amounts are being held until sufficient funds are
    accumulated for a design or construction contract award. Full funding
    of a design or construction project is required before a contract can
    be awarded. Of the total, $3,065,000 is being held for the
    modernization efforts at the National Center for Agricultural
    Utilization Research, Peoria, Illinois ($1,545,000) and U.S. Grain
    Marketing Research Laboratory, Manhattan, Kansas ($1,520,000). The
    remaining $22,415,000 is being held for construction of the following
    replacement laboratories: U.S. Horticultural Crop and Water Management
    Laboratory, Parlier, California ($2,630,000); U.S. Vegetable
    Laboratory, Charleston, South Carolina ($12,453,000); National Center
    for Cool and Cold Water Aquaculture, Leetown, West Virginia
    ($6,000,000); Poultry Disease Laboratory, Athens, Georgia ($936,000);
    and the Water Conservation and Western Cotton Research Laboratory,
    Maricopa, Arizona ($396,000). It is not possible to distinguish the
    agency-held funds by laboratory or office space usage.

    ------------------------------------------------------------------------
                                                Replacement    Modernization
                                               laboratories      projects
    ------------------------------------------------------------------------
    Parlier, CA.............................      $2,630,000  ..............
    Athens, GA..............................         936,000  ..............
    Charleston, SC..........................      12,453,000  ..............
    Leetown, WV.............................       6,000,000  ..............
    Maricopa, AZ............................         396,000  ..............
    Peoria, IL..............................  ..............      $1,545,000
    Manhattan, KS...........................  ..............        1,520,00
                                             -------------------------------
          Total.............................      22,415,000       3,065,000
    ------------------------------------------------------------------------

                                     ______

                           Economic Research Service
                     Questions Submitted by Senator Cochran
                                     travel
        Question. Please provide the Committee with a breakdown of ERS
    actual travel costs in fiscal year 1996.
        Answer. ERS travel costs in fiscal year 1996 were $1,184,000. Of
    this amount $621,000 or percent was paid by ERS appropriations, and
    $563,000 or 48 percent was paid from reimbursements from other
    government agencies. The primary reimbursement source for ERS travel is
    the Foreign Agricultural Service for technical assistance studies in
    Eastern Europe.
        Question. Please identify foreign travel obligations for fiscal
    years 1994, 1995, and estimates for fiscal years 1996 and 1997.
        Answer. A table that shows travel obligations paid from ERS
    appropriations and reimbursement funds will be submitted for the
    record.
        [The information follows:]

              Economic Research Service Foreign Travel Obligations

            Fiscal year                                               Amount
    1994..........................................................  $383,000
    1995..........................................................   407,000
    1996..........................................................   607,000
    1997 (est.)...................................................   700,000

        Question. How many ERS personnel were engaged in foreign trips in
    these years and for what purposes?
        Answer. A table that shows the number of ERS personnel engaged in
    foreign trips will be submitted for the record. The primary purpose of
    these trips was to provide technical assistance to Former Soviet Union
    countries and Eastern Europe countries to facilitate their transition
    toward market economies. Commodity outlook and policy analysis training
    in the form of seminars and hands on experience was provided.
        ERS travel to Eastern Europe and the FSU has been part of a program
    to provide technical assistance to help develop and institutionalize
    the capacity to conduct and disseminate market reporting, analysis and
    forecasting for key agricultural commodities. The funding for these
    activities came initially from AID (SEED Act), and subsequently from
    USDA's Emerging Democracies Program. These trips have been very
    successful. Programs for agricultural market analysis and forecasting
    now exist as self sustaining programs in Poland, the Czech Republic,
    and Slovakia, where ERS programs are ending. ERS training in Russia led
    to the establishment of successful reporting and analysis programs in
    20 oblasts, and provided the model for a larger World Bank loan (ARIES)
    to allow the Russians to spread the system to all oblasts. The
    transition from technical assistance to a Russian led program was a
    hallmark of the recent Gore-Chernomyrdin meeting. Programs in Bulgaria,
    Romania and Ukraine are still ongoing, but have already led to a series
    of market analysis and forecasting reports which are produced regularly
    and widely disseminated.
        Improved transparency and availability of market information has
    benefited the US--both public and private sector--as well as the
    recipient countries. The technical assistance activities have
    significantly increased the quantity and quality of information
    available to the United States on these countries' agriculture. The
    Foreign Agriculture Service has included reports produced by these
    countries on its website for use by the private sector and other
    government agencies and organizations. Current market assessments and
    forecasting of likely future conditions has helped to improve the trade
    and investment climate and provides private sector with valuable
    information on which to base its decisions. The countries themselves
    also benefit. Better information on their markets reduce costly and
    counter-productive interventions by governments, and has been important
    to countries in conducting the analysis needed to meet international
    trade obligations. The trips have also helped develop a network of
    well-trained economists and market analysts who are able, in turn, to
    provide additional training in their own countries and in other
    emerging democracies not covered by the ERS program.
        In fiscal year 1997, a group of ERS employees will be participating
    in the American Agricultural Economics Association meetings in Toronto,
    Canada.
        [The information follows:]

          Economic Research Service Personnel Engaged in Foreign Trips

            Fiscal year                                            Personnel
    1994..............................................................   210
    1995..............................................................   305
    1996..............................................................   243
    1997 (est.).......................................................   313
                          gpra initiative description
        Question. Would you please briefly describe the Administration's
    initiative to develop performance measures and indicators that can be
    employed to carry out program assessments mandated by the Government
    Performance and Results Act. What is the total cost of this initiative
    in fiscal year 1998 and future years? How much is USDA to contribute in
    each of these years?
        Answer. The initiative ``Provide Statistical Expertise for GPRA
    Measurement'' draws upon the expertise of eight federal agencies to
    develop performance measures and indicators to assist federal
    government agencies in meeting their GPRA requirements. The overall
    initiative statement explains a number of reasons for undertaking the
    activities. Many agencies have been struggling with measurement
    problems associated with outcome based performance. Consistent
    concepts, scales, and sampling methods are critical for reliable
    performance-based comparisons among Departments. Many Federal services
    contain common dimensions--e.g. courtesy, timeliness, knowledge--that
    are currently measured on different scales that undermine useful
    comparisons. Many agencies have asked for help in developing a catalog
    of tested questions and satisfaction scales. The American Consumer
    Satisfaction Index is the only nation-wide standardized satisfaction
    measure that permits consistent comparison of private sector products
    and services with Federal agency products and services.
        The total budget request for the initiative is $3.55 million and is
    composed of the following parts: a.--$1.6 million to develop or refine
    comparable ``turn-key'' data collection and measurement resources for
    use by agencies throughout the Government; b.--$0.75 million to develop
    standardized questions and satisfaction scales for common elements of
    Federal services; and c.--$1.2 million to add 10 Federal agencies to
    the American Consumer Satisfaction Index. USDA, through the
    participation of ERS and NASS, is requesting a total of $665,000.
                           gpra initiative time frame
        Question. Shouldn't government-wide performance measures and
    indicators be available for agencies to use in the development of their
    strategic plans, goals and measures? What is the proposed time frame
    for the development of these statistical measures and indicators?
        Answer. Development of measures and indicators is inextricably tied
    to the goals set. The benefits from the outcome oriented GPRA
    management approach depends first upon setting the correct goals.
    Challenges agencies governmentwide face in setting goals include: a.--
    balancing the relative importance of cost effective outcomes versus
    effectiveness at any cost; b.--setting goals to obtain outcomes which
    the agency can definitely control versus broader policy outcomes; and
    c.--balancing goals relative to customer satisfaction measurement--
    e.g., responsiveness and courtesy shown to customers--with basic goals
    for the program--e.g., retiring most environmentally sensitive lands at
    the lowest cost to U.S. taxpayers. Setting simplistic quantity goals
    for people served and answers provided may undermine the quality of the
    service and the answers. The choice of goals must define the measures
    and indicators used rather than allow the ease of measurement dictate
    the formulation of the goals. As agencies government-wide make progress
    in developing their strategic plans and setting goals, the statistical
    agencies involved in the initiative will be charged with finding what
    and how common performance measures and indicators can be developed to
    improve comparisons between different agencies' progress towards
    similarly defined goals. Identifying commonality in goals across the
    complex and sometime apparently conflicting array of outcomes sought
    will not be easy. Work on development of these statistical measures and
    indicators will begin in fiscal year 1998. Because all agencies will
    have developed their strategic plans by this time, the GPRA initiative
    will help agencies to refine and improve their goals and measures.
    Furthermore, the availability of these strategic plans will greatly
    assist ERS in identifying common goals in the various plans and allow
    ERS to focus our efforts.
                          ers role in gpra initiative
        Question. No staffing increases are proposed. What specifically
    will be funded with $125,000 in ERS funding and the $540,000 in NASS
    funding requested for fiscal year 1998?
        Answer. The additional funding for ERS and NASS would allow ERS to
    participate regarding performance measurement issues. NASS would be
    involved in all three phases of the initiative including formulation of
    sampling plans, development of standard survey instruments and scales,
    and work with the American Customer Satisfaction Index on development
    of measures for farm/rural programs and nutrition programs.
                     other participants in gpra initiative
        Question. Which other six federal statistical agencies will
    participate in this initiative, in addition to the Economic Research
    Service and the National Agricultural Statistics Service? Is there a
    lead agency?
        Answer. In addition to ERS and NASS, the other federal agencies
    participating in this initiative include the Bureau of Labor
    Statistics, Bureau of Transportation Statistics, Census, Energy
    Information Agency, National Center for Health Statistics, and the
    Statistics of Income in the Internal Revenue Service. The Interagency
    Council on Statistical Policy, chaired by OMB's Chief Statistician,
    will determine the most cost-effective tasks and division of labor with
    inputs from the President's Management Council and OMB Resource
    Management Officer's staff on priority objectives.
                                     ______

                    Questions Submitted by Senator Grassley
                        usda-doe biofuels collaboration
        Question. How has your relationship with the Department of Energy
    progressed during the past year with regard to biofuels? What new areas
    are being researched in science and economics? What are the
    Department's plans for this coming year to increase cooperation with
    DOE on biofuels? What is the status of the Memorandum of Understanding?
        Answer. The Department of Agriculture--USDA--has developed a close
    working relationship with the Department of Energy--DOE--on biofuels
    activities. For example, during the past year, the Agricultural
    Research Service--ARS--along with the Economic Research Service's--
    ERS--Office of Energy and New Uses have had two workshops with DOE and
    its laboratories to develop collaborative scientific activities. The
    areas covered were ethanol research and biodiesel research. The
    participants also set up a joint steering committee to plan for future
    coordination at the research level, to began sharing materials, and
    agreed to implement a scientist exchange. DOE's National Renewable
    Energy Laboratory--NREL--has provided their new biomass fermenting
    organism to two ARS Research Centers, at Peoria, Illinois and Wyndmoor,
    Pennsylvania. These labs plan to apply that technology to experiment
    with making ethanol from corn biomass. The steering committee will also
    facilitate sharing and coordinating strategic plans. ARS also has a
    cooperative research and development agreement with NREL and the Fats
    and Protein Research Foundation to examine the use of biodiesel
    feedstocks such as animal fats and restaurant grease, the use of
    enzymatic hydrolysis technology for making biodiesel fuel, and the use
    of branched chain alcohols as biodiesel fuel.
        The Forest Service is collaborating with the Quincy Library Group
    in California and DOE and its NREL lab to develop a feasibility study
    that includes ethanol as an option for disposal of wood waste from tree
    thinning. The Forest Service and DOE are also developing hybrid poplars
    on conservation reserve land in the north central region for use as an
    energy source for electric generation. One power company has already
    contracted with farmers to purchase their wood when it reaches maturity
    in 6 to 10 years. Oak Ridge and ARS have developed a new switchgrass
    variety, Shawnee, that combines higher forage value for livestock with
    high biomass yields. Finally, DOE and USDA cosponsored a request for
    proposal for a biomass power for rural development project to
    demonstrate and commercialize new biomass for power technology
    agencies. As part of the request for proposal, the Rural Utilities
    Service, Farm Service Agency, and Natural Resource and Conservation
    Service in USDA offered to use existing programs and authorities to
    help facilitate this project. Three awards were made in New York,
    Minnesota, and Iowa in response to the request for proposals.
        Ongoing economic research includes a project with DOE and the
    University of Tennessee to use an agricultural intercommodity model to
    evaluate how an expanding energy crop market would affect agricultural
    food and fiber markets and farm income. In addition, USDA is
    collaborating with DOE to update the net energy balance of corn ethanol
    and to look at the climate change emission benefits and is also working
    with DOE's NREL lab to examine the transition economics of moving from
    a corn-based to a biomass-based ethanol industry. USDA and DOE have
    nearly completed a life-cycle analysis of biodiesel's net environmental
    benefits. The next step will be to monetize the benefits in an economic
    analysis. USDA and DOE are cooperating with the Environmental
    Protection Agency--EPA--on an analysis of the effects of using
    oxygenates in gasoline on toxic emissions. USDA, DOE, and EPA are also
    participating in a benefit-cost analysis of the Oxygenated Fuels
    Program with the White House Office of Science and Technology Policy.
    All of these projects are ongoing into the coming year.
        ERS and DOE analysts will continue to evaluate the short-run and
    long-run marketing opportunities for biofuels response to the changing
    economic and policy environment. The Department will also take a fresh
    look at existing programs and authorities that could complement DOE
    biofuels efforts.
        The Memorandum of Understanding with DOE on biofuels research
    lapsed this past January. Nevertheless, USDA and DOE are continuing
    close coordination and mutual research on biofuels issues as I have
    discussed.
                           usda biofuels coordination
        Question. Has the Department designated a single person to
    coordinate ethanol, and separately biodiesel, research Department-wide?
    Who is that person? If not, why has the Department chosen that course
    of action?
        Answer. Yes, Dr. Roger Conway, Director of the ERS Office of Energy
    and New Uses has overall responsibility for coordinating energy and
    biofuels research for the Department. Most agencies within the
    Department also have an energy contact person.
                     office of energy and new uses funding
        Question. Will the Office of Energy receive the same amount of
    funding as last year, or has the Department asked for increased
    funding? Does the Office of Energy still have the ability to contract
    out for special studies? How much money has been allocated for this
    purpose? If not, why has the Department curtailed funding and activity
    in this area?
        Answer. In fiscal year 1997, the Office of Energy and New Uses has
    been funded at $544,000. Of that amount, $58,000 has been allocated for
    non-salary expenses that may include contracts for special studies. It
    is likely that another $45,000 for non-salary expenses will be
    allocated to the Office in the last quarter of the fiscal year.
    Assuming a total $103,000 of non-salary funds is ultimately available
    to the Office, it would have a more than proportionate share of such
    agency resources: with about one percent of the staff, it would claim
    10 percent of the agency's non-salary expenses. With the Departmental
    reorganization, the Office of Energy and New Uses becomes a component
    of the Economic Research Service, a move that facilitates the ability
    of the Office to draw on the agency's analytical resources and, indeed,
    it has. Consequently, the need for non-salary funds to contract for
    special studies should decrease commensurately. The allocation for
    fiscal year 1998 has yet to be determined.
                         ars and csrees ethanol funding
        Question. Will the Department maintain, at least, level funding for
    ethanol research at ARS and CSREES? If not, why not?
        Answer. ARS proposes level funding for ethanol research at $5.2
    million. CSREES estimates a decline from a current estimate of $2.9
    million in fiscal year 1997 to $1.8 million in fiscal year 1998. The
    decline in the fiscal year 1998 estimate reflects the reduced level of
    funding for Special Research Grants in the CSREES 1998 President's
    Budget Request.
                             usda biodiesel support
        Question. Has the Department assisted the biodiesel industry in
    their efforts to achieve alternative fuel status in Department of
    Energy regulations? In what way? Will the Department increase these
    efforts? If needed, will the Department support changes in EPACT
    favorable to biodiesel?
        Answer. Yes, the Department has assisted the biodiesel industry in
    its efforts to achieve alternative fuel status in DOE regulations. One
    hundred percent biodiesel fuel has been accepted by DOE as an
    alternative fuel. USDA research and economic analysis was used in the
    industry petition to include biodiesel blends in DOE's EPACT program.
    USDA is working with DOE on a biodiesel life-cycle analysis to estimate
    the comparative environmental benefits of biodiesel and biodiesel
    blends relative to petroleum diesel. A report on using alternative
    fuels in urban transit buses was cofunded by the biodiesel industry and
    USDA and published by ERS. This study shows that B20 is cost
    competitive with other alternative fuels such as natural gas and
    methanol. An ERS study published in the Industrial Uses of Agricultural
    Materials, Situation and Outlook Report shows that using B20 in Federal
    fleets can increase soybean prices and enhance farm income. In
    addition, USDA has met with DOE on several occasions to discuss the
    appropriate role of biodiesel in EPACT's alternative-fueled vehicle
    program. DOE has consistently stated that a biodiesel blend could
    qualify as an alternative fuel, although the level must be consistent
    with certain criteria to qualify as an alternative fuel.
        The Department also supports biodiesel through its research program
    to lower production costs of biodiesel fuels. ARS has and will continue
    to foster biodiesel development in fiscal year 1997. Specific research
    that has been addressed to feedstocks, e.g. soy oil, tallow, recycled
    greases and soap stocks; fuel quality assessments to demonstrate that
    biodiesel and blends of biodiesel--B20--are energy equivalent to
    petrodiesels, and engine and emission testing of neat biodiesel and
    B20.
        DOE is the lead agency determining implementation of EPACT rules
    and regulations. USDA is prepared to provide whatever information it
    has to DOE on the net benefits of biodiesel to facilitate its use. If
    the changes considered in EPACT are legislative, then an Administration
    position would be developed depending upon the nature of the change.
                             usda new uses research
        Question. What USDA agencies are involved in value added research?
    What is the proposed budget for new uses? How does this differ from the
    previous budget request?
        Answer. USDA agencies involved in nonfood new uses include the
    Agricultural Research Service--ARS--the Alternative Agricultural
    Research and Commercialization Corporation--AARCC--Cooperative State
    Research, Education, and Extension Service--CSREES--the Economic
    Research Service--ERS--and the Forest Service--FS. The current total
    USDA budget estimate for nonfood new uses for fiscal year 1997 is $70.2
    million, and the proposed fiscal year 1998 budget is $63.6 million. The
    decrease is a result of declines in ARS funding from $40.2 million in
    fiscal year 1997 to $36.5 million in fiscal year 1998 and in CSREES
    from $13.4 million in fiscal year 1997 to $7.6 million in fiscal year
    1998.
                office of energy and new uses biofuels function
        Question. Will the Office of Energy be capable of fulfilling its
    function of advocating for biofuels under this budget request?
        Answer. The Office of Energy and New Uses is responsible for
    assisting the Secretary in developing departmental energy policy and
    coordinating departmental energy programs and strategies. Secretary
    Glickman has made it clear that he has a policy of encouraging the
    development of an agriculturally-based biofuels industry. The Office
    will continue to support the policy position of the Secretary of
    Agriculture under the current budget request.
                                     ______

                    National Agricultural Statistics Service
                     Questions Submitted by Senator Cochran
                          gpra initiative description
        Question. The fiscal year 1998 request includes increased funding
    of $125,000 for the Economic Research Service and $540,000 for the
    National Agricultural Statistics Service to participate in an
    initiative to provide statistical support to Federal agencies in
    meeting the requirements of the Government Performance and Results Act.
    Would you please briefly describe the Administration's initiative to
    develop performance measures and indicators that can be employed to
    carry out program assessments mandated by the Government Performance
    and Results Act.
        What is the total cost of this initiative in fiscal year 1998 and
    future years? How much is USDA to contribute in each of these years?
        Answer. The initiative, ``Provide Statistical Expertise for GPRA
    Measurement,'' draws upon the expertise of eight federal statistical
    agencies to develop performance measures and indicators to assist
    federal government agencies in meeting GPRA requirements. The overall
    initiative statement explains a number of reasons for undertaking the
    activities. Many agencies have been struggling with measurement
    problems associated with outcome based performance. Consistent
    concepts, scales, and sampling methods are critical for reliable
    performance-based comparisons among Departments. Many Federal services
    contain common dimensions such as courtesy, timeliness, and knowledge
    that are currently measured on different scales that undermine useful
    comparisons. Many agencies have asked for help to develop sampling
    schemes, a catalog of tested questions, and satisfaction scales to
    obtain reliable results which can be compared across agencies and
    tracked over time. The American Customer Satisfaction Index is the only
    nation-wide standardized satisfaction measure that permits consistent
    comparison of private sector products and services with Federal agency
    products and services.
        The total budget request for the initiative is $3.55 million and is
    composed of the following parts: a) $1.6 million to develop or refine
    comparable ``turn-key'' data collection and measurement resources for
    use by agencies throughout the Government; b) $0.75 million to develop
    standardized questions and satisfaction scales for common elements of
    Federal services; and c) $1.2 million to add 10 Federal agencies to the
    American Customer Satisfaction Index. USDA, through the participation
    of both NASS and ERS, is requesting a total of $665,000 in fiscal year
    1998. Development of sampling plans, questionnaires, and satisfaction
    scales would require one-time development costs, followed by much lower
    costs to maintain and refine. Actual measurement tasks would be funded
    by the sponsoring agencies.
                           gpra initiative time frame
        Question. Shouldn't government-wide performance measures and
    indicators be available for agencies to use in the development of their
    strategic plans, goals and measures? What is the proposed time frame
    for the development of these statistical measures and indicators?
        Answer. Development of measures and indicators is inextricably tied
    to the goals set. The benefits from the outcome-oriented GPRA
    management approach depends first upon setting the correct goals.
    Challenges agencies governmentwide face in setting goals include: 1)
    balancing the relative importance of cost effective outcomes versus
    effectiveness at any cost; 2) setting goals to obtain outcomes which
    the agency can definitely control versus broader policy outcomes; and
    3) balancing goals relative to customer satisfaction measurements, such
    as responsiveness and courtesy shown to customers with basic goals for
    the program. Setting simplistic quantity goals for people served and
    answers provided may undermine the quality of the service and the
    answers. The choice of goals must define the measures and indicators
    used rather than have the ease of measurement dictate the formulation
    of the goals. As agencies government-wide make progress in developing
    their strategic plans and setting goals, the statistical agencies
    involved in the initiative will be charged with finding what and how
    common performance measures and indicators can be developed to improve
    comparisons between agencies of progress made towards achievement of
    similar goals. Identifying commonality in goals across the complex and
    sometime apparently conflicting array of outcomes sought will not be
    easy. Work on development of these statistical measures and indicators
    will begin in fiscal year 1998. Because all agencies will have
    developed strategic plans by this time, the GPRA initiative will be
    available to help them refine and improve their goals and measures.
    Furthermore, the availability of these plans will facilitate
    identification of common goals and measures, allowing NASS to focus its
    efforts on developing standard instruments and scales that will be
    useful to many agencies.
                          nass role in gpra initiative
        Question. No staffing increases are proposed. What specifically
    will be funded with the $540,000 in NASS funding requested for fiscal
    year 1998?
        Answer. NASS would be involved in all three phases of the project
    including formulation of sampling plans, development of standard survey
    instruments and scales, and work with the American Customer
    Satisfaction Index on development of measures for farm/rural programs
    and/or nutrition programs.
                     other participants in gpra initiative
        Question. Which other six federal statistical agencies will
    participate in this initiative, in addition to the Economic Research
    Service and the National Agricultural Statistics Service? Is there a
    lead agency?
        Answer. In addition to ERS and NASS, the other federal agencies
    participating in this initiative include the Bureau of Labor
    Statistics, Bureau of Transportation Statistics, Census, Energy
    Information Agency, National Center for Health Statistics, and the
    Statistics of Income in the Internal Revenue Service. The Interagency
    Council on Statistical Policy, chaired by OMB's Chief Statistician,
    will determine the most cost-effective tasks and division of labor with
    inputs from the President's Management Council and OMB's Resource
    Management Office staff on priority objectives.
                           nass data collection costs
        Question. The fiscal year 1998 request includes an additional
    $500,000 to cover higher costs for survey interviewers employed under a
    cooperative agreement with the National Association of State
    Departments of Agriculture whose salary increases are not covered by
    Federal pay cost increases, and for increased costs of per diem and
    mileage. Are these pay cost increases mandated under the cooperative
    agreement with the National Association of State Departments of
    Agriculture?
        Answer. No, the pay cost increases are not mandated by the
    agreement with the National Association of State Departments of
    Agriculture (NASDA). NASDA interviewers are intermittent, part-time
    employees. It has become extremely difficult in many areas of the
    country for NASDA to hire and retain enumerators because salaries are
    generally below local wages for comparable jobs. A failure to adjust
    salaries and mileage reimbursement of survey interviewers to keep pace
    with competing employers will result in higher turnover rates, lower
    morale, and a reduction in the overall quality of the survey work.
        Question. How much of the $500,000 increase requested is for pay
    cost increases and how much is for per diem and for mileage expenses?
        Answer. The total request is actually $640,000. The request is in
    two parts: $500,000 is for increased costs in NASS's regular survey
    program and an additional $140,000 is for increased data collection
    costs associated with the 1997 Census of Agriculture. The $640,000
    breaks down as follows: $470,000 is for increased pay costs; $30,000 is
    for increased per diem costs; and $140,000 is for increased mileage
    costs.
                                     travel
        Question. Please provide the Committee with a breakdown of NASS's
    actual travel costs in fiscal year 1996.
        Answer. Total NASS travel costs in fiscal year 1996, including
    appropriated and reimbursable travel, were $1,396,000.
        Question. Please identify foreign travel obligations for fiscal
    years 1994, 1995, and estimates for fiscal years 1996 and 1997.
        Answer. Foreign travel costs for fiscal years 1994 through 1997 are
    as follows:

            Fiscal year
    1994..........................................................   $73,700
    1995..........................................................   223,400
    1996..........................................................   377,200
    1997 (est.)...................................................   400,000

        Question. How many NASS personnel were engaged in foreign trips in
    these years and for what purposes?
        Answer. The following table shows the number of people and the
    purpose of the foreign trips for fiscal years 1994-97.

                      NUMBER OF PEOPLE TAKING FOREIGN TRIPS
    ------------------------------------------------------------------------
                                                                      1997
               Purpose               1994       1995       1996      (est.)
    ------------------------------------------------------------------------
    Technical Training and
     Survey Assistance..........         29         42         45         40
    Workshops, Meetings and
     Conferences................         11         15          4         10
    ------------------------------------------------------------------------

                                     ______

                      Questions Submitted by Senator Kohl
                              cheese price survey
        Question. NASS recently started conducting a nationwide survey of
    dairy manufacturing plants to determine the prices being paid for
    cheese nationally. I applaud the efforts of USDA to move forward with
    this survey, which I believe will help provide more accurate market
    information about cheese prices. Accurate market information is an
    important prerequisite to an efficient pricing system for cheese in the
    private sector, as well as being important to the overall federal milk
    pricing reforms that are underway at USDA. However, with any new
    survey, it takes some time to determine if the data retrieved is
    reliable and accurate. This is particularly true when the survey is
    voluntary, as is the case with this cheese price survey. In that
    regard, I have the following questions. How many dairy plants receive
    the survey each week?
        Answer. NASS contacted 112 plants for the cheddar cheese price
    survey. These plants accounted for over 99 percent of production.
    Thirty of the plants screened out of the survey because they had no
    bulk sales, aged all their cheese, used all production internally, etc.
    Seven plants refused to participate in the survey and another 12 have
    not made a final determination.
        Question. How many plants are responding?
        Answer. The 63 plants reporting price data weekly account for about
    80 percent of all bulk, wholesale sales of natural cheddar cheese.
        Question. In your view, does the rate of nonparticipation threaten
    the accuracy of the survey?
        Answer. Currently the survey accounts for about 80 percent of
    qualifying sales, which is a high level of coverage. However, there is
    no guarantee NASS will be able to maintain this high level of voluntary
    cooperation. Declining cooperation rates could threaten the accuracy of
    the series in the future.
        Question. Would the survey be more accurate if all the surveyed
    plants participated?
        Answer. Yes, it would be more accurate if all plants participated.
    This would ensure that the survey would be representative of all sales
    and produce consistent, statistically valid results. By consistency, we
    mean it is important for a large portion of the sales to be reported by
    the same firms every survey period.
        Question. Are there other aspects of the survey which raise
    concerns about the accuracy of the data? For example, are some regions
    more fully represented in the survey than others, and if so, does that
    in any way skew the data?
        Answer. The plants not participating in the survey are fairly
    evenly distributed across the country. But NASS has no way to measure
    the effect the nonreporting plants would have on the cheese prices.
        Question. Since industry has traditionally used the price
    established by the National Cheese Exchange (NCE) each week as a
    benchmark price for the large majority of off-exchange bulk cheese
    sales, is there any attempt being made in the survey to distinguish
    between forward-contract sales, which are linked to the NCE price, and
    spot market sales, which may be more independent of the NCE?
        Answer. All sales data recorded in the survey are for sales
    transactions completed during the survey week. Completed transactions
    generally mean cheese is shipped or title transfers. The possibility of
    collecting contracted sales was explored when the plants were initially
    contacted. It did not prove to be feasible to collect contracted sales
    since prices for the future were not generally established.
                               forage statistics
        Question. As farmers seek to take advantage of new crop insurance
    programs, dairy farmers in my state have had continuing difficulty with
    crop insurance on their forage crops, such as alfalfa. In discussing
    the matter with crop insurance providers in Wisconsin, one of the
    concerns that has been raised in this regard is related to an
    inadequacy of NASS data reporting. Specifically, the concern is that
    payments under Group Risk Plans (GRP) for forage crops are triggered by
    county average losses as reported by NASS. However, it is my
    understanding that while NASS calculates and reports figures for county
    average harvests, you do not report data for losses due to winterkill,
    which is a predominate form of forage loss for northern-tier states.
        In order to make the GRP crop insurance plans work effectively for
    forage crops, it would seem appropriate for NASS to augment its data
    retrieval process to show not only forage harvested, but also forage
    lost to winterkill. Would you be willing to make that change?
        Answer. The NASS program for forage is limited to dry hay
    statistics and includes acres harvested, yield, and production
    estimates. Since most hay crops are perennial, the acreage planted each
    year is not the same as the area devoted to hay.
        The GRP insurance program was implemented by the Risk Management
    Agency (RMA) using existing county data series published by NASS. NASS
    is very concerned that the yield data being used to determine payments
    under the GRP are not adequate to measure all losses which farmers may
    incur. The lack of data on forage losses due to winterkill is just one
    of many examples of the inadequacy of the existing NASS county
    estimates data series to measure losses due to adverse weather such as
    drought, flooding, hail, or severe winter temperatures which can cause
    excessive winterkill.
        The GRP insurance program for all crops, including forage, rely on
    the final average county yield per harvested acre. This means that
    severely damaged acres not harvested are not accounted for in the final
    county yield estimates. Also, severe natural disaster losses, such as
    those caused by hail and flooding, frequently occur in only a portion
    of any given county. Therefore using the county average statistics
    provide very limited risk protection for farmers since it requires a
    significant number of other farms to also incur severe losses.
        Forage crops in particular present special challenges. Because of
    the multiple uses of forage crops, NASS seriously questions whether
    reliable statistical data could be collected that would accurately
    measure winterkill and other factors which cause forage acres not to be
    harvested. For example, in most areas, forage crops can be cut for dry
    hay, green chop, silage, pastured by livestock, or plowed under for
    green manure. Also, a certain percentage of forage acres require
    reseeding every year--would those acres be reported as abandoned acres?
    Therefore, NASS has never attempted to measure forage acres planted.
    Finally, the RMA would probably need several years of historical forage
    data for use in the payment calculations.
                                     ______

                         Additional Committee Questions
                     Questions Submitted by Senator Cochran
        Dr. Woteki, you indicate in your prepared testimony that the
    ``returns for all research and development in agriculture are estimated
    to be 35 percent annually, while those for pre-technology or pre-
    development research--much of the kind of work funded through the
    National Research Initiative--are considerably higher.''
         returns to pre-technology/pre-development agriculture research
        Question. What are the returns for pre-technology or pre-
    development agricultural research?
        Answer. Although there have been many studies that provide
    estimates of the rate of return to public agricultural research, few
    provide estimates for pre-technology and applied research separately.
    An important exception is a landmark study by Wallace E. Huffman and
    Robert E. Evenson--professors of economics at Iowa State University and
    Yale University, respectively--entitled ``Science for Agriculture,''
    published by Iowa State University Press, Ames, 1993. In this study,
    Huffman and Evenson examined the contribution of research, extension,
    and improvements in farmer's schooling to productivity growth in U.S.
    agriculture between 1950 and 1982. They derived a separate rate of
    return to ``pre-technology'' or ``pre-invention'' research, which they
    define as ``research directed specifically toward producing discoveries
    that enable and assist technology invention'' (p. 42). A table that
    summarizes their findings is provided for the record.
        Their estimates measure social rather than private rates of return.
    The social rate of return includes benefits from research that go to
    farmers, agricultural input suppliers, food processors, and consumers.
    The private rate of return, on the other hand, is the return to the
    individual or group that conducted it.
        Their results indicate that while public agricultural research as a
    whole had a rate of return of 41 percent, the rate of return to pre-
    technology research was considerably higher, at 74 percent. Private
    agricultural research, which is almost entirely applied research, had a
    rate of return of 46 percent, comparable to public agricultural
    research. The private rate of return to private research is probably no
    more than 20 percent, indicating that a large share of the benefits
    from private research spills over to other firms and to consumers.
        The results of pre-technology research often benefit a wide range
    of commodities and regions, whereas applied research tends to be more
    commodity- or location-specific. This may explain why pre-technology
    research has apparently earned a higher rate of return. Public support
    for pre-technology research is especially important because the private
    sector lacks an incentive to fund it. Pre-technology research is
    usually long-term and high-risk in nature, and the results are often
    too general to be patented.
        [The information follows:]

    Social Rates of Return to Agricultural Research, Extension and Education

                                                             All agriculture
            Source                                                 (percent)
    Public agricultural research (all)................................    41
        Public pre-technology research................................    74
    Public extension..................................................    20
    Private research..................................................    46
    Farmer's schooling................................................    40

    Source: W.E. Huffman and R.E. Evenson, ``Science for Agriculture,'' Iowa
    State University Press, Ames, 1993. Table 9.1, p. 245.
    ---------------------------------------------------------------------------
                         returns to nri-funded research
        Question. What are the returns to research funded through the
    National Research Initiative specifically?
        Answer. To our knowledge, no study has estimated the returns to
    research funded specifically through the National Research Initiative
    (NRI). However, support for fundamental, pre-technology research is a
    stated goal of the NRI. According to the NRI annual report prepared by
    the Cooperative State Research, Extension, and Education Service, 63
    percent of NRI grants were awarded for fundamental research in 1994.
    This implies that a high proportion of NRI funds are allocated to pre-
    technology research. Given the findings of the Huffman and Evenson
    study, this would indicate that research funded through the NRI might
    earn a rate of return above the average for all USDA research.
                     documentation for returns to research
        Question. What is the documentation for these findings?
        Answer. The findings about returns to research are documented in a
    1996 report issued by the Economic Research Service, ``Agricultural
    Research and Development, Public and Private Investments Under
    Alternative Markets and Institutions,'' Agricultural Economic Report
    No. 735 and in a Wallace Huffman and R. E. Evenson study, ``Science for
    Agriculture'' that was published by the Iowa State University Press in
    1993.
                                     ______

          Cooperative State Research, Education, and Extension Service
                     Questions Submitted by Senator Cochran
                                  food safety
        Question. Funding of $4.365 million, a $2 million increase, is
    proposed for the Food Safety extension program. What is the
    justification for this increase? How are current program funds
    allocated and what have been the achievements of the program to date?
        Answer. Currently, food safety education programs funded under the
    Smith-Lever Act, Section 3d, address a wide variety of food safety and
    quality issues nationwide, and their intended purpose is to provide
    education, skills, and information needed to safeguard America's food
    supply, while reducing the risk of foodborne illness among consumers.
    Funded programs provide education and training for the development and
    implementation of Hazard Analysis and Critical Control Point--HACCP--
    programs for the meat and poultry industry, and for Federal and state
    inspectors of meat and poultry plants. In addition, food safety
    education programs focus on increasing consumer awareness and
    understanding of food irradiation, microbiological pathogens, pesticide
    residues, and safe food handling practices for both industry and
    consumers.
        As part of the President's Food Safety Initiative, the requested
    budget increase of $2 million will be used to further enhance food
    safety education programs and to increase the capacity of the research
    and extension system to address the ongoing critical issues in food
    safety, particularly as they relate to Hazard Analysis and Critical
    Control Point education and to food handler certification training.
        New HACCP regulations have presented significant challenges to the
    Department of Agriculture to provide compliance education for food
    handlers. Food handler certification training is provided by
    Cooperative Extension System faculty in many states as described below,
    and there is a growing trend for partnership and collaboration with
    state health departments and others to provide food handler
    certification training for food handlers from all areas of the food
    industry. States providing food handler certification training to
    industry, school foodservice workers, and health care facilities will
    be required to incorporate HACCP principles into their food handler
    programs. Food handler training and certification for foodservice
    workers at congregate meal sites for older Americans, foodbanks, day
    care, and child care facilities, among others, will also require
    compliance education to meet new Federal regulations. Increasingly,
    community kitchens, public service and public outreach programs rely on
    workers with limited foodhandling skills. HACCP and quality assurance
    education for consumers can provide education and training to support
    gleaning and other food rescue programs, two priority areas for the
    Department.
        Since 1991, 49 states and 5 territories have established food
    safety education programs with Smith Lever 3d funds and are addressing
    at least one of three major food safety educational objectives:
      --To increase the adoption of recommended food handling practices
      --To improve practices and processes that promote the production and
            protection of a safe food supply
      --To improve the understanding of risks and responsible practices
            related to food and health
        In subsequent years, food safety education programs have achieved
    the following impacts based on participant surveys:
      --42 percent of food safety education program participants have
            increased their adoption of recommended food handling
            practices.
      --70 percent of participants have increased their adoption of
            practices that protect the food supply.
      --53 percent of participants have increased their knowledge of food
            safety public policy issues.
        Food safety education funds were used to support the development of
    the National Food Safety Database, which completed its second phase of
    development in fiscal year 1996. The database is now available on the
    World Wide Web for use by consumers, educators, researchers, and others
    seeking food safety information and resources for a wide variety of
    uses. Further development of the database will be completed with fiscal
    year 1997 competitive funds awarded to a multi-state, interdisciplinary
    team of database researchers coordinated at the University of Florida.
        Food safety education funds were used to support the development of
    the Food Animal Residue Avoidance Databank, a central source of residue
    avoidance information for producers, veterinarians, extension
    specialists, and regulatory agencies. Drug and pesticide tolerances for
    food animal products, residue screening methods, and pharmacokinetics
    of chemicals in food animals have been included in the database. In
    fiscal year 1996, the Food Animal Residue Avoidance Databank grew to
    include a seafood and aquaculture component. The Databank has been
    jointly developed by a multi-state, interdisciplinary team of
    researchers at the University of California-Davis, North Carolina State
    University, and the University of Florida. The University of Illinois,
    a partner in the development of the Food Animal Residue Avoidance
    Databank, is no longer active in the project.
        Food safety education programs funded through Smith Lever 3d have
    included the following:
      --24 states and territories have implemented Hazard Analysis and
            Critical Control Point education programs with food safety
            education funds.
      --20 states and territories have implemented food safety programs
            related to biotechnology.
      --28 states and territories have conducted educational programs
            focused on microbiological pathogens.
      --24 states and territories have developed educational programs on
            pesticide residues.
      --44 states and territories have conducted educational programs in
            food processing and food preservation.
        Audiences targeted by food safety education programs funded through
    Smith Lever 3d have included the following:
      --33 states and territories have implemented food safety programs
            targeting youth audiences.
      --32 states and territories have targeted industry.
      --8 states and territories have focused on providing food safety
            education to immigrants, those with low literacy skills, or
            those who speak English as a second language.
        Since the program's inception in 1991, approximately $18.5
    million--$10.5 from Federal sources, and $8 million from State matching
    funds--have supported the development and implementation of 283 food
    safety education projects. More than half of those funded projects
    remain active and continue to impact both national and international
    audiences.
                           integrated pest management
        Question. How have extension activities supported with Integrated
    Pest Management (IPM) funds accelerated the transfer of proven pest
    management technologies from the researchers to farmers, crop
    consultants, ranchers, and other users?
        Answer. Presently, $10.8 million of Smith-Lever 3(d) funds are
    distributed to land-grant universities for extension activities to
    educate farmers and others about IPM methods. This investment has
    resulted in an increased use of IPM methods by farmers in the United
    States. The extension effort is focusing on the expansion of team-
    based, multidisciplinary programs in areas where tough pest problems
    continue to cause major losses to growers, threaten the competitiveness
    of food industries, and sometimes pose unacceptable risks to the
    environment and workers. USDA investments have resulted in improved
    management of a wide array of pests that inflict economic and quality
    damage on nearly every crop produced in the country.
        The Department is supporting IPM education programs at every land-
    grant university in the country, and successful outcomes resulting from
    this investment can be cited for virtually every state. At Mississippi
    State University, Cooperative Extension estimates that its IPM
    education efforts have helped cotton growers increase their yields by
    approximately $50 per acre and reduce control costs by approximately
    $40 per acre, an economic benefit to Mississippi cotton growers of more
    than $90 million. The use of IPM tactics has played a crucial role in
    maintaining the viability of cotton as one of Mississippi's leading
    agricultural commodities, despite the problems with insecticide
    resistance. Research and extension efforts conducted by the University
    of Missouri have provided Missouri farmers with resistant soybean
    varieties and other management techniques that have increased their
    profits by $7.5 million per year. It is estimated that Iowa corn
    farmers save $15 million annually as a result of improved management of
    black cutworms made possible by Iowa State University's early-
    monitoring program. Washington Cooperative Extension has worked closely
    with the Agricultural Research Service to implement an Areawide IPM
    Program for codling moth on over 3,000 acres of apples. This program
    has reduced pesticide use by over 75 percent, improved quality, and
    increased net profits by more than $30 per acre. The University of
    Wisconsin's IPM program developed decision support software that saved
    potato growers more that $5.9 million per year by reducing input costs
    while protecting the water resources of the region through reductions
    in applications of pesticides, nitrogen and water. Stored grain IPM
    strategies developed by Kansas State University research and extension
    staff helped reduce pest management costs by 45 to 70 percent, leading
    to a net savings of more than $1 million per year in Kansas. These
    technologies have been distributed nationwide to over 2,400 elevator
    operators. In Oklahoma alone, elevator operators and producers have
    saved $20 million per year by reducing pesticide use and grain losses.
                         pesticide applicator training
        Question. Funding of $1.5 million is being proposed for fiscal year
    1998 to initiate a redesigned Pesticide Applicator Training Program. No
    funding was provided for the program for fiscal year 1997. Is this
    program currently being carried out? How will the program be
    redesigned?
        Answer. It is anticipated that $1.7 million will support the
    Pesticide Applicator Training Program in fiscal year 1997 through a
    reimbursable agreement with the Environmental Protection Agency. The
    proposed funds would provide ``seed money'' for states to develop
    partnerships with other public programs such as EFNEP, 4-H, Master
    Gardener and selected private organizations to educate the general
    public, especially homeowners and small or part-time farmers that will
    reduce exposure of toxic pesticides to users and the environment.
    Educational programs are needed in the areas of risk management that
    will mitigate exposure, when pesticides are used in a pest management
    program, and minimize risk to public health and the environment. The
    lack of education in use of pesticides has resulted in gross misuse in
    home environments, threatening personal health, as well as possibly
    causing the loss of the pesticide to production agriculture.
                     children, youth, and families, at risk
        Question. An increase of almost $2.15 million is requested for the
    Children, Youth, and Families at Risk [CYFAR] program. Of this
    increase, $446,000 is to bolster ongoing programs and $1.7 million is
    to be targeted to the 1890 Institutions. What is the justification for
    the increase in funding for this program?
        Answer. Since 1991, USDA has received an annual appropriation to
    expand Extension programs to reach at-risk children and families. The
    Children, Youth, and Families at Risk [CYFAR] National Initiative
    mission is to marshal resources of the land grant university
    Cooperative Extension System to develop and deliver educational
    programs that equip limited resource families and youth who are at risk
    for not meeting basic human needs, to lead positive, productive,
    contributing lives.
        The CYAR funds are distributed to 1862 land-grant universities'
    Cooperative Extension Service through a competitive application and
    review process. Projects are funded for five years. Since only 1862
    land-grant universities have been eligible for funds, they were urged
    to partner with 1890 universities on Children, Youth, and Families
    Networks and State Strengthening Projects. Changes in the 1996 Farm
    Bill allow 1890 institutions to apply for these programs--if there is
    new or increased funding over the fiscal year 1995 appropriated level.
        Increased funding would open the CYFAR Initiative to 1890
    universities and provide them the opportunity to support community-
    based programs for children, youth and families at risk. Educational
    resources of the entire university/Extension System could be made
    available to people and communities least likely to have access. 1890
    universities would be able to support prevention education programs
    which meet critical needs of children and families.
        Question. How are the current program funds allocated and what has
    been accomplished through the program?
        Answer. In 1997, Children, Youth and Families at Risk funds have
    been allocated for community-based projects for at risk children and
    their families and for support systems for these community-based
    projects.

            Children, Youth and Families at Risk            Fiscal year 1997
    Youth At Risk Community Project Renewal.......................  $149,834
    40 State Strengthening Projects--50 percent to communities.... 6,709,787
    Five CYF Networks.............................................   900,000
    CYFERNet Coordination.........................................   184,000
    Technical Assistance liaisons.................................   215,000
    CYFAR Evaluation Collaboration................................   494,000
    Annual CYFAR Conference--for community projects...............    40,000
    Annual Report Publication, Distribution.......................    40,059
    CYFAR Video/Brochures: Product/Distribution...................    25,000
    State Strengthening Review Team Expenses......................    15,000
    State Strengthening Project Meeting...........................    17,000
                        --------------------------------------------------------------
                        ____________________________________________________

          Subtotal................................................ 8,789,680
    Federal Administration........................................   764,320
                        --------------------------------------------------------------
                        ____________________________________________________

          Total................................................... 9,554,000

        Through this Initiative, the Cooperative State Research, Education,
    and Extension Service has supported 170 community-based projects with
    sites in over 500 communities in 49 states and 3 territories. These
    programs serve 99,000 youth and 17,000 parents.
        CYFAR projects incorporate research-based strategies for effective
    programs through collaboration, citizen involvement, inclusiveness,
    community-base, and ecological principles. Extension staff have formed
    collaborations with other community agencies and with citizens to
    create programs that meet critical needs of children and families. Each
    year state and local public and private agencies and organizations
    contribute cash and in-kind resources that match or exceed the Federal
    appropriation for the Children, Youth and Families at Risk program. In
    addition, approximately 25,000 youth and adult volunteers contribute
    time to the community programs.
        In the interest of sustaining and expanding these community
    programs, the Children, Youth and Families at Risk Initiative has also
    funded a broad variety of support and technical assistance including:
        The 5 National Children, Youth, and Family Networks which merge
    resources of all the land grant universities to provide research-based
    program and curriculum information, technical assistance, and training
    to communities. National Networks focus on Child Care, Family
    Resiliency, Science and Technology, Collaborations, and Decisions for
    Health.
        CYFERNet, the electronic information infrastructure which links and
    supports all the five networks and assists communities with computer
    and technology issues.
        Forty (40) State Strengthening Projects which each support a
    minimum of three community-based programs for at risk youth and
    children through the universities.
        The Children, Youth, and Families at Risk Evaluation Collaboration
    which is assessing program impact and assisting communities evaluate
    their prevention education programs. This evaluation is finding that
    many of the community-based projects funded previously for five years
    by CSREES are no longer receiving federal funding and are continuing to
    operate with a variety of community and county public and private
    resources. The Children, Youth, and Family Networks have stimulated
    collaboration across universities, more efficient use of faculty and
    program monies, and broad dissemination of information on the World
    Wide Web which meets quality standards established by consensus of
    multidisciplinary faculty teams from many universities.
        Question. What specific activities will be carried out with the
    increased funding proposed?
        Answer. 1890 Universities could apply for Children, Youth, and
    Families at Risk Projects for statewide staff development and training,
    technical assistance to community programs, and direct funding to
    community programs designed to address needs identified by youth and
    adult citizens. Electronic connectivity could provide computers,
    software, Internet connections, and technology training for staff as
    well as youth and adult participants in community programs--to citizens
    least likely to have the resources for access.
        This funding available on a competitive basis could insure active
    involvement of the 1890 universities in collaborative sharing of
    research and educational resources of the Children, Youth and Family
    Networks.
                         extension activities programs
        Question. The budget proposes to terminate a number of extension
    activities which this Administration has requested funding for in past
    years. These include farm safety, the Renewable Resources Extension
    Act, agricultural telecommunications, and rural health and safety. The
    budget indicates that these programs are state specific and/or do not
    address current regional or national priorities. With respect to each
    program listed above, please indicate why the Administration requested
    funding for the program in past years and why it now believes support
    of the program should be left to the discretion of the states to
    support through Hatch and Smith-Lever (b) and (c) formula funds.
        Answer. The Administration has not requested continued funding for
    these programs because we are committed to responding to high priority
    problems of broad national concern. For example, CSREES has requested
    an increase of $2 million for the Food Safety programs funded under
    Smith-Lever 3(d) because reducing the incidence of food-borne illness
    is a top priority of the public and the Administration. We have also
    requested an increase of $2.146 million for the Children, Youth, and
    Families at Risk programs funded under Smith-Lever 3(d), which is
    consistent with the nationwide focus on at-risk youth.
        Farm Safety and Rural Health and Safety.--Both of these programs
    are national in scope and affect rural, suburban, and urban
    populations. The farm safety and rural health and safety programs focus
    on the rural sector and, while the importance of these programs to some
    rural communities cannot be understated, the Administration believes
    that the availability of Smith-Lever 3(b) and (c) formula funds enables
    States to provide continued support of the programs as they deem
    appropriate. The formula funds permit a consistent, stable, dependable,
    and reliable programming source for State and county Extension
    cooperators and allow maximum flexibility in addressing national,
    regional, and/or local problems and issues.
        Agricultural Telecommunications.--Continued funding of the
    Agricultural Telecommunications program has not been requested because
    the Administration has viewed the program as an opportunity to provide
    an infusion of funding to move the Cooperative Extension System forward
    in the areas of distance learning and computer networking. However, one
    of the criteria for award under the program has been the sustainability
    of a proposed project, or the ability of a project to continue and grow
    after receiving funding from the program. It is anticipated that these
    projects will be sustained through other funding sources, such as from
    the sale of products and/or the use of ideas and results from the
    projects by others. The projects could also be sustained through the
    use of formula funds if deemed appropriate by the States.
        Renewable Resources Extension Act.--Funds provided under the
    Renewable Resources Extension Act provide for expanded natural resource
    education programs and are distributed to all States for educational
    programs and projects. Continued funding under the Act has not been
    requested because natural resource education programs are currently
    supported through the States' use of Smith-Lever 3(b) and (c) formula
    funding for Natural Resources and Environmental Management, which is
    one of the Extension base programs.
                                 formula funds
        Question. Why is no increase in Hatch and Smith-Lever formula funds
    proposed if the Administration is proposing to withdraw over $9 million
    in federal support for these specific activities?
        Answer. As part of the Administration's efforts to balance the
    budget, we have not requested increases in formula funding to offset
    the proposed eliminations of several programs.
                             water quality program
        Question. Why is a reduction of $1.672 million being proposed for
    Water Quality extension activities? What activities are currently being
    carried out through this program?
        Answer. The President's $1.672 million reduction for Water Quality
    extension activities reflects a desire to place emphasis in other
    priority areas in addition to water quality extension programs. It is
    anticipated that the state partners will secure additional funding to
    compensate for all or part of the federal reduction in funds. The Water
    Quality extension program provides support to every state for
    educational programs concerned with improving water quality. In
    addition, demonstration and hydrologic unit activities are funded
    throughout the country through almost 100 individual projects.
                      expanded food and nutrition program
        Question. Would you please provide a description of the projects
    being funded through the Expanded Food and Nutrition Program [EFNEP].
        Answer. EFNEP funds are distributed to all 50 States and 6
    territories based on a formula that takes into account the percent of
    the population at or below 125 percent of poverty. These funds are used
    to deliver intensive nutrition education to limited resource youth and
    families with young children. Through an experiential learning process,
    adult participants learn how to make good choices to improve the
    nutritional quality of the meals they serve their families. They
    increase their ability to select and buy food that meets the
    nutritional needs of their family. They gain new skills in food
    production, preparation, storage, safety and sanitation, and they learn
    to better manage their food budgets and related resources such as Food
    Stamps. EFNEP is a program that produces results; surveys show that 87
    percent of the Expanded Food and Nutrition Program adult graduates
    improve 1 or more food resource management practices; 92 percent
    improve 1 or more nutrition practices; and 69 percent improve 1 or more
    food safety practices; EFNEP reaches all ethnic groups, in urban and
    rural settings, with culturally sensitive educational programs leading
    to positive behavior change.
                        rural health and safety program
        Question. Would you please provide an update on achievements of the
    projects being carried out through the Rural Health and Safety Program?
        Answer. The Rural Health and Safety program is conducted by the
    Cooperative Extension Service and community colleges in Mississippi to
    address the problems of shortages of rural health care professionals
    and health care services and facilities. The Mississippi program has
    established the Mississippi Rural Health Corps--MRHC--a program of 15
    community and junior colleges. The program is designed to increase the
    number of nurses, licensed practical nurses, and other health care
    professionals with a commitment, up to three years, to work in a rural
    health care service, and to develop an Extension health education and
    community health service strategic planning program.
        After four years of operation, the MRHC provided junior and
    community colleges with educational opportunities for 2,516 students in
    the health care field. Nearly 90 percent of those enrolled have either
    completed their courses of study or remained in training. Of the
    program's 962 graduates, over 90 percent are employed in rural
    communities. Because of additional state funds generated by the
    project, one community college was able to add Emergency Medical
    Technician--EMT--and Emergency Medical Responder--EMR--courses to its
    curriculum. Nearly 200 students have been able to complete this
    training in the first two years of the program. In fiscal year 1997, an
    additional distance learning downlink site will be established with the
    Mississippi Nurses Association in preparation for adding graduate
    nursing education programs to help provide continuing nursing education
    certification and advanced degree faculty members for the MRHC program.
        Rural health educational activities of the Mississippi Cooperative
    Extension Service have been very effective in raising rural resident's
    awareness of health care needs and available services. Over 29,000
    residents have received health screening and referral services, and
    community leaders have begun strategic planning efforts towards
    establishing local community health centers. Eleven county-wide health
    coalitions and two health councils have been established to address
    county needs in the areas of breast cancer, high blood pressure, and
    sexually transmitted diseases education. The councils are served by 154
    certified MRHC volunteer lay health advisors.
        A second program, conducted by Cooperative Extension and the School
    of Nursing at Louisiana's Southern University, provides community-based
    health promotion and disease prevention services to persons who
    otherwise would not have access to them. The Louisiana program has
    established a nurse-managed mobile health care clinic that is providing
    culturally sensitive community-based health education, assessments,
    screening, and referral services. The mobile clinic also provides
    nursing students with clinical learning experiences within the
    immediate environment of the medically at-risk and underprivileged
    populations. The Louisiana program has also made progress in developing
    a mobile clinic-based nurse education curriculum. This mobile clinic
    gives students a direct understanding of health care needs and
    obstacles to accessing health care services of the rural medically at-
    risk populations. Community residents are given the opportunity to
    advise in the operation of the mobile clinic. Many of the student
    nurses acknowledge a change in attitude and perception regarding
    diverse groups. This experience has enabled them to more effectively
    provide culturally sensitive health care services. Health education is
    provided to participants to enhance individual and family awareness in
    health promotion and disease prevention strategies, while increasing
    self-care capabilities in nutrition, dental health, aging, childhood
    immunizations, breast self-examination, hypertension, diabetes, and
    other illnesses.
        A major focus of this Louisiana program has been serving the health
    care needs of the homeless. The program report states that: ``This
    excursion into the world of the homeless has assisted all directly
    involved to clearly understand the problems associated with the
    population. The student nurses experienced a gamut of emotions from
    brief moments of depression over their experiences to absolute joy at
    being able to do something to assist the homeless to meet health care
    needs. Many of them express a new interest in the field of community
    nursing.''
                        agricultural telecommunications
        Question. Would you please tell us how the agricultural
    telecommunications funds have been spent in each of the last three
    fiscal years and who has received these funds.
        Answer. The Cooperative State Research, Education, and Extension
    Service conducts a competitive grants program to make available to
    accredited institutions of higher education the funding allocated to
    the Agricultural Telecommunications Program.
        In fiscal year 1994, 12 projects were funded in the areas of Staff
    and Faculty Training, Program Delivery and Program Development and
    Production. Grant recipients in the Staff and Faculty Training category
    included University of Alaska, and two projects at Iowa State
    University. In the Program Delivery category, grant recipients included
    University of Puerto Rico, University of Hawaii, California State
    University-Fresno, and University of Nebraska. In the Program
    Production and Development Category, grant recipients included New
    Mexico State University, University of Florida, University of Idaho,
    Texas A&M University, and Utah State University.
        In fiscal year 1995, 12 projects were funded in the areas of
    Program Delivery; Innovative Program Development and Production; and
    Capacity Building. Grant recipients in the Program Delivery category
    included University of Massachusetts, University of California,
    University of Georgia, University of Arkansas. In the Innovative
    Program Development and Production category, grant recipients included
    Iowa State University, University of California, University of
    Illinois, and two projects at Cornell University. In the Capacity
    Building category, grant recipients included University of Florida,
    Pennsylvania State University, Texas A&M University.
        In fiscal year 1996, 13 projects were funded in the areas of
    Program Delivery; Innovative Program Development and Production; and
    Capacity Building. In the Program Delivery category, grant recipients
    included Cornell University, University of Idaho, University of
    Arizona, Oklahoma State University, University of Vermont, Mississippi
    State University, University of Hawaii. In the Innovative Program
    Development and Production category, grant recipients included New
    Mexico State University, Ohio State University and Fort Valley State
    University. In the Capacity Building category, grant recipients
    included University of Arkansas-Pine Bluff, Kansas State University,
    and North Carolina State University.
                                1890 facilities
        Question. Please provide a summary of how the 1890 facilities
    funding has been allocated in each of the past three fiscal years,
    including how much was received by each institution and the facilities
    funded.
        Answer. The information follows.

                                               1890 FACILITIES (SEC. 1447)
    ----------------------------------------------------------------------------------------------------------------
                                                            Fiscal year--
              Institutions            Fund status ---------------------------------              Status
                                                      1994       1995       1996
    ----------------------------------------------------------------------------------------------------------------
    Alabama:
        Alabama A&M University.....  Allocated...   $422,607   $422,607   $416,242  The construction of the joint
                                     Awarded.....    422,607    422,607    416,242   Research/Extension Conference
                                                                                     Center is planned.
    ----------------------------------------------------------------------------------------------------------------
        Tuskegee University........  Allocated...    422,607    422,607    416,242  The renovation of the food
                                     Awarded.....    422,607    422,607    416,242   processing laboratories and the
                                                                                     construction of the Extension
                                                                                     Activities Center in progress.
    ----------------------------------------------------------------------------------------------------------------
    Arkansas: University of          Allocated...    405,926    405,926    399,812  Construction of the small
     Arkansas at Pine Bluff.         Awarded.....    405,926    405,926    399,812   ruminant research and fish
                                                                                     processing/marketing buildings
                                                                                     in progress.
    ----------------------------------------------------------------------------------------------------------------
    Delaware: Delaware State         Allocated...    324,560    324,560    319,672  Construction plans underway for
     University.                     Awarded.....    324,560    324,560    319,672   the Research/Extension
                                                                                     herbarium.
    ----------------------------------------------------------------------------------------------------------------
    Florida: Florida A&M University  Allocated...    427,721    427,721    421,279  Construction of farm shops &
                                     Awarded.....    427,721    427,721    421,279   equipment shed planned.
    ----------------------------------------------------------------------------------------------------------------
    Georgia: Fort Valley State       Allocated...    469,833    469,833    462,757  Plans include an education
     University.                     Awarded.....    469,833    469,833  .........   support center, a family life
                                                                                     center, and an agricultural
                                                                                     administrative support complex.
    ----------------------------------------------------------------------------------------------------------------
    Kentucky: Kentucky State         Allocated...    520,692    520,692    512,850  Plans include the construction
     University.                     Awarded.....    520,692    520,692    512,850   of horticulture and entomology
                                                                                     labs, renovation of the water
                                                                                     quality lab and the purchase of
                                                                                     land to develop a fish
                                                                                     nutrition lab.
    ----------------------------------------------------------------------------------------------------------------
    Louisiana: Southern University.  Allocated...    397,350    397,350    391,365  Plans include purchasing movable
                                     Awarded.....  .........  .........  .........   equipment for livestock
                                                                                     pavilion, construction of a
                                                                                     multi-purpose research &
                                                                                     demonstration facility, and
                                                                                     construction of an Extension
                                                                                     telecommunication center.
    ----------------------------------------------------------------------------------------------------------------
    Maryland: University of          Allocated...    373,433    373,433    367,809  Plans include the construction
     Maryland Eastern Shore.         Awarded.....    373,433    373,433    367,809   of a food science & technology
                                                                                     Research & Extension center,
                                                                                     and a human development center.
    ----------------------------------------------------------------------------------------------------------------
    Mississippi: Alcorn State        Allocated...    410,717    410,717    404,531  Original plans included
     University.                     Awarded.....  .........  .........  .........   renovation of swine research &
                                                                                     demonstration unit,
                                                                                     construction of a poultry
                                                                                     research feed mill and a fish
                                                                                     hatchery.
    ----------------------------------------------------------------------------------------------------------------
    Missouri: Lincoln University...  Allocated...    518,512    518,512    510,702  Design & construction for the
                                     Awarded.....    518,512    518,512    510,702   beef/cattle facility and the
                                                                                     multi-purpose building
                                                                                     underway.
    ----------------------------------------------------------------------------------------------------------------
    North Carolina: North Carolina   Allocated...    534,886    534,886    526,830  The 5-year plan has been amended
     A&T State University.           Awarded.....    534,886    534,886    526,830   to include construction of an
                                                                                     Extension/Research office
                                                                                     building at the university farm
                                                                                     complex and the renovation of
                                                                                     the food & nutrition lab.
    ----------------------------------------------------------------------------------------------------------------
    Oklahoma: Langston University..  Allocated...    418,263    418,263    411,963  Plans include construction and
                                     Awarded.....    418,263    418,263    411,963   equipment/furnishing for a
                                                                                     Research and Extension multi-
                                                                                     purpose facility.
    ----------------------------------------------------------------------------------------------------------------
    South Carolina: South Carolina   Allocated...    413,265    413,265    407,041  The renovation design for the 4-
     State University.               Awarded.....    413,265    413,265    407,041   H camp has been completed.
                                                                                     Construction is scheduled to
                                                                                     begin in June 1997.
    ----------------------------------------------------------------------------------------------------------------
    Tennessee: Tennessee State       Allocated...    476,248    476,248    469,075  Proposed plans include the
     University.                     Awarded.....  .........  .........  .........   purchase of land and the
                                                                                     construction of a Research/
                                                                                     Extension facility.
    ----------------------------------------------------------------------------------------------------------------
    Texas: Prairie View A&M          Allocated...    597,336    597,336    588,339  Irrigation system, security
     University.                     Awarded.....    597,336    597,336    588,339   fence, and waste disposal
                                                                                     system installed.
    ----------------------------------------------------------------------------------------------------------------
    Virginia Virginia State          Allocated...    451,004    451,004    444,211  Parking lot for the Multi-
     University.                     Awarded.....    451,004    451,004    444,211   purpose Pavilion has been
                                                                                     completed. Diagnostic
                                                                                     laboratory furnishings and
                                                                                     satellite downlinking equipment
                                                                                     has been installed in the
                                                                                     Pavilion. Renovation of the
                                                                                     meat goat handling & housing
                                                                                     facilities underway.
    ----------------------------------------------------------------------------------------------------------------

                            buildings and facilities
        Question. Please provide the Committee with a summary report on
    each of the facilities funded through CSREES' Buildings and Facilities
    Program, including the federal funds provided, the total estimated cost
    of the project, the current status of the project, and the available
    non-federal project match.
        Answer. This information is provided in the following table.

                                                    SUMMARY OF FUNDING AND PROJECT STATUS, CSREES BUILDINGS AND FACILITIES PROGRAM--FISCAL YEAR 1997
                                                                                         [Dollars in thousands]
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                             Total Federal
                                              Total est.        funding
         Name and location of facility          cost of     provided as of           Total non-Federal match available to date                            Current status of facility
                                                project       fiscal year
                                                                 1997
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    Poultry Science Facility, Auburn               $12,000          $6,000  Assurance of required match has come from State and poultry  Design work is underway.
     University (Auburn, AL).                                                industry sources.
    Animal Sciences Research and Teaching            3,892           1,946  Matching funds of $200,000 are now available, balance of     Design phase completed; preparing bids for construction
     Facility, University of Arkansas \1\                                    $720,000 is being pursued from State appropriations.         phase.
     (Fayetteville).
    Alternative Pest Control Containment/           38,118          10,921  Majority of matching funds are anticipated to become         Most of the programming & design phase is completed;
     Quarantine Facility: University of                                      available in fiscal year 2000 (and in-kind value of land     develop. of construction documents to begin in fiscal year
     California (Davis/Riverside).                                           to be proposed as part of match).                            1997.
    Animal Reproduction & Biotechnology              5,302           2,651  Matching funds are available...............................  Construction work began in fiscal year 1994. Full occupancy
     Laboratory, Colorado State University                                                                                                expected by Summer 1997.
     (Fort Collins).
    Agricultural Biotechnology Laboratory,          18,100           3,915  Matching funds to be made available annually by the State..  Most of the programming & design phase is completed;
     University of Connecticut (Storrs).                                                                                                  develop. of construction documents to begin in fiscal year
                                                                                                                                          1997.
    Center for Applied Aquaculture,                 11,450           9,956  Availability of required match for the fiscal year 1995      Construction Ongoing.
     Oceanic Institute (Waimanolo, HI) \2\.                                  increment of funding has not been determined.
    Agricultural Biotechnology Facilities,          13,479           5,900  In 1991, Univer. provided $1M to complete an aquaculture     Design & construction completed on an Aquaculture Lab (1
     University of Idaho (Moscow) \3\.                                       lab, but only $250,00 came from the State. The State did     component of the project). Preliminary stages only on the
                                                                             not match during fiscal year 1992-1995. During fiscal        remaining components.
                                                                             years 1996-97, the university was able to obtain a total
                                                                             of $4.3 million in bond commitments from the State with a
                                                                             additional $1 million of State support anticipated for
                                                                             fiscal year 1997.
    Biotechnology Center, Northwestern              24,000           8,536  Matching funds are available...............................  All construction has been completed; the buildings are
     University (Evanston, IL).                                                                                                           occupied.
    Biological and Environmental Sciences           10,000           5,000  Matching funds are available...............................  Most of the programming & design phase is completed;
     Facility, DePaul University (Chicago,                                                                                                develop. of construction documents to begin in fiscal year
     IL).                                                                                                                                 1997.
    Institute for Natural Resources and             20,000          10,000  $1.1 million of matching funds have been provided by the     Planning and design phases are underway.
     Environmental Science, University of                                    State, with more matching funds anticipated from State
     Maryland (Statewide).                                                   appropriations next year.
    Center for Hunger, Poverty, and                 16,340           8,170  CSREES is considering the University's proposed use of in-   Most of the programming & design phase is completed;
     Nutrition Policy, Tufts University                                      kind value of land as part of its matching contribution.     develop. of construction documents to begin in fiscal year
     (Boston, MA).                                                           Cash may become available for additional matching purposes   1997.
                                                                             in the future.
    Center for Plant Biodiversity,                  15,826           7,913  Matching funds are available...............................  In final phase of construction work; occupancy date
     Missouri Botanical Garden (St. Louis).                                                                                               estimated at 12/01/97.
    Center for Molecular Biology, Rutgers           47,900          17,836  Matching funds are available...............................  Construction Ongoing.
     University (New Brunswick, NJ).
    Center for Arid Land Studies, New               22,600          11,000  Matching funds are available...............................  Most of the programming & design phase is completed;
     Mexico State University (Las Cruces).                                                                                                develop. of construction documents to begin in fiscal year
                                                                                                                                          1997.
    Ctr. for Rsch. on Human Nutr. &                108,607          18,108  Matching funds are available...............................  Construction Ongoing.
     Chronic Disease Prevention, Wake
     Forest University (Winston-Salem, NC).
    Research Greenhouse, Cornell                     1,212             606  Matching funds are available...............................  Construction completed; building is occupied.
     University (Ithaca, NY) \4\.
    Lake Erie Soil & Water Research &                5,600           2,800  Matching funds made available through State appropriations   Construction Ongoing.
     Education Center, The University of                                     in fiscal year 1994.
     Toledo (Toledo, OH).
    Forest Ecosystem Research Laboratory,           24,000          10,000  Matching funds are available...............................  Most of the programming & design phase is completed;
     Oregon State University (Corvallis).                                                                                                 develop. of construction documents to begin in fiscal year
                                                                                                                                          1997.
    Animal Resource Wing, South Dakota              11,600           5,400  Matching funds are available...............................  Design work to be initiated in fiscal year 1997.
     State University (Brookings).
    Agricultural, Biological, &                     38,500          10,434  Matching funds of $5-6 million are available now, the        Most of the programming & design phase is completed;
     Environmental Research Complex,                                         balance to be pursued from State appropriations.             develop. of construction documents to begin in fiscal year
     University of Tennessee (Knoxville).                                                                                                 1997.
    Horse Science and Teaching Center,               5,170           2,585  MTSU has requested the award to be made to the MTSU          Design work to be initiated in fiscal year 1997.
     Middle Tennessee State University                                       Foundation since the univer. has not been able to obtain
     (Murfreesboro).                                                         the matching funds required. CSREES is currently reviewing
                                                                             the proposed request to change the award recipient to the
                                                                             Fdtn. since they can provide the match.
    Center for Southern Crop Improvement,           14,500           7,000  Matching funds are available...............................  Most of the programming & design phase is completed;
     Texas A&M University (College                                                                                                        develop. of construction documents to begin in fiscal year
     Station).                                                                                                                            1997.
    Animal Disease Biotechnology Facility,          54,000          23,400  Matching funds are available...............................  Construction Ongoing.
     Washington State University (Pullman).
                                           --------------------------------
          Totals..........................         522,196         190,077
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    \1\ Includes carryover funds from fiscal year 1995 in the amount of $946,000.    \2\ Includes carryover funds from fiscal year 1994 and 1995 in the amount of $3,581,000.    \3\ Includes
      carryover funds from fiscal year 1993 and 1994 in the amount of $1,266,000.    \4\ Includes carryover funds from fiscal year 1993 in the amount of $232,000.

                           higher education programs
        Question. Please provide the Committee with a report on each of the
    CSREES higher education programs, indicating the institutions receiving
    grants under each program and an assessment of how each program is
    meeting its objectives.
        Answer. In most programs, fiscal year 1997 awards currently are
    being processed. The most recent funding information is provided for
    each program, as follows.
    Higher Education Challenge Grants Program
        Institutions funded in fiscal year 1996 are the following:

    California Polytechnic State University-San Luis Obispo
    California State University, Chico
    Cornell University
    East Carolina University
    Iowa State University
    Kansas State University
    Louisiana State University
    Michigan State University
    Mississippi State University
    Montana State University
    Ohio State University
    Oklahoma State University
    Rutgers University
    Salish Kootenai College
    Southern Illinois University
    State University of New York College of Environmental Sciences and
            Forestry
    Tarleton State University
    Texas Tech University
    Texas A&M University
    University of Connecticut
    University of Delaware
    University of Florida
    University of Georgia
    University of Hawaii at Manoa
    University of Illinois at Urbana-Champaign
    University of Kentucky
    University of Maryland, College Park
    University of Minnesota-Twin Cities
    University of Nebraska
    University of North Carolina at Chapel Hill
    University of Rhode Island
    University of Tennessee, Knoxville
    University of Texas-Austin
    University of Wisconsin-Platteville
    University of Vermont
    Utah State University
    Virginia Polytechnic Institute and State University
    Washington State University

        The objective of the Challenge Grants Program is to enable colleges
    and universities to provide high quality education in the food and
    agricultural sciences required to strengthen the Nation's food and
    agricultural scientific and professional work force. The program is
    accomplishing this by funding model projects that address regional and
    national higher education issues, use creative approaches to teaching,
    and foster partnerships among universities and between universities and
    the private sector. The program doubles the Federal investment since it
    requires dollar-for-dollar matching. The program serves both land-grant
    and other institutions with baccalaureate and higher degree programs in
    food and agricultural sciences, making it the centerpiece of USDA's
    teaching grants programs. An exciting array of projects funded under
    the program are serving to revitalize agriscience and business
    curricula, enhance faculty teaching skills, introduce and emphasize
    international issues and strengthen students' problem solving skills.
    Hispanic-Serving Institutions Education Grants Program
        The Hispanic-Serving Institutions Education Grants Program is being
    initiated in fiscal year 1997. The program's objectives are to promote
    and strengthen the ability of Hispanic-Serving Institutions to carry
    out higher education teaching programs in the food and agricultural
    sciences. The program will accomplish these by awarding grants to
    Hispanic-Serving Institutions for projects that will address one or
    more targeted need areas: curricula design and materials development;
    faculty preparation and enhancement for teaching; instruction delivery
    systems and scientific instrumentation for teaching; student
    experiential learning, and student recruitment and retention. The
    program is competitive among Hispanic-Serving Institutions. Awards will
    be made later this fiscal year.
    1890 Institution Capacity Building Grants Program
        Institutions funded for teaching projects in fiscal year 1996 are:

    Alabama A&M University
    Alcorn State University
    Delaware State University
    Florida A&M University
    Kentucky State University
    Langston University
    North Carolina A&T State University
    South Carolina State University
    Tennessee State University
    Tuskegee University
    University of Arkansas-Pine Bluff
    University of Maryland-Eastern Shore
    Virginia State University

        Institutions funded for research projects in fiscal year 1996 are:

    Alabama A&M University
    Alcorn State University
    Delaware State University
    Florida A&M University
    Fort Valley State University
    Kentucky State University
    Langston University
    North Carolina A&T State University
    Southern University and A&M College
    Tuskegee University
    University of Maryland-Eastern Shore
    University of Arkansas-Pine Bluff
    Virginia State University

        The highly competitive 1890 Institution Capacity Building Grants
    Program serves as the crux of the Department's high-priority
    initiatives to advance the teaching and research capacity of the 1890
    Land-Grant Institutions and Tuskegee University. It reflects USDA's
    commitment to encourage more minorities to prepare for careers as food
    and agricultural scientists and professionals. The program meets these
    objectives by providing support for teaching and research projects in
    high-priority areas targeted by the institutions and USDA. Matching
    support from non-Federal dollars is strongly encouraged. Another
    component of the program that assists the 1890 Institution to build
    teaching and research capacity is the required cooperation of the
    institutions with one or more USDA agencies in developing a proposal
    and carrying out a project.
    Multicultural Scholars Program
        Grants are awarded every two years. Thus, institutions funded in
    fiscal year 1997, with combined 1996 and 1997 funds, include:

    Alabama A&M University
    California State University, Fresno
    California Polytechnic State University-San Luis Obispo
    Cornell University
    Michigan State University
    New Mexico State University
    North Dakota State University
    Oklahoma State University
    Pennsylvania State University
    Purdue University
    Rutgers University-Cook College
    Seton Hill College
    South Dakota State University
    Tennessee State University
    University of Arkansas
    University of Florida
    University of Hawaii at Manoa
    University of Idaho
    University of Illinois at Urbana-Champaign
    University of North Dakota
    University of Vermont
    University of Wisconsin-River Falls
    University of Wisconsin-Stout
    Virginia Polytechnic Institute and State University

        The Multicultural Scholars Program ultimately aims to increase the
    participation of America's diverse talent in the food and agricultural
    work force and to advance the educational achievement of all Americans.
    The program strives to attract and educate more students from groups
    currently underrepresented in the food and agricultural sciences for
    careers in agriscience and agribusiness. The program accomplishes these
    goals by providing undergraduate scholarships for outstanding students
    from such underrepresented groups. The program is open to all colleges
    and universities. Since the program began in 1994, 206 scholarships
    have been provided. The Federal investment in the program leverages
    state and private support via a 25 percent matching requirement.
    USDA National Needs Graduate Fellowships Grants Program
        Institutions funded in fiscal year 1996 are:

    Colorado State University
    Cornell University
    Iowa State University
    Kansas State University
    Michigan State University
    North Carolina State University
    Ohio State University
    Pennsylvania State University
    Purdue University
    Texas A&M University
    University of Missouri
    University of Minnesota
    University of Nebraska
    University of Chicago
    University of Illinois at Urbana-Champaign
    University of Florida
    University of California, Davis
    University of Wisconsin-Madison
    University of Washington
    Virginia Polytechnic Institute and State University

        Begun in 1984, the USDA National Needs Graduate Fellowships Grants
    Program seeks to stimulate the development of food and agricultural
    scientific expertise in targeted national need areas. This program
    represents a key investment strategy, as it is the only Federal program
    targeted specifically to the recruitment and training of pre-doctoral
    students for critical food and agricultural scientific positions. The
    program achieves its goal by providing funds competitively to
    universities for attracting and supporting outstanding graduate
    students to pursue advanced degrees in areas of the food and
    agricultural sciences experiencing shortages of expertise. Over the 12
    years of this program, approximately 915 fellows have been trained
    within 6 areas, namely Plant and Animal Biotechnology; Human Nutrition
    and/or Food Science; Water Science; Engineering--Food, Forest Products,
    or Agricultural; and, Marketing or Management--Food, Forest Products,
    or Agribusiness. Graduates of the program are working in private
    industry, with such major companies as Kellogg, Nabisco, Kraft, General
    Foods, American Express Company, and General Mills, as well as with
    major universities. They hold such positions as Product Engineer,
    Research Scientist, Econometrician, Chemical Engineer, Extension
    Economist, and teaching positions from Instructor to Professor.
    Tribal Colleges Endowment Fund
        All 29 tribally controlled Land-Grant Institutions were funded in
    the Tribal Colleges Endowment Fund in fiscal year 1996. They are:

    Bay Mills Community College, MI
    Blackfeet Community College, MT
    Cheyenne River Community College, SD
    College of the Menominee Nation, WI
    Crownpoint Institute of Technology, NM
    D-Q University, CA
    Dull Knife Memorial College, MT
    Fond du Lac Tribal and Community College, MN
    Fort Belknap College, MT
    Fort Peck Community College, MT
    Fort Berthold Community College, ND
    Haskell Indian Nations University, KS
    Institute of American Indian Arts, NM
    Lac Courte Oreilles Ojibwa Community College, WI
    Leech Lake Tribal College, MN
    Little Hoop Community College, ND
    Little Big Horn College, MT
    Navajo Community College, AZ
    Nebraska Indian Community College, NE
    Northwest Indian College, WA
    Oglala Lakota College, SD
    Salish Kootenai College, MT
    Sinte Gleska University, SD
    Sisseton Wahpeton Community College, SD
    Sitting Bull College, ND
    Southwestern Indian Polytechnic Institute, NM
    Stone Child College, MT
    Turtle Mountain Community College, ND
    United Tribes Technical College, ND

        The Tribal Colleges Endowment Fund, launched in 1996, distributes
    interest earned by an endowment established for the 29 tribally
    controlled Land-Grant Institutions, as authorized by law in 1994. The
    Endowment Fund seeks to enhance education in food and agricultural
    sciences and related areas for Native Americans by building educational
    capacity at these institutions in the areas of curricula design and
    materials development, faculty development and preparation for
    teaching, instruction delivery systems, experiential learning,
    equipment and instrumentation for teaching, and student recruitment and
    retention.
    Tribal Colleges Education Equity Grants
        All 29 tribally controlled Land-Grant Institutions were funded
    under the Tribal Colleges Education Equity Grants Program in fiscal
    year 1996. See above list of institutions.
        This program, launched in fiscal year 1996, is a formula program
    designed to enhance educational opportunities for American Indians by
    strengthening instruction in the food and agricultural sciences at 1994
    Land-Grant Institutions. This is accomplished by strengthening
    instructional programs in the food and agricultural sciences at the 29
    tribally controlled colleges designated as the 1994 Land-Grant
    Institutions. These institutions serve approximately 14,000 American
    Indian students. Funded projects focus on undergraduate and graduate
    studies in the food and agricultural sciences and must address one or
    more of the following need areas: (1) Curricula Design and Materials
    Development; (2) Faculty Development and Preparation for Teaching: (3)
    Instruction Delivery Systems; (4) Student Experiential Learning: (5)
    Equipment and Instrumentation for Teaching: and (6) Student Recruitment
    and Retention. Each institution is required to develop a plan of work
    that addresses the institution's long-range goals and shows how these
    funds will be used to strengthen institutional capacities.
                            challenge grants program
        Question. Why is increased funding being requested for the
    Institution Challenge Grants program for fiscal year 1998?
        Answer. American higher education in the food and agricultural
    sciences must continually address a number of issues to maintain its
    quality and competitiveness. The USDA Higher Education Institution
    Challenge Grants Program is the Department's flagship initiative to
    ensure excellence in education by stimulating and providing incentives
    for institutional change. This program has shown its worth by moving
    higher education in the following directions over the last seven years.
    An increasing number of joint degree programs in agribusiness have
    emerged between colleges of business and colleges of agriculture.
    Faculty in colleges of agriculture are increasing their skill in
    working with multicultural student bodies through specially designed
    workshops. Significant numbers of faculty have participated in
    workshops that have reoriented them from use of traditional lecture
    methods to experiential learning and problem solving for students.
    Undergraduate students more often participate in research in
    biotechnology, environmental management, and other important emerging
    fields. Institutions more often partner to accomplish their educational
    goals. However, current funding is not adequate to meet the needs or to
    fully capture the potential benefits to be derived from the program.
    For example, there are critical needs to expand curricula to include
    global perspectives and to enhance graduate education, which the
    program does not have the capacity to accomplish. The changing nature
    of higher education and its students requires more emphasis on the
    utilization of various new delivery systems to promote outreach and
    flexibility and the creation of partnerships among institutions to make
    higher education more efficient and cost-effective. Over time,
    inflation has negatively impacted project scope. Over the past seven
    years, only about 22 percent of approximately 1,000 excellent proposals
    generated by this highly competitive program could be funded. In fiscal
    year 1997, this program experienced a cut of $.35 million from the
    level of fiscal year 1996. An increase in 1998 will return the program
    to the 1996 funding level and will enable four to five more colleges to
    undertake projects, including international projects, that promote
    excellence in agricultural education. In order to really achieve the
    potential of this program to change the face of food and agricultural
    higher education at both the undergraduate and graduate levels,
    sufficient funds must be allocated. At the current and projected size,
    the potential benefits cannot be fully realized.
                            special research grants
        Question. The fiscal year 1998 budget proposes a new $2 million
    food safety competitive special research grants program. Why is a
    special research grants program being proposed? You are also proposing
    to target food safety increases through the National Research
    Initiative (NRI) competitive grants program. Why is a special research
    grants program needed? Why can't this research be funded through the
    NRI?
        Answer. The proposed special research grant will be more responsive
    and able to address more specific research priorities within a shorter
    time frame. In the past, CSREES has been asked by FSIS to assist them
    with research that would address their specific needs in providing a
    scientific basis for setting policies or providing information to food
    producers, processors, handlers, and consumers; to develop improved
    analytical techniques for detecting and measuring contaminants in
    foods; and to develop intervention techniques that would prevent or
    eliminate contaminants. The Agency funds food safety research through
    formula funds (including Hatch, Evans-Allen, and Animal Health and
    Disease Acts), competitive grants (through the NRICGP), and
    Congressionally directed special research grants. The research is
    conducted by the Agency's land-grant university partners and other
    cooperators. The current programs afford little flexibility for the
    Agency to direct its food safety research in a timely manner to address
    specific high priority needs identified by USDA action agencies and
    other federal and state food safety experts. The new special grants
    program will increase the Agency's ability to respond rapidly to
    research questions. NRI funding allows the Agency to research more
    fundamental, often longer-term, research problems.
             binational agricultural research and development--bard
        Question. The budget proposes $2.5 million for United-States-Israel
    Binational Agricultural Research and Development program (BARD), a
    $500,000 increase above the 1997 level. Why is an increase in funding
    for this program being proposed, especially given the fact that the
    Administration is proposing the elimination of funding for a number of
    on-going CSREES activities?
        Answer. The $2.5 million requested for the BARD program would
    restore funding to the level provided by CSREES for BARD in each of the
    fiscal years 1994, 1995, and 1996. CSREES also requested $2.5 million
    for BARD for fiscal year 1997, but only $2 million was appropriated.
    Restoration of the $2.5 million funding level for BARD is requested
    because the Administration supports increasing the proportion of
    agricultural research funding that is awarded by merit review with peer
    evaluation, as is the case with the BARD program. The Administration
    also believes that the dollar-for-dollar matching support provided by
    the Israeli government under BARD results in a high quality return on
    the U.S. investment in the program. Further, each project funded under
    the BARD program is a joint effort between U.S. and Israeli scientists,
    which exemplifies the integrated approach to problem solving preferred
    by the Administration in meeting the challenges facing U.S. and global
    agriculture. The challenges of today and the future are more complex
    than those we have solved in the past and require the multi-functional,
    multi-disciplinary, multi-institutional approaches found under the BARD
    program.
        Question. Please indicate the research projects which have been
    carried out under this program for each of the last five fiscal years.
        Answer. The BARD program has been funded through CSREES in fiscal
    years 1994 through 1997. While none of the 1997 funds have been awarded
    to date, a listing of the research projects funded in fiscal years
    1994, 1995, and 1996 follows:

     Binational Agricultural Research and Development Program--Fiscal year
                                      1994

    University of California:e                                        Amount
        Davis, CA:
            Utilization of NMR Technology for Internal Non-
              Destructive Quality Evaluation of Fruits and
              Vegetables..........................................  $135,000
            Grapes, Wines, and Byproducts as Potential Sources of
              Antioxidants........................................   120,000
        Riverside, CA:
            Ecology, Population Dynamics and Genetic Diversity of
              Epi- phytic Yeast Antagonists of Postharvest
              Diseases of Fruit...................................   125,000
            Characterization of Field-Scale Solute Transport in
              Spatially Variable Unsaturated Field Soils..........    78,120
    Colorado State University, Ft. Collins, CO: Evaluation of
        Naked Proviral DNA as a Vaccine for Ovine Lentivirus
        Infection.................................................   140,000
    University of Florida, Gainesville, FL:
        Strategies to Optimize Reproduction in Heat Stressed Dairy
          Cattle..................................................   120,000
        Citrus Tristeza Virus: Molecular Approaches to Cross
          Protection..............................................   144,000
    Iowa State University of Science and Technology, Ames, IA:
        Molecular Markers for Immunocompetence and Resistance to
        Disease...................................................   127,000
    University of Minnesota, Minneapolis, MN: Bacterial
        Mineralization of Atrazine as a Model for Herbicide
        Biodegradation............................................   119,000
    North Carolina State University, Raleigh, NC:
        Aspects of Sugar Metabolism in Fruit as Determinants of
          Fruit Quality...........................................   125,000
        Non-Destructive Quality Sensing of High-Valued
          Agricultural Commodities through Response Analysis......   113,000
    University of Nevada, Reno, NV: Mechanisms for Control of Leaf
        Growth during Salinity Stress.............................   125,000
    Cornell University, Ithaca, NY:
        Improving Preferential Flow Modules by Experimentation....   107,000
        Consequences of Nonequilibrium Pesticide Fate Processes on
          Profitability of leaching...............................   141,000
        Discovery and Use of Genes and Gene Products Coding for
          Proteins Useful in Biocontrol...........................   131,000
    Texas A&M Research Foundation, College Station, TX: Pathogenic
        Streptococcus in Tilapia: Rapid Diagnosis Epidemiology and
        Patho- physiology.........................................    94,000

     Binational Agricultural Research and Development Program--Fiscal year
                                      1995

    University of California:e                                        Amount
        Berkeley, CA: Relationship of Genes Conferring Epiphytic
          Fitness and Internal Multiplication in Plants in Erwinia
          Herbicola...............................................  $137,500
        Davis, CA:
            Involvement of the TMV-MP in the Control of Carbon
              Metabolism and Partitioning in Transgenic Plants....   133,000
            Environmental, Developmental and Physiological Bases
              of Curcurbit Seed Quality \1\.......................   115,370
            Isoflavrnoid Regulation of Root Bacteria..............   125,000
            Wooliness in Peaches and Nectarines...................   109,778
            Targeting of an Expressed Insect Selective Neurotoxin
              by its Recombinant Baculovirus......................   102,000
            Genetic and Biochemical Characterization of Fructose
              Accumulation........................................   106,614
        Riverside, CA: Structural Elements and
          Neuropharmacological Features Involved in the
          Insecticidal Properties of an Alpha Scorpion Neurotoxin.   105,000
    University of Florida, Gainesville, FL:
        Mapping Quantitative Trait Loci in the Woody Perennial
          Plant Genus Citrus......................................   130,000
        Identification of DNA.....................................   125,000
    Purdue Research Foundation, West Lafayette, IN: An Inquiry
        into the Phenomenon of Enhanced Pesticide Transport Caused
        by Effluents..............................................   109,200
    Michigan State University, East Lansing, MI: Analysis of
        Senescence-inducible Ribonuclease in Tomato...............   116,700
    University of Nebraska, Lincoln, Nebraska: Pathogenicity and
        Sclerotia Development of Sclerotinia sclerotiorum:
        Involvement of Oxalic Acid and Chitin Synthesis...........    50,100
    Cornell University, Ithaca, NY:
        Analysis of Quantitative Traits in Pepper using Molecular
          Mark- ers...............................................   124,200
        Polyphenoloxidases--Expression, Assembly, and Function....   122,410
    Texas A&M Research Foundation, College Station, TX: Improving
        Productivity of Cotton in Arid-Region Agriculture: An
        Integrated Physiological/Genetic Approach.................   110,000
    Virginia Polytechnic Institute and State University,
        Blacksburg, VA: Environmental, Developmental, and
        Physiological Determinants of Curcurbit Seed Quality \1\..    63,820
    University of Wisconsin, Madison, WI: Lymphocyte Response to
        Genetically-engineered Bovine Leukemia Virus Proteins.....   125,000

     Binational Agricultural Research and Development Program--Fiscal year
                                      1996

    University of California:e                                        Amount
        Berkeley, CA: Functional Biogenesis of V-ATPase in the
          Vacuolar System of Plants...............................   $81,000
        Davis, CA:
            Enhancement of Baculovirus Potency by Expression of
              Synergistic Scorpion Toxin..........................   125,000
            Genetic Diversity of Resistance Gene Clusters in Wild
              Population of Lectuca...............................   125,000
            Biosensors for On-line Measurement of Reproduction
              Hormones and Milk Proteins to Improve Dairy Herd
              Management..........................................   145,870
            Resistance to Tomato Yellow Curl Virus by Movement
              Protein in a Single Cultivar........................   121,250
            Creating Genetic Variation in Tilapia Through the
              Creation of an Artificial Center of Origin \2\......   145,500
            Mapping and Tagging by DNA Markers of Emmer Alleles
              that Improve Traits in Wheat........................   137,000
            Rhizosphere Ecology of Plant-Beneficial Microorganisms   130,410
            Molecular Genetic Analysis of Citrus Acid Accumulation
              in Citrus Fruit.....................................   125,000
    Purdue Research Foundation, West Lafayette, IN:
        Osmotin and Osmotin-like Proteins as a Novel Source for
          Phytopathogenic Fungal Resistance in Transgenic
          Carnation...............................................   125,000
        Regulated Expression of Yeast FLP Recombinase in Plant
          Cells...................................................   135,610
        Elicitor-Induced Response in Lycoperscor Esculentus.......   125,000
        Study of the Basis for Toxicity and Specificity of
          Bacillus Thuringiensis-Endotoxins.......................   113,630
    Cornell University, Ithaca, NY: Virus Synergy in Plants.......   124,480
    The Pennsylvania State University, University Park, PA:
        Developing Nutritional-Management Protocols Which Prevent
          Tibial Dyschondroplasia.................................   125,000
        Ozone Altered Stomatal/Guard Cell Function: Whole Plant
          and Single Cell Analysis................................   135,400
        Identification of Staphylococcus Aureus Virulence Factors
          Associated With Bovine Mastitis.........................   142,000
    Texas A&M Research Foundation, College Station, TX: Role of
        Placental Lactogen in Sheep...............................   116,130
    Virginia Polytechnic Institute and State University,
        Blacksburg, VA: Creating and Characterizing Variation in
        Tilapia by Creating and Center of Variation \2\...........    65,700

    \1\ Collaborative project funded at the University of California, Davis,
    and Virginia Polytechnic Institute and State University.
    \2\ Collaborative project funded at the University of California, Davis,
    and Virginia Polytechnic Institute and State University.
    ---------------------------------------------------------------------------
                            special research grants
        Question. For each of the special research grants listed below
    which the Administration proposes to continue for fiscal year 1998,
    please indicate how the current funding is being allocated, the
    research activities being carried out, the location where the research
    is being performed, and what has been accomplished to date under the
    program: Critical Issues, Expert IPM Decision Support System, Global
    Change, Integrated Pest Management and Biological Control, Minor Crop
    Pest Management--IR-4, National Biological Impact Assessment Program,
    Pesticide Impact Assessment, Pest Management Alternatives, Rural
    Development Centers, and Water Quality.
        Answer. The information for the special research grants follows:
        Critical Issues.--These grant funds, which are appropriated at
    $200,000 in fiscal year 1997, support research on critical issues
    impacting agriculture that require immediate attention. These funds are
    intended to initiate research efforts until other resources can be
    secured to address the critical issues. Six research proposals have
    been funded to address potato late blight and two research proposals
    have been funded to address vesicular stomatitis. The potato late
    blight work is being carried out at Washington State University, Oregon
    State University, the University of Idaho, the University of Wisconsin,
    and the Pennsylvania State University. The first North American Late
    Blight Workshop was convened which involved potato growers and
    processors, national potato organizations, university scientists, and
    the chemical industry. The major contribution of this workshop was the
    resulting set of recommendations for short-and long-term efforts needed
    to solve this problem. The vesicular stomatitis work is being carried
    out at Colorado State University and the University of Arizona. Work
    has been initiated to focus on the transmission of this virus, which
    was identified by commodity groups, regulatory veterinarians, and USDA
    researchers as a high priority problem.
        Expert IPM Decision Support System.--A prototype information and
    decision support system was developed in collaboration with Purdue
    University and the Department of Energy's Argonne National Laboratory
    that integrates and manages information from multiple data sources.
    Information on the status of EPA review of pesticides, losses caused by
    pests, status of alternative tactics, status of minor use
    registrations, current research in progress, and priorities of IPM
    implementation teams are integrated in the Pest Management Information
    Decision Support System--PMI/DSS. The appropriation for this grant in
    fiscal year 1997 is $177,000. The PMI/DSS supports a USDA/EPA
    Memorandum of Understanding to find alternatives to pesticides under
    regulatory review or being lost due to genetic resistance. The data
    base has identified priorities for the Pest Management Alternatives
    request for proposals for the past two years and interacts with the
    project system of the IR-4 Minor Use Registration Program. It also
    interacts with the identification of priorities for research and
    extension activities in the regional IPM special grant and special
    projects. It provides a mechanism for growers and grower organizations
    to interact with the priority process, and the ultimate result is to
    help insure that farmers have alternatives for managing pests at the
    specific local level. Work is carried out by CSREES National Program
    Leaders in IPM, NAPIAP, and IR-4 program areas working on PMI/DSS. The
    Argonne National Laboratory has a Washington, D.C. office where
    information, decision support personnel are housed, and there are daily
    interactions between CSREES and other USDA staff personnel, the program
    addresses priority commodity pest management needs due to voluntary
    pesticide cancellations and regulatory cancellations responding to the
    MOU and supplemental MOU between USDA and EPA. In fiscal year 1996,
    there were 58 pesticides and 374 uses identified and prioritized. The
    process included information on cancellations furnished by EPA,
    selected uses were sent to the states NAPIAP and IPM network, and
    impacts of cancellations effecting individual state agriculture
    reported back for compilation in the decision support system.
        Global Change.--The work supported by this grant has a fiscal year
    1997 appropriation of $1,657,000. CSREES is in the process of
    establishing a network for monitoring surface UV-B radiation which will
    meet the needs of the science community of the U.S. and will be
    compatible with similar networks being developed throughout the world.
    The discovery of a deterioration of the stratospheric ozone layer and
    the occurrence of an ozone hole over polar regions has raised concern
    about the real potential for increased UV-B irradiance reaching the
    surface of the earth and the significant negative impact this could
    have on all biological systems, including man plus animals and plants
    of agricultural importance. This research is closely coordinated with
    other Federal agencies involved in the U.S. Global Change Research
    Program UV-Monitoring Network Plan. Colorado State University is
    managing the operating network which, when completed, will include all
    regions of the country. At least 30 sites are planned for the
    climatological network including sites in Hawaii, Alaska, and Puerto
    Rico. Ten sites have been operational with broad band instruments for
    up to three years, and it is planned to have at least twenty sites
    operational with new generation instruments by the summer of 1997. The
    research level network will begin with the first instrument to be
    installed at the Department of Energy Solar Radiation site near Ponca
    City, Oklahoma, as part of the Atmospheric Radiation Measurements field
    network. The USDA UV-B Network is to provide accurate, geographically-
    dispersed data on UV-B radiation reaching the surface of the earth, and
    to detect trends over time in this type of radiation. A network of a
    new multi-band instrument, which will provide the spectral information
    needed to support both biological and atmospheric science research and
    to serve as ground-truth for satellite measurements, was made available
    in 1996. These instruments have been deployed and are currently in
    operation at ten monitoring sites across the U.S. To gain network
    experience, broadband instruments, along with ancillary instruments,
    had been installed at ten selected field sites and operated for the
    last 28-36 months. An additional ten sites have been developed during
    the last 12 months, including those equipped with the new multi-band UV
    instrument. Data from all sites is transmitted daily to Colorado State
    University for analysis, distribution, and archiving.
        Integrated Pest Management/Biological Control.--Research supported
    by IPM special grants, which has a fiscal year 1997 appropriation of
    $2,731,000, continues to provide a science basis for the development of
    alternative approaches for managing pests including insects, mites,
    weeds, plant pathogens, and ectoparasites. Emphasis of the program has
    been on enhanced natural control, which emphasizes increased use of
    biological control, cultural control, and host resistance practices and
    the management of genetic resistance of pests. Research is being
    carried out in nearly all of the State Agricultural Experiment
    Stations. The original and current goal is to bring IPM into the 21st
    Century with a paradigm shift from past sole dependence on pesticides
    to an emphasis on natural control integrated with selective pesticides
    and biopesticides when pest population densities warrant their use. The
    more recent increase in joint research/extension collaboration has
    assisted bringing the accomplishments of research into implementation
    reality. All four regions have produced 12- to 15-page brochures
    documenting the impacts of research and extension efforts. IPM advances
    on 25-30 commodities are described in these brochures.
        Minor Crop Pest Management, IR-4.--The Pest Management for Minor
    Crops IR-4 Program, formerly the Pesticide Clearance Program, is a
    joint effort between the State Agricultural Experiment Stations,
    CSREES, and ARS with a fiscal year 1997 appropriation of $5,711,000.
    IR-4 provides the national leadership, coordination, and focal point
    for obtaining tolerance and safety data for pesticides and biological
    control agents for specialty crops such as horticultural crops. With
    Federal registration resulting from this research, a large number of
    small acreage crops such as vegetables, fruits, nuts, spices, and other
    specialized crops have been provided with needed crop protection
    against pests. Field work is performed at the State and Territorial
    Experiment Stations. Laboratory analysis is conducted primarily at the
    California, New York, Florida, and Michigan Agricultural Experiment
    Stations. Protocol development, data assimilation, writing petitions,
    and registration processing are coordinated through the New Jersey
    Agricultural Experiment Station. ARS is conducting minor use pesticide
    studies at several locations also. This research effort has been
    responsible for data in support of 2,074 food use clearances, which
    include 1,127 since 1984, 3,602 ornamental registrations, and research
    on 26 biopesticides resulting in 18 minor use registrations.
        National Biological Impact Assessment Program.--This program, with
    a fiscal year 1997 appropriation of $254,000, was established to
    facilitate and assess the safe application of new technologies for the
    genetic modification of animals, plants, and micro-organisms to benefit
    agriculture and the environment. This program supports the agricultural
    and environmental biotechnology community by providing useful
    information resources to scientists, administrators, regulators,
    teachers, and the interested public. The research for this program is
    being conducted by the Virginia Polytechnic Institute and State
    University. This computer-based information system now includes texts
    of Federal biotechnology regulations, proposed rules, and policy
    statements; databases of biotech companies, research centers,
    institutional biosafety committees, and state regulatory contacts;
    resource lists of publications, directories, bibliographies, and
    meetings; monthly newsletters developed and distributed by this
    program; relevant Federal Register announcements; and links to other
    electronic information resources. In addition, this program provides
    biosafety training through workshops for academic and corporate
    scientists, biosafety officers, and state regulators.
        Pesticide Impact Assessment Program.--Research funded by the
    National Agricultural Pesticide Impact Assessment Program--NAPIAP--
    which has a fiscal year 1997 appropriation of $1,327,000, discovers,
    gathers, publishes, and distributes information relating to the use and
    effectiveness of pest management alternatives essential to the
    maintenance of U.S. agricultural crops and livestock production. These
    data involve evaluating the biologic and economic impact and
    consequences of restricting the use of key pesticides either through
    voluntary cancellations or regulatory action. This work is being
    carried out at 53 state and territorial Agricultural Experiment
    Stations. Competitively awarded research funds are coordinated through
    a lead state in each of the four regions of the U.S.--California, West;
    Ohio, North Central; Pennsylvania, Northeast; and Florida, South.
    NAPIAP's goals are defined in its strategic plan as: first, in
    collaboration with USDA, EPA, and Land-Grant partners, to focus
    activities on collecting and delivering high quality, science-based
    pest management information for use in the regulatory process; and
    second, maintain and enhance a strong partnership between the USDA and
    the Land-Grant System in order to continue the positive interactive
    flow of vital pest management information between the USDA, the
    regulatory community, and production agriculture.
        Pest Management Alternatives.--The research supported by this
    grant, which has a fiscal year 1997 appropriation of $1,623,000,
    represents a new proactive way to address and interface with
    environmental regulatory issues confronting agriculture. The goal of
    this research is to provide farmers and other pest managers with
    alternative pest management approaches and technologies when pesticide
    tools are lost due to regulatory action, voluntary withdrawal by the
    registrant, or the development of resistance. This research is being
    carried out by State Agricultural Experiment Stations, Land-Grant
    Universities, and other public and private research institutions and
    organizations. Examples of research supported by this program are (1)
    provides farmers and others with replacement technologies for
    agricultural chemicals lost due to regulatory actions, potential
    regulatory actions, or due to voluntary cancellation by registrants for
    which producers do not have effective alternatives; (2) provides
    effective alternative technologies for situations where pest resistance
    to pesticides limit adoption of integrated pest management strategies;
    and (3) facilitates implementation of new technologies on farms,
    ranches, forests, urban landscapes, and in homes, public, and
    commercial buildings.
        Rural Development Centers.--The function of the Rural Development
    Centers, which has a fiscal year 1997 appropriation of $423,000, is to
    increase the productivity of regional faculty both in doing research on
    rural issues and in using research to do effective outreach with rural
    communities. The number of research faculty who are addressing broader
    rural issues is declining in many places. The multi-disciplinary and
    multi-state work, supported by the Centers, becomes even more crucial
    in a period of reduced research emphasis. Critical needs are being met
    by Center's support, including public lands policy, changing rural
    migration patterns, fiscal alternatives for local governments, and
    forest stewardship education. The regional rural development centers
    include the following: Northeast Regional Center for Rural Development,
    Pennsylvania State University; North Central Regional Center for Rural
    Development, Iowa State University; Southern Rural Development Center,
    Mississippi State University; and Western Rural Development Center,
    Oregon State University. There is also a rural development project at
    North Dakota State University. The Rural Development Centers' mission
    is to strengthen rural families, communities, and businesses by
    facilitating collaborative socio-economic research and extension.
    Research programs are undertaken after evaluating broader regional and
    national priorities.
        Water Quality.--This national, competitively-awarded grants
    program, which has a fiscal year 1997 appropriation of $2,757,000,
    supports research to investigate the impacts of non-point source
    pollution from agriculture on water quality and to develop improved,
    sustainable agricultural practices and systems that protect the
    environment and are economically profitable. This program also supports
    research on five Management Systems Evaluation Area (MSEA) projects as
    part of the Midwest Initiative on Water Quality to develop new farming
    systems that protect water quality, with research located at 10 sites
    throughout the Corn Belt. Funds provided under the Water Quality
    Program have been awarded to institutions in virtually every state, so
    work is being carried out in all parts of the country. The MSEA
    projects of the Midwest Initiative on Water Quality are headquartered
    in Iowa, Minnesota, Missouri, Nebraska, and Ohio, with satellite
    locations in North Dakota, South Dakota, and Wisconsin. During the past
    three years, focus and allocation of resources have increased for
    surface water quality. Major progress has been made on these goals.
    Nitrogen testing research and implementation of the Pre-sidedress
    Nitrogen Test in the Northeast and Midwest is helping producers match
    the supply and demand for nitrogen, thus reducing excess application.
    Also, in the Pacific Northwest, nitrate lost from the root zone of
    irrigated potatoes can be effectively recaptured by following with a
    grain or forage crop. The Management System Evaluation Area modeling
    group has adapted, improved, and verified the usefulness of the Root
    Zone Water Quality Model as a tool for extending MSEA results beyond
    the research sites.
                               rangeland research
        Question. The fiscal year 1998 request proposes to terminate
    funding for rangeland research. What is the justification for this
    proposal? For each of fiscal years 1993-1997, please indicate how these
    funds have been allocated and the specific activities have been
    supported through the program.
        Answer. The proposed elimination of this program is consistent with
    the emphasis on high priority national interest programs in the 1998
    CSREES budget. Although this program is proposed for elimination,
    alternate sources of funding, including the Hatch Act formula and
    related base funded programs, permit institutions to fund research in
    those areas identified as high priority. This flexibility could provide
    for maintaining some of the rangeland research programs if the State
    institutions wish to continue the research. These projects could also
    be submitted for competition and possible funding under CSREES'
    National Research Initiative--NRI--Program.
        The following tables list funds allocated and activities for the
    Rangeland Research program from fiscal years 1993-1996. No awards have
    been made in fiscal year 1997. The solicitation for applications for
    the fiscal year 1997 program was published in the March 1997 Federal
    Register. Proposals are due to CSREES by May 17, 1997.

                               Rangeland research

    Fiscal year 1993:/title                                           Amount
        Colorado State University, Cattle Preference as a Tool to
          Modify Riparian Vegetation..............................   $77,200
        University of Nebraska, Influence of Genetic Variation in
          North American Leafy Spurge on Apthona nigriscrutis.....    74,740
        Texas A&M University, Spatial Modeling of Succession in a
          Sub-tropical Savanna: An Integrated Approach............    73,982
        Utah State University, The Importance of Food and
          Companionship in Choice of Foraging Location by Sheep...    77,200
        USDA-ARS, Characterization of Seedbed Microclimate for
          Burn-Rehabilitation Planning............................    72,572
        USDA-FS, Regulation of Seed Germination in Facultatively
          Fall-Emerging Grasses...................................    77,175
                        --------------------------------------------------------------
                        ____________________________________________________

            Subtotal, Grants......................................   452,869
        SBIR......................................................     6,911
        Biotechnology Risk Assessment.............................       970
        Federal Administration....................................    14,250
                        --------------------------------------------------------------
                        ____________________________________________________

          Total...................................................   475,000
                        ==============================================================
                        ____________________________________________________
    Fiscal year 1994:
        University of Arizona, Significance of Local Adaptation in
          Rangeland Revegetation with Native Species..............    34,549
        Oregon State University, Quantifying the Impact of
          Rangeland Management on Stream Temperatures.............    68,500
        South Dakota University, Effects of Stocking Rate and
          Grazing System on Patterns of Tiller Utilization........    69,500
        Texas A&M University, Tree/Shrub Influence on the Nitrogen
          Cycle of a Subtropical Savanna Ecosystem................    69,500
        University of South Dakota, Intraspecific Action of
          Allelochemicals in Leafy Spurge--Euphorbia esula L.--...    13,790
        Utah State University, Biological Control of Dyer's Woad
          with a Pathogenic Rust Fungus...........................    61,000
        Washington State University, The Influence of Grazing on
          Long-Term Site Productivity of Transitory Range.........    68,500
        USDA-FS, Regeneration Biology of Shadscale--Atriplex
          conferti- folia.........................................    68,500
                        --------------------------------------------------------------
                        ____________________________________________________

            Subtotal, Grants......................................   453,839
        SBIR......................................................     6,911
        Biotechnology Risk Assessment.......................................
        Federal Administration....................................    14,250
                        --------------------------------------------------------------
                        ____________________________________________________

          Total...................................................   475,000
                        ==============================================================
                        ____________________________________________________
    Fiscal year 1995:
        Montana State University:
            Livestock, Forage, and Grasshopper Interactions:
              Cumulative Effects of Grazing.......................    79,950
            Integrated Management for Spotted Knapweed Infested
              Range...............................................    57,050
        Texas A&M University:
            Hydrologic Mechanisms Determining Plant Species
              Interactions in Grazed Savannas.....................    79,992
            R:FR Regulation of Tiller Initiation: Is It Applicable
              to Range Grasses?...................................    79,354
            Bush Removal and Regrowth: Implications for Water Use
              and Aquifer Recharge................................    75,835
        Utah State University, Behavioral Bases for Varied Diets
          of Ruminants............................................    79,354
                        --------------------------------------------------------------
                        ____________________________________________________

            Subtotal, Grants......................................   451,535
        SBIR......................................................     9,215
        Biotechnology Risk Assessment.......................................
        Federal Administration....................................    14,250
                        --------------------------------------------------------------
                        ____________________________________________________

          Total...................................................   475,000
                        ==============================================================
                        ____________________________________________________
    Fiscal year 1996:
        Colorado State University, Grazing Impacts on
          Infiltration, Runoff, and Erosion in a Montane Riparian
          Ecosystem...............................................    79,999
        Montana State University, Do Windbreaks Minimize Stress on
          Cattle Grazing Winter Range?............................    59,941
        Texas A&M University:
            Quantification of Vegetation Transitions and
              Thresholds on Diverse Landscapes....................    79,893
            Does Soil Carbon and Nitrogen Accumulation Beneath
              Plants Regulate Bunchgrasses?.......................    80,000
        USDA-FS:
            Nitrogen and Phosphorus Mineralization in Conifer and
              Aspen Soils.........................................    71,717
            Basin Big Sagebrush Dominated Riparian Corridors-Dry
              Meadows as an Alternative Stable State..............    79,985
                        --------------------------------------------------------------
                        ____________________________________________________

                Subtotal, Grants..................................   451,535
        SBIR......................................................     9,215
        Biotechnology Risk Assessment.......................................
        Federal Administration....................................    14,250
                        --------------------------------------------------------------
                        ____________________________________________________

          Total...................................................   475,000
                        sustainable agriculture program
        Question. How is the $8 million currently available for the
    Sustainable Agriculture Program being spent? For each of fiscal years
    1993-1997, please show how these funds have been allocated and the
    specific activities which have been supported through the program.
        Answer. For fiscal year 1997, the $8 million allocated for
    sustainable agriculture spending on research and education is being
    awarded primarily through a regional competitive grants program. Of the
    funds being awarded through the four regional programs, roughly 90
    percent is spent on competitive grants of $30,000 to $150,000 to
    universities, non-profit organizations, or public agencies. The
    remaining funding supports grants to farmers and ranchers for research,
    demonstration, or education efforts on their farm; these grants are
    typically under $5,000 per project. About 2 percent of the total fiscal
    year 1997 funds are being used for general sustainable agriculture
    education efforts through the National Agricultural Library and the
    Sustainable Agriculture Network, and about 2 percent of funds are used
    for national communications and program coordination. Less than 1
    percent of funds were awarded directly from national office for special
    education projects or workshop and conference support. The regional
    funds typically provide for about 11 to 14 institution/agency research
    or education projects, and 25 to 35 farmer projects per year in each
    region.
        Detailed fiscal year allocations are as follows:

    ----------------------------------------------------------------------------------------------------------------
                                                                              Fiscal year--
                                                    ----------------------------------------------------------------
                                                         1993         1994         1995         1996         1997
    ----------------------------------------------------------------------------------------------------------------
    Regional allocations (divided among 4 regions).   $4,632,785   $6,229,900   $7,159,520  $7,014,000   $7,077,700
    National initiatives/projects \1\..............    1,760,000      804,540      551,747     685,860      487,958
    National communications/coordination...........  ...........  ...........  ...........    (346,000)    (219,000)
    National Agricultural Library..................  ...........  ...........  ...........    (116,200)    (122,010)
    SARE Sustainable Agriculture Network...........  ...........  ...........  ...........     (80,000)     (82,000)
    National projects (education, conferences).....  ...........  ...........  ...........    (143,660)     (64,948)
                                                    ----------------------------------------------------------------
          Subtotal.................................    6,392,785    7,034,440    7,711,267   7,699,860    7,565,658
    Federal Administration.........................      201,750      222,000      243,360     243,000      240,000
    SBIR...........................................      130,465      143,560      157,373     157,140      194,000
    Biotechnology Risk Assessment..................  ...........  ...........  ...........  ...........         342
                                                    ----------------------------------------------------------------
          Total, SARE..............................    6,725,000    7,400,000    8,112,000   8,100,000    8,000,000
    ----------------------------------------------------------------------------------------------------------------
    \1\ In 96 and 97, national allocations were more specifically broken out into subcategories.

                            headquarters management
        Question. How much will CSREES expend for Headquarters management
    costs in fiscal year 1997? How does this correspond to your percentage
    program assessment?
        Answer. It is estimated that CSREES will spend $39.3 million in
    fiscal year 1997 for Headquarters management costs. These funds will be
    used to cover the salaries and benefits of Federal staff, travel,
    printing, supplies, equipment and other miscellaneous expenses
    necessary for the administrative oversight and coordination of CSREES
    programs. Funds from federal administrative set-asides, carry over
    funds, and reimbursable agreements with other Federal agencies are used
    to cover these operating costs. Management costs account for 4.3
    percent of the total fiscal year 1997 appropriation for CSREES. With
    the $7.1 million available in Direct Federal Administration funds,
    excluding earmarked grants and projects, and the current legislative
    set-asides of 3 or 4 percent, CSREES has continued to operate on
    extremely low administrative costs.
               food and agricultural education information system
        Question. CSREES recently gave a presentation on the Food and
    Agricultural Education Information System (FAEIS). How much funding is
    being allocated for this system for fiscal year 1997? Is funding
    included in the President's fiscal year 1998 budget request for this
    system? If so, where is it included?
        Answer. In fiscal year 1997, Congress directed $150,000 from the
    funds appropriated for the USDA Higher Education Challenge Grants
    Program be made available to support the continued operations of the
    Food and Agricultural Education Information System. This provided
    assured funding for the information system that furnishes the
    Department and its university partners with necessary baseline data for
    planning and coordinating efforts directed towards supporting higher
    education in the areas of food, agriculture, natural resources,
    forestry, family and consumer sciences, and veterinary medicine. While
    the fiscal year 1998 budget request does not explicitly cite this
    system, it is included.
                          national research initiative
        Question. Please provide a summary of the geographical distribution
    of the competitive research grants awarded under the National Research
    Initiative for the last two years showing the state, entity and funding
    level.
        [The information follows:]

    ------------------------------------------------------------------------
                                                          Fiscal year--
                    State/recipient                -------------------------
                                                        1996         1997
    ------------------------------------------------------------------------
    Alabama:
        Auburn University.........................     $256,749     $378,265
        University of Alabama, Birmingham.........  ...........      133,352
        University of Alabama, Huntsville.........  ...........  ...........
        University of South Alabama...............  ...........  ...........
        Alabama A&M University....................       47,917       50,000
        Alabama State University..................  ...........       45,000
                                                   -------------------------
          Subtotal................................      304,666      606,617
                                                   =========================
    Arizona:
        Arizona State University, Northern Arizona
         University...............................      135,972  ...........
        University of Arizona.....................      928,367      744,474
                                                   -------------------------
          Subtotal................................    1,064,339      744,474
                                                   =========================
    Arkansas:
        University of Arkansas....................      407,223      552,039
        University of Arkansas for Medical
         Sciences.................................      121,682      198,918
                                                   -------------------------
          Subtotal................................      528,905      750,957
                                                   =========================
    California:
        California Institute of Technology........        5,000      106,781
        University of California, Berkley.........      991,885      797,303
        University of California, Davis...........    2,151,309    1,621,411
        Loma Linda University.....................  ...........      106,694
        University of Califomia, Los Angeles......      238,032      111,544
        University of California, Riverside.......      550,483      662,316
        University of California, San Diego.......      208,643       97,073
        University of California, Santa Barbara...  ...........      116,283
        University of California, Santa Cruz......       97,357  ...........
        California State University, San Marcos...      196,407  ...........
        Metropolitan Water District of South.
         California...............................  ...........      110,233
        Salk Institute for Biological Studies.....      186,958  ...........
        Stanford University.......................  ...........       43,822
        USDA, ARS.................................      116,041      384,847
        USDA, Forest Service, Pacific SW Station..      228,798      204,602
        Stephen W. Beam...........................       82,000  ...........
        E. Harville...............................  ...........       82,000
        B. Manning................................  ...........       82,000
                                                   -------------------------
          Subtotal................................    5,052,913    4,526,909
                                                   =========================
    Colorado:
        Colorado State University.................      376,952      431,227
        University of Colorado....................       92,267      118,430
        University of Colorado at Denver..........       57,171  ...........
        USDA, ARS Northern Plains Area............      116,283  ...........
        Midcontinent Ecological Sciences Center...  ...........      111,814
                                                   -------------------------
          Subtotal................................      642,673      661,471
                                                   =========================
    Connecticut:
        University of Connecticut.................      229,876      173,409
        Yale University...........................      106,835       92,220
        Connecticut Agricultural Experiment
         Station..................................  ...........       50,000
        Economic Research Service.................  ...........       48,691
        Trinity College...........................  ...........       43,743
                                                   -------------------------
          Subtotal................................      336,711      408,063
                                                   =========================
    Delaware:
        E.I. de Pont de Nemours & Co..............       50,000  ...........
        University of Delaware....................      438,411      418,217
                                                   -------------------------
          Subtotal................................      488,411      418,217
                                                   =========================
    District of Columbia: Carnegie Institute of
     Washington...................................      196,662      101,927
                                                   =========================
    Florida:
        Florida A&M University....................       97,278  ...........
        Mote Marine Laboratory....................       40,273  ...........
        University of Florida.....................      939,951      480,779
        University of South Florida...............      104,716  ...........
                                                   -------------------------
          Subtotal................................    1,182,218      480,779
                                                   =========================
    Georgia:
        Institute of Paper Science and Technology.      128,436      110,922
        University of Georgia research Foundation.      233,222      923,535
        USDA, ARS South Atlantic Area, Georgia....       93,507      219,621
                                                   -------------------------
          Subtotal................................      455,165    1,254,078
                                                   =========================
    Hawaii: University of Hawaii..................  ...........       87,212
                                                   =========================
    Idaho: University of Idaho....................      719,494      318,036
                                                   =========================
    Illinois:
        University of Illinois....................      860,715    1,261,821
        USDA, ARS Mid-West Area, Illinois.........       84,107      340,508
        Illinois Institute of Technology..........  ...........       47,406
        Jonathan E. Beever........................       82,000  ...........
        G. Copenhaver.............................  ...........       82,000
                                                   -------------------------
          Subtotal................................    1,026,822    1,731,735
                                                   =========================
    Indiana:
        Purdue University.........................    1,991,636  ...........
        Purdue Research Foundation................  ...........      977,198
        Indiana University........................  ...........      185,116
        University of Notre Dame..................  ...........      174,424
        Sally E. Johnson..........................       81,896  ...........
                                                   -------------------------
          Subtotal................................    2,073,532    1,336,738
                                                   =========================
    Iowa:
        Iowa State University.....................      790,254    1,416,549
        University of Iowa........................      243,086  ...........
        Rebecca L. Wilson.........................       82,000  ...........
                                                   -------------------------
          Subtotal................................    1,115,340    1,416,549
                                                   =========================
    Kansas:
        Kansas State University...................    1,003,611      360,209
        University of Kansas......................      106.835  ...........
                                                   -------------------------
          Subtotal................................    1,110,446      360,209
                                                   =========================
    Kentucky:
        Murray State University...................       47,727  ...........
        University of Kentucky....................      509,585      261,929
        Patrick D. Barnes.........................       82,000  ...........
        Heather H. Wilkinson......................       82,000  ...........
                                                   -------------------------
          Subtotal................................      721,305      261,929
                                                   =========================
    Louisiana:
        Louisiana State University Medical Center.      112,140  ...........
        Louisiana State University A&M College....  ...........      328,772
        Louisiana Technology University...........  ...........       44,982
        Timothy B. Mihue..........................       82,000  ...........
                                                   -------------------------
          Subtotal................................      194,140      373,754
                                                   =========================
    Maine: University of Maine....................      179,662      146,270
                                                   =========================
    Maryland:
        Americal Center for Cell Biology..........       17,000  ...........
        Genetics Society of America...............        4,000  ...........
        University of Maryland....................      195,765      179,515
        University of Maryland, Baltimore.........      109,091  ...........
        USDA, ARS Beltsville Area.................  ...........       87,366
        Amrit Bart................................       82,000  ...........
                                                   -------------------------
          Subtotal................................      407,856      266,881
                                                   =========================
    Massachusetts:
        Massachusetts General Hospital............       55,000  ...........
        Tutts University..........................      663,206      186,523
        University of Massachusetts...............      397,359      461,815
        Boston University.........................  ...........       53,390
        Stonehill College.........................  ...........       49,830
        Worcester Polytechnical Institute.........  ...........       34,950

        International Association for
         Paratuberculosis, Inc....................  ...........        5,000
                                                   -------------------------
          Subtotal................................    1,115,565      791,508
                                                   =========================
    Michigan:
        Michigan State University.................    1,355,363      839,971
        Michigan Technological University.........      118,706  ...........
        University of Michigan....................      325,621  ...........
        M. Fisk...................................  ...........       82,000
                                                   =========================
          Subtotal................................    1,799,690      921,971
                                                   =========================
    Minnesota:
        University of Minnesota...................    1,035,805      901,104
        Mayo Foundation...........................  ...........      223,722
        Donna M. Becker...........................       82,000  ...........
        Mary L. Johnson...........................       82,000  ...........
                                                   -------------------------
          Subtotal................................    1,199,805    1,124,826
                                                   =========================
    Mississippi:
        Mississippi State University..............      217,384      375,087
        University of Southern Mississippi........      154,097  ...........
                                                   -------------------------
          Subtotal................................      371,481      375,087
                                                   =========================
    Missouri:
        University of Missouri....................    1,594,959      799,612
        Washington University.....................      418,904  ...........
        Donald L. Auger...........................       82,000  ...........
                                                   -------------------------
          Subtotal................................    2,095,863      799,612
                                                   =========================
    Montana:
        Montana State University..................      206,394    1,015,443
        University of Montana.....................  ...........      113,972
        Jacobs....................................  ...........       20,000
                                                   -------------------------
          Subtotal................................      206,394    1,149,415
                                                   =========================
    Nebraska: University of Nebraska..............      476,882      727,485
                                                   =========================
    Nevada: University of Nevada..................      116,283  ...........
                                                   =========================
    New Hampshire:
        Dartmouth College.........................      164,826      189,293
        University of New Hampshire...............  ...........      161,544
                                                   -------------------------
          Subtotal................................      164,826      350,837
                                                   =========================
    New Mexico: New Mexico State University.......      106,379  ...........
                                                   =========================
    New Jersey:
        Princeton University......................       94,925  ...........
        Rutgers University........................      154,903      467,866
        University of Medicine and Dentistry of
         New Jersey...............................  ...........      116,283
                                                   -------------------------
          Subtotal................................      249,828      584,149
                                                   =========================
    New York:
        Boyce Thompson Institute..................      116,283      405,161
        Canisius College..........................      116,576  ...........
        Cold Spring Harbor Laboratory.............       97,147  ...........
        Columbia University.......................      116,815  ...........
        Cornell University........................    1,676,390    1,937,458
        N.Y. Botanical Garden/lnst. of EcoSystem
         Studies..................................      512,858  ...........
        Rensselaer Polytechnic....................       92,267  ...........
        State University of New York, Albany......      486,218  ...........
        State University of New York, Buffalo.....      121,697  ...........
        University of Rochester...................      126,607  ...........
        State University of Binghampton...........  ...........       87,366
        State University of New York, Stoney Brook  ...........       92,220
        SUNY, Environmental Science and Forestry..  ...........       47,408
        Syracuse University.......................  ...........      168,026
        Hemendinger...............................  ...........       82,000
        Heather G. Allore.........................       82,000  ...........
        Alice C. Churchill........................       82,000  ...........
        Kenneth J. Schlather......................       82,000  ...........
                                                   -------------------------
          Subtotal................................    3,708,858    2,819,639
                                                   =========================
    North Carolina:
        Bownan Grey Schol of Medicine/Wake Forest
         Univ.....................................       96,429  ...........
        Duke University...........................      276,179  ...........
        East Carolina University..................        5,080  ...........
        Forest Service, Southeaster Forest
         Experiment Station.......................       84,651       89,516
        North Carolina State University...........    1,279,943      838,411
        University of North Carolina, Chapel Hill.      523,443      228,420
        Western Carolina University...............       13,765       92,220
        Kristi M. Westover........................       82,000  ...........
                                                   -------------------------
          Subtotal................................    2,361,490    1,248,567
                                                   =========================
    North Dakota:
        North Dakota State University.............      319,634      369,765
        University of North Dakota................      107,264       91,597
                                                   -------------------------
          Subtotal................................      426,898      461,362
                                                   =========================
    Ohio:
        Miami University..........................      242,144  ...........
        Ohio state University research Foundation.      859,899      460,457
        University of Toledo......................      145,051  ...........
                                                   -------------------------
          Subtotal................................    1,247,094      460,457
                                                   =========================
    Oklahoma:
        Oklahoma State University.................      597,852      145,731
        University of Oklahoma, Health Sciences
         Center...................................      187,867      224,280
        University of Tulsa.......................       59,079  ...........
                                                   -------------------------
          Subtotal................................      844,798      370,011
                                                   =========================
    Oregon:
        Oregon State University...................    1,073,756    1,052,002
        University of Oregon......................      320,584       87,366
        Forest Service, NW Range and Experiment
         Station..................................  ...........      201,560
        R. Tuma...................................  ...........       82,000
        Robert G. Fjellstrom......................       82,000  ...........
                                                   -------------------------
          Subtotal................................    1,476,340    1,422,928
                                                   =========================
    Pennsylvania:
        Drexal University.........................      101,844  ...........
        Pennsylvania State University.............      801,015    1,220,867
        Rodale Institute..........................      219,253  ...........
        University of Pennsylvania................      141,394      184,592
        Carnegie Mellon University................  ...........       97,306
        Clarion University of Pennsylvania........  ...........       49,912
        Duquesne University.......................  ...........       96,902
        USDA, ARS North Atlantic Area.............      242,408  ...........
                                                   -------------------------
          Subtotal................................    1,505,914    1,649,579
                                                   =========================
    Rhode Island:
        Brown University..........................       61,090  ...........
        Gordon Research Conference................       40,900        7,000
        University of Rhode Island................      284,085      337,513
                                                   -------------------------
          Subtotal................................      386,075      344,513
                                                   =========================
    South Carolina:
        Clemson University........................      261,063      307,331
        Medical University of South Carolina......       47,917      116,698
                                                   -------------------------
          Subtotal................................      308,980      424,029
                                                   -------------------------
    South Dakota:
        South Dakota State University.............      116,767      510,390
        University of South Dakota................  ...........       87,366
                                                   -------------------------
          Subtotal................................      116,767      597,756
                                                   =========================
    Tennessee:
        East Tennessee State University...........      222,793  ...........
        University of Tennessee...................      406,306       92,145
        Tennessee Technological University........       24,400  ...........
        University of Memphis.....................      252,047  ...........
        University of Tennessee at Memphis........       82,792  ...........
                                                   -------------------------
          Subtotal................................      988,338       92,145
                                                   =========================
    Texas:
        Baylor College of Medicine................      243,121      694,642
        Southwest Texas State University..........      178,164  ...........
        Texas A&M Research Foundation.............    1,055,097    1,112,635
        Texas Tech University.....................      381,401      194,859
        University of Texas, Austin...............      286,127      189,293
        University of North Texas.................  ...........       97,073
        Prairie View A&M University...............  ...........      151,848
        Southern Methodist University.............  ...........      135,663
        USDA, ARS Southern Plains Area............      142,142  ...........
        C. Dean...................................  ...........       74,706
        Stephen R. Craig..........................       82,000  ...........
                                                   -------------------------
          Subtotal................................    2,368,052    2,650,719
                                                   =========================
    Utah: Utah State University...................      121,051      409,847
                                                   =========================
    Vermont: University of Vermont................       49,975      125,576
                                                   =========================
    Virginia:
        James Madison University..................      180,699       92,290
        Virginia Polytechnic Institute and State
         University...............................      331,554      871,902
        U.S. Animal Health Association............  ...........        5,000
        J. Christiansen...........................  ...........       82,000
                                                   -------------------------
          Subtotal................................      512,253    1,051,192
                                                   =========================
    Washington:
        University of Washington..................      459,767      389,945
        Washington State University...............      475,972    1,657,912
        Children's Orthopedic Hospital and Medical
         Center...................................  ...........       93,507
        D. Reed...................................  ...........       82,000
        D. Berrigan...............................  ...........       82,000
                                                   -------------------------
          Subtotal................................      935,739    2,305,364
                                                   =========================
    Wisconsin:
        Medical College of Wisconsin..............      126,260  ...........
        University of Wisconsin, Madison..........    1,872,564    1,500,011
        Forest Service, Forest Products Laboratory      245,333       76,867
        Marquette University......................  ...........       92,290
        University of Wisconsin...................  ...........       49,610
        Kenneth P. Blemings.......................       78,073  ...........
        Paul E. Mozdziak..........................       79,761  ...........
        Laura B. Regassa..........................       82,000  ...........
                                                   -------------------------
          Subtotal................................    2,483,991    1,718,778
                                                   =========================
    West Virginia: Marshall University............      121,682      116,858
                                                   =========================
    Wyoming: University of Wyoming................      302,520      283,454
                                                   =========================
          Total...................................   45,971,071   41,630,469
                                                   =========================
    Total grants awarded from fiscal year 1996
     Appropriation................................  ...........   87,601,540
    Federal Administration (4 percent)............  ...........    3,769,400
    Small Business Innovative Research Act........  ...........    1,809,312
    Biotechnology Risk Assessment.................  ...........      266,877
    Peer Panel Costs..............................  ...........      587,871
    Reimbursements................................  ...........      200,000
                                                   -------------------------
          Total...................................  ...........   94,235,000
    ------------------------------------------------------------------------

                              usda-epscor program
        Question. Ten percent of the competitive research grant funds are
    to be used for the USDA-EPSCOR program (Experimental Program to
    Stimulate Competitive Research). Please provide a list of eligible
    States and funding levels awarded under this program for each of the
    past two fiscal years and a list of the States that will be eligible
    for the program in fiscal year 1997.
        Answer. Below is a table of funding for the USDA EPSCOR program:

          NRI COMPETITIVE GRANTS PROGRAM FUNDING FOR USDA EPSCOR STATES
                   [Total funding for fiscal years 1995, 1996]
    ------------------------------------------------------------------------
                                                       Fiscal year--
               USDA EPSCOR States            -------------------------------
                                                   1995            1996
    ------------------------------------------------------------------------
    Alaska..................................        $147,000  ..............
    Arkansas................................       1,112,080      $1,279,862
    Connecticut.............................         816,789         516,206
    Delaware................................       1,187,004         682,628
    Hawaii..................................         665,000          87,212
    Idaho...................................       1,057,836       1,037,530
    Maine...................................         567,194         325,932
    Mississippi.............................         811,183         746,568
    Montana.................................       1,869,826       1,355,810
    Nevada..................................         906,923         116,283
    New Hampshire...........................         281,061         515,663
    New Mexico..............................               0         106,379
    North Dakota............................       1,350,733         970,260
    Rhode Island............................         253,500         882,688
    South Carolina..........................         825,641         733,009
    South Dakota............................         468,083         714,523
    Vermont.................................         219,000         175,551
    West Virginia...........................         445,000         238,540
    Wyoming.................................         154,998         585,974
                                             -------------------------------
          Total for States..................      13,138,851      11,070,618
    U.S. Territories & Possessions..........  ..............  ..............
    District of Columbia....................         434,978          48,691
    Puerto Rico.............................  ..............  ..............
                                             -------------------------------
          Grand total.......................      13,573,829      11,119,309
    ------------------------------------------------------------------------

                            1997 usda-epscor states
        For fiscal year 1997, the following states are eligible for the
    EPSCOR Program. In addition, all U.S. territories and possessions and
    the District of Columbia are eligible.

    Alaska

    Arkansas

    Connecticut

    Delaware

    Hawaii

    Idaho

    Maine

    Mississippi

    Montana

    Nevada

    New Hampshire

    New Mexico

    North Dakota

    Rhode Island

    South Carolina

    South Dakota

    Utah

    Vermont

    West Virginia

    Wyoming

                          national research initiative
        Question. Please summarize the major accomplishments of research
    funded through the NRI in each of the past five fiscal years.
        Answer. The goal of the NRI is to support fundamental and mission-
    linked research of importance to agriculture. Over the past 5 years,
    the NRI has supported almost $500 million in agricultural research.
    This research is designed to contribute to the knowledge base from
    which practical solutions can be made to the most pressing agricultural
    problems. Because the NRI has six major divisions and 27 program areas,
    it is difficult to describe all of the many scientific accomplishments.
    However, below are some general and specific accomplishments of the
    program:
    General advancements:
        Knowledge has been gained in the area of natural resources and the
    environment addressing contemporary issues of importance for
    agriculture and forestry and society as a whole. Biological systems,
    including humans, influence and are influenced by the environment.
    Further, the impact of environmental changes on the sustainability of
    agriculture and forestry, and the enhanced stewardship of natural
    resources and the minimization of negative environmental consequences,
    have been the subject of many grants. A strong scientific basis also is
    being sought for understanding the impact of potential global change.
        The maintenance of human health is significantly affected by both
    the quality and quantity of the foods consumed by individuals. Research
    is supported which contributes to our understanding of the requirements
    of dietary components and factors which impact optimal human nutrition.
    Data generated from these studies and those conducted to better
    understand consumer attitudes and behavior toward food will be used for
    updating dietary recommendations, formulating national nutrition
    policy, and stimulating new developments by the food industry. Safety
    of food products is of paramount importance to the producer, processor,
    distributor, and consumer. In response to this need, food safety
    research has been supported emphasizing the detection, prevention and
    control of food-borne disease-causing microorganisms, naturally
    occurring toxicants and drug residues. Research on food safety is a
    Department-wide initiative which adds scientific validity to the HACCP
    Model.
        Research across the broad scope of animal agriculture has been
    funded for achieving competitive and sustainable food and fiber
    production from animals. The critical need for a better understanding
    of the biology of animal production and performance necessitates a
    broad scientific approach that contributes to integrated food animal
    management systems. To accomplish this, both fundamental and mission-
    linked research have been supported that have the following goals: (a)
    enhancing reproductive efficiency; (b) improving animal growth and
    development; (c) identifying animal genetic mechanisms and mapping
    genes; and (d) sustaining animal health and well-being. Emphasis has
    been given to innovative approaches to research questions related to
    animals primarily raised for food or fiber. This includes aquaculture
    species and those animals such as horses that contribute significantly
    to the agricultural enterprise of the country.
        Pests cause major damage each year to crops, forests, rangeland,
    and livestock. How well pests are controlled becomes a major limiting
    factor in the ability of the United States to produce, store, ship and
    trade food and other products of agriculture. Although vital to the
    sustainability of agriculture, pest control also can have negative
    effects. Environmental damage can occur in the form of chemical
    contamination due to pesticide use. Conversely, lack of pest control
    may create other environmental and human health problems. Fundamental
    knowledge has been gained to form the basis of novel pest management
    strategies for new or emerging pests or for replacement of obsolete
    pest management practices. Moreover, pest management of the future has
    been improved while simultaneously reducing our dependency on
    pesticides as one of many steps toward the goal of sustaining
    agriculture and our natural resources. Research conducted by NRI
    supports the Department's initiative to implement IPM practices on 75
    percent of U.S. crop acreage by 2000.
        Additional knowledge has been generated across a broad range of
    plant sciences critical to sustainable crop and forest productivity,
    and for addressing the environmental impacts of farming and forestry.
    For example, the ability to breed crop and forest species with specific
    desirable traits has been enhanced by knowledge of the location,
    behavior, and characteristics of plant genes. Plant development affects
    plant productivity and the quality of plant products. Knowledge of how
    plants obtain, use, or store energy and nutrients has been obtained and
    is essential for proper management of plant populations. Innovative
    research on plant systems has been supported in: (a) genomes, genetics,
    and diversity; (b) plant growth and development; and (c) energy and
    metabolism.
        The economy and standard of living in the United States are
    increasingly dependent upon export market growth and the retention of
    domestic markets. This is especially true for the nation's rural areas
    long dependent upon the production and marketing of agricultural,
    aquacultural, and forest products. The research supported by NRI grants
    has generated a continuing stream of new knowledge on how to compete in
    the production and marketing of raw commodities and value-added
    products, stimulated economic development in rural areas, and developed
    production and processing practices to enhance the natural environment
    and standard of rural living.
        Research to enhance the value and use of agricultural and forest
    products helps to maintain and strengthen U.S. agricultural and forest
    based industries. Expanded uses for agricultural and forest
    commodities, more efficient use of resources, more environmentally
    sound manufacturing processes, and greater economic competitiveness of
    U.S. produced goods are all resulting from NRI funded research.
    Opportunities exist for making new and better agricultural and forest
    products at all stages of product development and use, starting with
    understanding and improving the agricultural/forest resource base,
    production, harvest, storage, transportation, product formulation,
    processing and manufacturing, and understanding and optimizing end-use
    characteristics. Innovative research has been supported in: (a) value-
    added products research encompassing food and non-food
    characterization/process/product research and (b) improved utilization
    of wood and wood fiber.
        Agriculture encompasses the system that produces, processes, and
    distributes food, fiber, and other products and services from the
    producer to the consumer. Agricultural systems also include
    aquaculture, forestry and a diversity of supporting natural resource
    elements such as soils, surface water, ground water, wildlife, and the
    atmosphere. In addition, human resources, institutions, and financial
    capital are needed to support and manage agricultural systems. It is
    the management of all these diverse and complex resources within a
    systems context that is critical to how well the agricultural system
    fulfills societal goals. Although agricultural research has most often
    focused on individual components of systems, the NRI has provided
    opportunities for integration of these components through a systems
    research program. The objective has been to obtain knowledge that is
    essential to sustain the viability of agriculture. Such research
    addresses directly interactions among the components that comprise
    agricultural systems. The NRI supports systems research that has the
    potential to aid in the development and/or evaluation of national,
    regional, community, and/or producer level practices and policies that
    will sustain: a safe and adequate supply of agricultural products and
    services; environmental quality and the natural resource base; human
    health; and the economic viability and quality of life of rural
    communities; and address linkages between urban and rural areas.
    Specific Accomplishments:
        Erwinia herbicola is a bacterial plant pathogen responsible for
    fruit russeting of pear trees. Researchers at the University of
    California at Berkeley studied the expression of a gene in this
    pathogen that is activated in dry environments, a condition quite
    common for bacteria growing on plants in the field. They found that
    this gene is inhibited in the presence of free ammonium ions when the
    bacteria are grown in culture. They tested these results in the field
    and found that the application of nitrogenous compounds, such as
    ammonium sulfate, at low rates near bloom is a simple and safe
    alternative to the use of chemical pesticides for the control of fruit
    russet.
        Researchers at South Dakota State University have identified
    extracts of the noxious weed, leafy spurge that induce a strong
    aversive feeding response in laboratory rats. The extracted portion of
    leafy spurge is being characterized for chemicals that induce this
    aversive feeding reaction. Once such a chemical(s) is(are) identified,
    researchers may be able to alter leafy spurge such that cattle will
    graze on this noxious weed.
        Porcine Reproductive and Respiratory Syndrome--PRRS--is caused by a
    virus that causes a disease identified by the National Pork Producers
    Council as the number one disease problem of swine. Based on an
    understanding of the biology of the virus--research funded by the NRI
    and the National Pork Producers Council--a vaccine was developed that
    prevents the disease. Investigators at South Dakota State University
    and the University of Minnesota have made a major contribution to the
    swine industry through this research.
        In the summer of 1996, about 400,000 acres of Bt corn was grown in
    the U.S. Bt corn has a bacterial gene incorporated into the corn genome
    that produces a toxin extremely effective against the European Corn
    Borer. Estimates are that 3.4 million acres will be grown in 1997.
    Although this product is viewed as developed by industry, public
    research laid the groundwork for its development. The NRI has funded
    considerable work on Bacillus thurengiensis (1) for determining the way
    Bt toxin destroys its insect host so that the most effective Bt genes
    can be incorporated into the engineered plant, and (2) for
    understanding the biochemical and ecological basis of insect resistance
    to Bt so that resistance problems can be avoided or delayed with the
    engineered crop. Other NRI funding has allowed the molecular genetic
    mapping of corn leading to efficient means for crossing the transgene
    into various elite lines, documentation of the genetic behavior of
    tissue cultures facilitating the regeneration of corn plants with the
    Bt gene, etc.
        The safe handling of food has been enhanced through NRI funded
    projects. One of the outcomes is the isolation of a protein--invisible
    when applied to food preparation surfaces such as cutting boards--that
    binds firmly to the surface but does not allow harmful bacteria to
    bind. If they do bind, the protein kills the cells. This product is
    called Nisin, developed by researchers at Oregon State University. The
    medical field is considering Nisin's value in treating mechanical
    devises used in medicine.
        The take-all disease can wipe out whole fields on wheat in the U.S.
    as well as abroad. A few soils, called ``suppressive soils'', do not
    allow much growth of the fungus. USDA Agricultural Research Service
    scientists at Washington State University with NRI funding have found
    that certain strains of Pseudomonas bacteria found in suppressive soils
    prevent the growth of the take-all fungus. These scientists found that
    certain soil bacteria produce antibiotics--phenazines--that stop the
    growth of the fungus. The antibiotic has been isolated and
    characterized. These bacteria can be grown in a fermentor and applied
    as a seed coating like any other seed treatment, except this represents
    a biological control agent instead of chemical control. Another
    difference is that only the seed to be immediately planted is treated
    because otherwise the bacteria will die; an advantage is that only seed
    to be planted is treated. Currently, seed treated with chemicals and
    not planted must be disposed of and that can be a problem.
        The Spider Lamb Syndrome--SLS--is a congenital skeletal defect
    controlled by a single recessive gene. Lambs that carry the gene in
    heterozygous condition--carriers--are perfectly normal--but matings
    between two carriers produce defective lambs in about 25 percent of the
    progeny. Knowing that breeding stock carries this gene reduces their
    value by about 70 percent. The gene is becoming more and more prevalent
    in the Sulfolk and Hampshire breeds. In 1994, the NRI published a
    ``Research Highlights'' publication page indicating that research had
    been funded to discover a marker gene that might allow farmers to know
    when a ewe or ram carried the gene. In the ensuing years, a marker was
    found that would allow the identification of such carriers with 92
    percent accuracy. Using the chromosome map position of this marker gene
    in sheep as a guide, a Utah State University researchers looked for the
    marker on the human molecular genetic map. At about the same distance
    from this marker gene as found between it and the SLS trait in sheep,
    the researchers noticed that a human trait had been mapped that also
    influenced skeletal development. Using the human gene as a probe onto
    the DNA from progeny segregating for the SLS, the researchers found
    that this gene was 100 percent associated with the trait. By this
    series of discoveries, we now have available not only a perfect
    molecular genetic tag to know when a lamb is a carrier, but the exact
    gene causing the biochemical defect is now known.
        Several wild species of tomatoes produce seemingly worthless
    small--\1/2\-inch diameter--green fruit. It is not surprising to find
    that these wild tomato species furnish genes for cold tolerance, virus
    resistance, insect resistance, and increased solids. What is surprising
    is that a Cornell University researcher, through NRI funding, found
    that these green tomatoes possess genes that will make our normal red
    tomato even redder. The researcher has found that the use of the
    molecular genetic map of tomato, also developed in part through NRI
    funding, allowed him to detect genes in the green wild tomato that have
    an effect directly opposite to what one would expect. The researcher
    also has found that these tiny fruited tomatoes have genes that will
    increase yield in our normally cultivated types.
        Researchers at Purdue University have developed a system to use
    corn grits--ground corn kernels--to take the water out of ethanol
    produced from corn, a system now used to process 750 million gallons of
    ethanol per year at a significant cost savings over other methods.
    Through NRI support, the technology is being extended to new
    applications. For example, modified grits are being examined as a
    replacement for expensive inorganic desiccants in pressure swing dryers
    to provide dry air or other gases for use in paint spraying, ozone
    generation, and pressurization of power and communication cables. In
    addition, corn grits are being examined as a low-cost, natural
    desiccant for air conditioners based evaporative cooling; in this
    application, the grits can help displace ozone-depleting
    chloroflourocarbons and tap into a $26 billion global market.
        Technology also can result from the USDA competitive grants program
    that has an impact on all of biology. A system has been developed for
    isolating and biologically purifying fragments of DNA that led to the
    ``shotgun cloning'' of DNA, declared as a revolution in DNA sequencing
    technology by many writers. The contribution of this research was in
    using the M13 bacteriophage to amplify specific DNA segments. The
    genome programs of today owe part of their success to this innovative
    strategy funded by USDA.
                       special and administrative grants
        Question. For each of the special research and administrative
    (research and extension) grants funded for fiscal year 1997, please
    indicate the following: a detailed description of the project funded;
    who is carrying out the research; federal and non-federal funding made
    available for the project to date, by fiscal year; and the anticipated
    completion date for the original objectives of the project and whether
    those objectives have been met; and the anticipated completion date of
    additional or related objectives. For each project, please indicate
    when the last agency evaluation of the project was conducted. Provide a
    summary of the last evaluation conducted.
        Answer. The information follows.
                          aflatoxin research, illinois
        Past work on this problem has involved identifying corn germplasm
    resistant to aflatoxin, identifying Asperigillus flavus-inhibiting
    compounds, identifying fungus-inhibiting enzymes, developing
    transformation methods, and developing tissue culture/plant
    regeneration procedures. Aflatoxin are potent carcinogens with other
    toxic properties, and pose potential health risks wherever toxin-
    contaminated corn occurs. Aflatoxin contamination occurs frequently in
    the southeastern United States, but outbreaks have also occurred in the
    upper Midwest. Because there, are significant needs for research and
    program implementation national interest areas such as the integrated
    pest management initiative, funds are not proposed to continue this
    Special Research Grant. At the discretion of the state, Hatch Act or
    other funding could be used to support this research.
        The original goal of this research was the reduction of aflatoxin
    production in corn. Recent accomplishments include identification of
    corn germplasm producing high levels of fungus-inhibiting enzymes,
    production of transformed corn plants, finding new sources of
    resistance, and developing advanced corn lines for hybrid production.
        Grants have been awarded from funds appropriated as follows: fiscal
    year 1990, $87,000; fiscal year 1991, $131,000; and fiscal years 1992-
    1993, $134,000 per year, fiscal year 1994, $126,000; and fiscal years
    1995, 1996, and 1997, $113,000 per year. A total of $951,000 has been
    appropriated.
        The non-federal funds and sources provided for this grant are:
    $21,251 university operating funds for project investigator salary and
    fringe benefits, and $18,000 in corn seed company support.
        This research is being conducted at the University of Illinois. The
    anticipated completion date for the original objectives was 1995. The
    original objectives have not been completely met. In other related
    work, the project leaders, working with collaborating corn breeders,
    anticipate providing the different sources of resistance to commercial
    seed companies for incorporation into high-yielding commercial hybrids
    within five to seven years. Keeping with the Administration's policy of
    awarding research grants competitively, no further Federal funding for
    this grant is requested.
        The last agency evaluation was in December 1996. In summary, the
    evaluation stated that the research techniques are consistent with high
    likelihood that specific objectives will be accomplished. There is a
    good balance between fundamental and applied research, which should
    foster the development of new, highly-desirable corn germplasm.
            agricultural diversification and specialty crops, hawaii
        The white taro project is in its final phase. Many of the
    processing obstacles have been overcome, flour is being produced in
    pilot-scale quantities, better taro food product formulations are
    coming out, and the project is ready to turn over to the private
    sector.
        Due to demand conditions, the pineapple wet-pack processing project
    was changed to a high pressure minimal processing of tropical fruits.
    High pressure processing of tropical fruits provides a ready-to-eat
    chilled fresh product by adding value to fruit which can not meet fresh
    fruit quality standards and eliminating the fruit fly quarantine
    problem. Once the high pressure equipment arrives in February 1997,
    qualitative results should be out quickly. An agricultural business
    development handbook called, ``This Hawaii Product Went to Market'' was
    published. It contains 43 short chapters written by 46 people
    representing 26 companies and institutions in Hawaii. This book was
    necessary to help others with business initiation and expansion. A new
    taro production manual is nearing completion. Agribusiness interested
    in taro now have what all good agribusinesses need: a cost of
    production study, market reconnaissance information delivered by the
    project's newsletter, marketing tools developed in earlier phases of
    this project, and a production manual. Underlying all of this
    information is a business guide.
        Hawaii's economy needs help to recover after the decline of sugar
    and pineapple in the state. Taro products would be one such avenue,
    albeit relatively small at the outset. These gluten-free products could
    be a staple to many people in the U.S. who suffer from food ingredient
    intolerance. In general, collaboration with the private sector is
    needed to evaluate the commercial potential of university-based work.
    In view of significant needs for research in high priority national
    interest topics such as improved pest management systems, funds are not
    proposed to continue this grant. At the discretion of the state, Hatch
    Act or other funding could be used to support this research. The
    principal investigator believes this research to be of regional and
    local need.
        The goal of the original proposal was to screen potential food and
    non-food crops for commercial development in Hawaii. As mentioned
    above, white taro emerged as one of the most promising opportunities
    and also offered the opportunity to develop an infrastructure that will
    help new crop ideas come on line even faster. Overall, the researchers
    have identified a need, people with food sensitivities; then identified
    a crop; figured out a mechanism to inexpensively process the crop into
    flour; worked with a private sector company to set-up a pilot-scale
    facility; developed the operating protocol for the facility; worked
    with local food processors to develop prototype products and have
    improved on them; and found some interested parties that might be
    willing to invest in the commercial version of this project. Currently,
    the University of Hawaii is working on handing-off the project to the
    private sector. The high pressure project is just getting off the
    ground because it took a long time to acquire the equipment.
        Grants have been awarded from funds appropriated as follows: fiscal
    years 1988 and 1989, $156,000 per year; fiscal years 1990 through 1993,
    $154,000 per year; fiscal year 1994, $145,000; fiscal years 1995
    through 1997, $131,000 per year. A total of $1,634,000 has been
    appropriated.
        The University of Hawaii provides in-kind support in the form of
    laboratory and office facilities, equipment and equipment maintenance
    and administrative support services: $68,503 in fiscal year 1992;
    $75,165 in fiscal year 1993; and $74,663 in each fiscal year 1994-1997.
    In addition, nearly $35,000 of in-kind support has come from private
    sector partners and $30,000 is committed from the private sector on the
    high pressure minimal processing project.
        Research is being conducted at the University of Hawaii's College
    of Tropical Agriculture and Human Resources, and on the Big Island of
    Hawaii. All taro-related work will be done by May 31, 1997 and all
    objectives will be met. The high pressure processing project will have
    a great deal of work done by May 31, 1998 but will need to be continued
    on private sector funds. In keeping with the Administration's policy of
    awarding research grants competitively, no further federal funding for
    this grant is requested. Research could be continued at the state's
    discretion using, formula funds.
        The CSREES agency representative to this project meets with the
    University of Hawaii investigators at least twice each year to review
    progress and plan subsequent activities. This close interaction has led
    the project through a progression of steps from research discovery to
    near-term commercialization, and, in the case of high pressure
    processing, back to testing and development of a new technology for
    possible commercial use.
                      alliance for food protection, ne, ga
        The fiscal year 1997 appropriation supports the continuation of a
    collaborative alliance between the University of Georgia Center for
    Food Safety and Quality Enhancement and the University of Nebraska
    Department of Food Science and Technology. Fiscal year 1996 funds
    supported research at the University of Nebraska on the detection,
    identification and characterization of food allergens, the effects of
    processing on peanut allergens, and investigation of the efficacy of
    using various types of thermal processes to reduce or destroy the
    toxicity and mutagenicity of certain Fusarium metabolites in corn and
    corn products. Research at the University of Georgia was directed
    toward determining the foodborne significance of Helicobacter pylori,
    determining the fate of Arcobacter in foods and the effect of
    environmental factors on survival and growth, determining the efficacy
    of nisin and environmental factors on controlling Bacillus cereus, and
    developing a device to rapidly detect foodborne pathogens using
    immunomagnetic separation technology. The principal researcher believes
    the proposed research addresses emerging issues in food safety which
    have national, regional and local significance. Specifically, research
    will address bacterial pathogens that can cause ulcers, cancer and
    diarrheal illness and allergens in foods that cause serious reactions,
    including death, in sensitive people. These emerging issues affect
    consumers, the food industry, and food producers at all levels,
    national, state, and local. In view of significant needs for research
    in high priority national interest topics such as improved pest
    management systems and food safety, funds are not proposed to continue
    this Special Research Grant. At the discretion of the State, Hatch Act
    or other funding could be used to support this research.
        The original goal of this research was to: (1) facilitate the
    development and modification of food processing and preservation
    technologies to enhance the microbiological and chemical safety of
    products as they reach the consumer and (2) develop new rapid and
    sensitive techniques for detecting pathogens and their toxins as well
    as toxic chemicals and allergens in foods. The University of Nebraska
    developed assays for the detection of milk and egg residues in
    processed foods, produced high-quality antibodies for soybean proteins,
    partially characterized sunflower seed. and soybean allergens, and
    developed a simple liquid chromatographic procedure for determination
    of moniliformis toxin. The University of Georgia developed a method to
    culture Helicobacter pylori, identified a treatment to prevent Bacillus
    cereus from producing toxin in refrigerated foods, determined survival
    and growth characteristics of Arcobacter and Helicobacter pylori, and
    determined the appropriate homogenization conditions to prepare food
    samples for rapid detection of pathogens by immunoseparation.
        The work supported by this grant began in fiscal year 1996, and
    $300,000 was appropriated in fiscal years 1996 and 1997, for a total
    appropriation of $600,000. The nonfederal funds and sources provided
    for this grant were $117,000 state funds and $250,000 industry and
    miscellaneous in fiscal year 1996 and are expected to be $141,000 state
    funds and $175,000 industry and miscellaneous in fiscal year 1997.
        Research will be conducted at the University of Georgia Center for
    Food Safety and Quality Enhancement in Griffin, Georgia and at the
    University of Nebraska Department of Food Science and Technology in
    Lincoln, Nebraska. The original objectives have not yet been met. The
    researchers anticipate that work will be completed on the original
    objectives in 1999. However, in keeping with the Administration's
    policy of awarding research grants competitively, no further Federal
    funding for this grant is requested. Research could be continued at the
    State's discretion using Hatch or other funds.
        An agency science specialist conducts a merit review of the
    proposals submitted in support of the appropriation on an annual basis.
    A review of the proposal from the University of Nebraska was conducted
    on December 20, 1996, and good progress was demonstrated on the
    objectives undertaken to date as discussed above. A progress report
    from the University of Georgia was evaluated by the agency on January
    16, 1997, and demonstrated good progress on its 1996 objectives.
                    alternative crops for arid lands, texas
        This grant is to develop the two most abundant plants in
    southwestern United States, i.e. mesquite and cactus, into commercial
    crops through a combination of applied research and marl,,et
    development. In Texas, New Mexico, Arizona and California these plants
    occupy 72 million acres. The semi-arid regions of the United States
    that border with Mexico in Texas, New Mexico, Arizona, and California
    have some of the highest unemployment rates, lowest economic returns
    per acre, and lowest incomes in the United States. The two most
    abundant plant species in this region are prickly pear cactus and
    mesquite. By working with Mexican researchers, this grant will help to
    stabilize the economic situation of rural poor in Mexico and the United
    States. There are few crops capable of being grown sustainably in these
    regions. Due to the nitrogen fixing capability, and thus soil improving
    properties, of mesquite and high water use efficiency of cactus, these
    plants contribute to sustainable agriculture, and will diversify
    southwestern agriculture. This research group is the only center in the
    United States developing these plants as crops. The principal
    researcher has been active with a national New Crops initiative
    supported by the Center for Agricultural Science and Technology (CAST)
    to develop grants programs for new feed/food from new crops. In view of
    the significant need for research in national priority areas, such as
    integrated pest management, additional funding for this Special Grant
    is not proposed. At the discretion of the State, Hatch Act or other
    funding could be used to support this effort.
        The goal is to improve the economic returns, and year-to-year
    economic stability in the southwestern United States. Accomplishments
    have been sale of a new cactus vegetable variety in 100 stores of the
    largest retail grocery chain in Texas, presentations to architects in
    all major cities in Texas on mesquite technical qualities and all
    mesquite sawmill and furniture manufacturers, publication of 4 year
    field trials in which cactus was found to be the most efficient
    converter of water to dry matter of all plant types, a major collection
    of 130 fruit, forage and, vegetable varieties of cactus, 10 year non-
    irrigated pruning and spacing trial with mesquite found diameter growth
    rates greater than walnut and oak in the northeastern United States,
    and a sustainable system for mesquite management that avoids use of
    bulldozers and aerial herbicides by creating markets for mesquite
    products and utilizing mesquite's nitrogen fixing properties.
        Fiscal year 1994 was the first year of funding for this grant and
    $94,000 was appropriated. In fiscal years 1995 through 1997, $85,000
    was appropriated each year. A total of $349,000 has been appropriated.
    In fiscal year 1994, $43,215, was provided by the Texas legislature.
        The work is being conducted by Texas A&M University, Kingsville,
    Texas. Significant but small Texas cactus and mesquite industries now
    exist. Transformation of these small industries into medium industries
    and transfer of the and technologies to low rainfall areas of the
    Midwestern and southeastern United States will carry on 10 years into
    the next century. Keeping with the Administration's policy of awarding
    research grants competitively, no further Federal funding for this
    grant is requested.
        Evaluation of this project is conducted annually based on the
    annual progress report and discussions with the principal investigator,
    as appropriate. The review is conducted by the cognizant staff
    scientist who has determined that this research is in accordance with
    the mission of the agency.
                        alternative crops, north dakota
        In this investigation of alternative crops, there are two main
    thrusts: the development and commercialization of novel new crops, and
    the differentiation of traditional crops. Both avenues of research have
    the shared goals of increasing biodiversity at the farm and field,
    while producing new crops and products for current and future societal
    needs. Some of these include (a) the development of crambe, flax,
    sunflower, safflower, and various rapeseeds as a renewable supply of
    industrial oil, (b) the study of products from amaranth, potatoes,
    sugarbeets, carrots, soybeans, barley, and sunflower for novel new uses
    in the paints, coatings, as food ingredients, and critical human
    nutrition markets, and (c) the development of new bio-chemical and
    enzymatic processes to refine and create super critical and other high-
    value fluids from oilseed crops which could serve as effective
    renewable replacements for industrial uses.
        The principal researcher believes that nationally, developing new
    crops and new markets for agricultural products is critical for both
    environmental and economic reasons. Enhanced biodiversity that comes
    from the successful commercialization of new crops aids farmers in
    dealing with pests, reducing the dependency upon pesticides. New
    markets are needed to provide more economic stability for agricultural
    products, especially as federal price supports are gradually withdrawn.
    The development of new crops and products, offers a unique way to
    satisfy national goals of enhanced environmental quality, while at the
    same time opening new economic opportunities to farmers and other rural
    entrepreneurs. Regionally, the temperate areas of the Midwest have the
    potential to grow a great number of different crops, but are in need of
    publicly sponsored research efforts to reveal the most practical,
    efficient, and economical crops and products to pursue. This effort has
    forged a strong link with the private sector, and successfully spawned
    several crops and products into profitable private sector businesses.
    In view of significant needs for research in high priority national
    interest topics such as improved pest management systems, funds are not
    proposed to continue this Special Research Grant. At the discretion of
    the state, Hatch Act or other funding could be used to support this
    research. The principal researcher believes this research to be of
    national, regional or local need.
        The original goal of this research was to introduce, evaluate and
    test new crops which will broaden the economic diversity of crops grown
    in North Dakota. Over the past eight years, this special federal
    appropriation has been an important part of North Dakota State
    University's approach to research and development on agricultural
    alternatives. It has helped sponsor research on crambe, lupin, canola,
    safflower, cool-season grain legumes, buckwheat, amaranth, field pea
    production and utilization, transgenic sugar beets to produce levan,
    utilization and processing of lupin flour, confectionery sunflower
    production, and growing and marketing of carrots in North Dakota. It
    has helped develop a crop-derived red food dye and high quality pectin
    as food ingredients. It has sponsored research on innovative new bio-
    chemical means of splitting crop oils, and other new uses of oilseed
    crops. It has also helped develop markets for new crops as livestock
    and fish feeds. This appropriation has helped create both new knowledge
    and new wealth.
        Appropriations by fiscal year are as follows: 1990, $494,000; 1991,
    $497,000; 1992 and 1993, $700,000 per year; 1994, $658,000 and in
    fiscal year 1995, $592,000; and in 1996 and 1997, $550,000 per year. A
    total of $4,691,000 has been appropriated.
        In fiscal year 1991, $10,170 was provided by state appropriations.
    In fiscal year 1992, $29,158, was also provided by state appropriations
    and self-generated funds. In fiscal year 1993, $30,084, was provided by
    state appropriations. In fiscal year 1994, $161,628 was provided by
    state funds, $3,189 provided by industry and $9,020 provided by other
    sources, totalling $174,417. In fiscal year 1995, $370,618 was provided
    by state appropriations, $1,496 provided by self-generated funds,
    $1,581 provided by industry and $5,970 was provided in other non-
    federal funds, totalling $379,665 for fiscal year 1995. In fiscal year
    1996 $285,042 was provided by state appropriation, $4,742 provided by
    industry, $14,247 provided from other non-federal funds, totaling
    $304,031 for 1996.
        The work is conducted on the campus of North Dakota State
    University and at the Carrington Research and Extension Center,
    Carrington, North Dakota, and the Williston Research Center, which are
    both in North Dakota. Work is also done in eastern Montana.
        Fiscal year 1997 is the eighth year of activity under this grant.
    The primary emphasis has been to find new crops with non-food uses and
    create value added products. The original objectives have been met.
    Keeping with the Administration's policy of awarding research grants
    competitively, no further Federal funding for this grant is requested.
        This project has been evaluated based on the annual progress report
    and agency participation in evaluating proposals submitted to the
    Agricultural Experiment Station under this grant. The cognizant staff
    scientist has reviewed the project and determined that the research is
    conducted in accordance with the mission of this agency.
             alternative marine and freshwater species, mississippi
        The research has focused on the culture of hybrid striped bass,
    prawns, and crawfish. Nutritional requirements and alternative
    management strategies for these species have been evaluated and field
    tested. Utilization of improved technologies will enhance production
    efficiency and accelerate the use of these alternative species and
    alternative management strategies in commercial aquaculture. The
    principal researcher indicates that as the aquaculture industry
    continues to grow, it is extremely important to consider alternative
    species and production strategies for culture in order to help the
    industry diversify. Diversification is of benefit to both the producer
    and consumer of aquaculture products. In view of the significant needs
    for research in high priority national interest topics such as improved
    pest management systems, funds are not proposed to continue this
    Special Research Grant. At the discretion of the state, Hatch Act or
    other funding could be used to support this research.
        The original goal of this research was to develop and evaluate
    aquaculture production technologies that would lead to the use of
    alternative species and management strategies in commercial aquaculture
    production. Research evaluating stocking rates, nutritional
    requirements, and methods to reduce stress in hybrid striped bass
    production systems has led to the development of improved production
    efficiency in these systems. Recent research indicates that feed
    formulations for hybrid striped bass should be adjusted for seasonal
    fluctuations in temperature. Nutritional studies also indicate that the
    niacin requirement for striped bass may be much lower than previously
    reported. Field testing of alternative management strategies for
    crawfish indicates that the most efficient and cost effective
    production strategy involves the appropriate combination of stocking,
    feeding, and harvesting practices. In addition, researchers evaluating
    product quality of cryogenically frozen whole prawns indicate that
    prawns can be kept in frozen storage up to 7 months with no loss of
    quality.
        The work supported by this grant began in fiscal year 1991 and the
    appropriation for fiscal years 1991-1993 has been $275,000 per year,
    $258,000 in 1994, and $308,000 in fiscal years 1995-1997 each year. A
    total of $2,007,000 has been appropriated.
        The university reports a total of $332,091 of non-federal funding
    to support research carried out under this program for fiscal years
    1991-1994, $70,636 in fiscal year 1995 and $79,935 in fiscal year 1996.
    The primary source of the non-federal funding was from state sources.
        Research is being conducted at Mississippi State University. The
    original specific research objectives were to be completed in 1994.
    These specific research objectives have been met, however, the broader
    research objectives of the program are still being addressed. The
    specific research outlined in the current proposal will be completed in
    fiscal year 1998. Keeping with the Administration's policy of awarding
    research grants competitively, no further Federal funding for this
    grant is requested. Research could be continued at the State's
    discretion using other funds.
        The agency evaluates the progress of this project on an annual
    basis. The university is required to submit an accomplishment report
    when the new grant proposal is submitted to CSREES for funding. The
    1996 review indicated that the research addresses an important
    opportunity in the aquaculture industry, that progress on previous
    research was well documented, and that the proposed research builds on
    the previous work funded through this program.
                     animal science food safety consortium
        The research goal of the consortium has been to enhance the safety
    of red meat and poultry products for human consumption. Research has
    focused on accomplishing six objectives (1) develop rapid detection
    techniques for pathogenic bacteria and toxic chemicals for use by the
    red meat and poultry production-marketing system; (2) devise a
    statistical framework from which to develop tolerance levels for these
    hazardous substances; (3) identify effective interdiction points and
    develop methods to prevent or reduce substance presence; (4) develop
    monitoring techniques and methodologies to detect and estimate the
    human health risk of these contaminants; (5) develop technologies to
    reduce hazards and enhance quality of animal food products to
    complement the development of Hazard Analysis Critical Control Point
    [HACCP] programs by the Department's Food Safety and Inspection
    Service; and (6) estimate benefits and costs and risks associated with
    interdiction alternatives. The consortium's researchers have focused
    their efforts primarily on the first, third, fifth, and sixth
    objectives.
        The principal researchers believe a safer national meat product
    food supply could reduce large economic losses, they estimate $4 to $7
    billion a year, as a result of lost productivity and wages and medical
    treatment of victims of food-borne illnesses, in addition to reducing
    the human suffering and loss of life that occur every year as a result
    of these illnesses. Safer products could also find greater acceptance
    in global markets and, therefore, could contribute to increased meat
    product exports and rural economic growth. In view of significant needs
    for research in high priority national interest topics such as improved
    pest management systems and food safety, funds are not proposed to
    continue this Special Research Grant. However, the fiscal year 1998
    President's Budget requests $2 million for a competitively-awarded food
    safety program. The principal researchers could submit a proposal to
    this new program if it is funded. Also, at the discretion of the State,
    Hatch Act or other funding could be used to support this research.
        The goal is to develop detection, prevention, and monitoring
    techniques that will reduce or eliminate the presence of food borne
    pathogens and toxic substances from the Nation's red meat and poultry
    supplies. The consortium is organized and operated along institutional
    lines with a coordinator and directors managing the research program.
    Advisory and technical committees consist of outside representation and
    provide advice on research planning and expertise on technical matters.
        Major accomplishments this past year by the University of Arkansas
    include showing that young infants and children are more likely to be
    infected with Salmonella by caretakers than through food consumption,
    developing a technique to distinguish strains of Salmonella that are
    epidemiologically related, discovering anti-microbial bacteriocin with
    potentially broad application in the food system, and testing a process
    for mechanically stripping meat from poultry carcasses which may reduce
    microbiological contamination. Researchers have also developed a
    research oven which is leading to valuable models for cooking processes
    that kill pathogens while retaining quality of cooked poultry. They
    have also found that certain enzyme linked immunosorbent assays for
    Listeria monocytogenes may not be as useful in detecting these
    pathogens in cooked food products as on uncooked products. An
    experimental system for detection of Salmonella typhimurium organisms
    in pure culture has been developed which is based on immunomagnetic,
    immunofluorescent staining and image analysis which results in a
    significant reduction in time for analysis. Intervention techniques
    have been shown to aid in the reduction of bacterial populations as an
    integral component in successful HACCP program implementation.
        Major accomplishments this past year at Iowa State University
    include development of rapid detection methods for foodborne pathogens
    in live swine and on pork products, intervention approaches at
    production and processing levels to enhance product safety, and
    assessment of health risks from pathogens which may be borne by pork or
    pork products. Specifics include the application of polymerase chain
    reaction technology to detect and differentiate Campylobacter jejuni
    and the more prevalent Campylobacter coli in pork, effective
    application of enzyme-linked immunosorbent assays to identification of
    antibodies against prevalent Salmonella species in swine sera and pork
    meat extracts, and development of a reliable culture test for rapid
    detection and differentiation of coliform and E coli bacteria.
    Effectiveness of a new vaccine for Salmonella developed with partial
    sponsorship of the Consortium has been assessed in laboratory
    experimentation and field experience. Research found that bacteria are
    readily inactivated by practical levels of irradiation but viruses,
    especially the small RNA viruses were quite resistant to irradiation
    and were not sensitized to low heat treatment which would be sublethal
    to non-irradiated contaminated pork. Willingness to pay for irradiated
    pork or chicken was 10-30 percent above non-irradiated products in
    customer market tests. Risk assessment studies on food borne pathogens
    placed public health impact from pork at high level for no pathogens,
    at moderate level for Salmonella, Yersinia, Clostridium, and
    Staphylococcus, and at low to negligible level for all other potential
    pork borne pathogens.
        Kansas State University has demonstrated under commercial
    conditions that electronic identification systems to track and
    determine contamination points for beef cattle are feasible from an
    implant retention, operational, and retrievability standpoint;
    developed analytical procedures to detect mycotoxin and organophosphate
    pesticide contaminates in animal tissue; demonstrated optimum carcass
    washing and trimming practices supplemental treatments of carcasses and
    cuts after final handling to be effective in the removal of pathogens;
    and demonstrated the efficacy of steam pasteurization and steam
    vacuuming in eliminating pathogenic bacteria from beef carcasses.
    University researchers have also determined that low dose irradiation
    is a viable intervention technology with minimal effects on beef
    quality; demonstrated that processing protocols for large diameter
    Lebanon bologna are sufficient to control E coli 0157:H7; determined
    that monitoring endpoint cooking temperature of ground beef patties or
    following a prescribed time/temperature interaction known to achieve a
    given endpoint are the safest ways to prevent consumption of
    undercooked ground beef, and developed technology to enhance growth of
    pathogenic bacteria so they can be rapidly detected at very low but
    potentially hazardous levels.
        Grants have been awarded from funds appropriated as follows: fiscal
    year 1989, $1,400,000; fiscal year 1990, $1,678,000; fiscal year 1991,
    $1,845,000; fiscal years 1992-1993, $1,942,000 per year; fiscal year
    1994, $1,825,000; fiscal years 1995-1996, $1,743,000 each year; and
    fiscal year 1997, $1,690,000. A total of $15,808,000 has been
    appropriated.
        The non-federal funds and sources provided for this grant are as
    follows: $1,313,653 State appropriations, $2,959 product sales, $35,600
    industry, and $259,735 miscellaneous for a total of $1,611,947 in 1991;
    $1,270,835 State appropriations, $10,129 product sales, $90,505
    industry, and $267,590 miscellaneous for a total of $1,639,059 in 1992;
    $1,334,680 State appropriations, $1,365 product sales, $33,800
    industry, and $356,308 miscellaneous for a total of $1,726,153 in 1993;
    $1,911,389 State appropriations, $192,834 industry, and $200,000
    miscellaneous for a total of $2,304,223 in 1994; $1,761,290 State
    appropriations, $221,970 industry, and $91,885 miscellaneous for a
    total of $2,075,145 in 1995; $2,643,666 State appropriations and
    $152,431 industry, for a total of $2,796,097 in 1996; and $1,508,112
    State appropriations, $638,172 industry, and $129,753 product sales,
    for a total of $2,276,037 in 1997. Thus, from 1991 through 1997 a total
    of $14,428,661 in non-federal funds was provided.
        Research is being conducted at the University of Arkansas at
    Fayetteville, the University of Arkansas for Medical Sciences at Little
    Rock, Arkansas Children's Hospital, Iowa State University, and Kansas
    State University.
        The current program of research outlined under the Consortium's
    revised strategic research plan should be completed in 1999. Keeping
    with the Administration's policy of awarding research grants
    competitively, no further Federal funding for this grant is requested.
    However, the fiscal year 1998 President's Budget requests $2 million
    for a competitively-awarded food safety program. The principal
    researchers could submit a proposal to this new program, if funded.
    Also, at the discretion of the State, Hatch Act or other funds could be
    used to support this research. An agency science specialist evaluates
    the progress of this project on an annual basis.
                    apple fire blight, michigan and new york
        This project studies fire blight in apple trees, which is a disease
    that can kill fruit spurs, branches, and whole trees. The research
    supported under this project will help develop fire blight resistant
    varieties, evaluate biological and chemical controls, and develops an
    education and extension component. Fire blight disease is caused by
    bacteria and effects apple trees in all apples growing areas of the
    nation. In the northeast, the disease is more prevalent because of
    humid weather conditions. The management of this disease is difficult
    because only one antibiotic treatment is available. Because there are
    significant needs for research in high priority national interest
    topics such as improved pest management systems, funds are not proposed
    to continue this Special Research Grant. At the discretion of the
    state, Hatch Act or other funding could be used to support this
    research. The principal researcher believes this research to be of
    national, regional, and local need.
        The objectives are to develop transgenic apple trees through
    various molecular technologies, to develop new approaches to antibiotic
    treatment of the disease, to develop an early screening technique for
    tree sensitivity to the disease, to evaluate biological and cultural
    controls and to develop and improve education and extension components
    of disease management.
        Fiscal year 1997 was the first year funds were appropriated for
    this grant. A total of $325,000 was appropriated. The proposed non-
    federal funds for 1997 for the Michigan proposal are estimated for
    state appropriated matching at $20,127 in salaries and $20,000
    miscellaneous whereas New York is estimating state appropriated funds
    at $104,166 for 1997.
        Research will be conducted at Michigan State University and Cornell
    University, New York Experiment Station. The anticipated date of
    completion of the projects is in fiscal year 1998. Keeping with the
    Administration's policy of awarding research grants competitively, no
    further Federal funding for this grant is requested.
        The projects underwent merit reviews in January 1997. The
    objectives outlined in the proposal appear to be satisfactory to meet
    the goals.
                             aquaculture, illinois
        Researchers are developing and evaluating closed system technology
    for application to commercial aquaculture. System design and cost of
    production analysis for these systems have been conducted in commercial
    trials and pilot studies. The principal researcher believes the
    development of alternative aquaculture production systems, such as
    closed recirculating systems, world reduce demands for water and would
    provide for greater control over production in aquacultural systems.
    Closed systems could be established independent of climatic condition
    in any region of the country. These systems also offer greater
    opportunity to manage aquacultural waste and reduce environmental
    impact. In view of significant needs for research in high priority
    national interest topics such as improved pest management systems,
    funds are not proposed to continue this Special Research Grant. At the
    discretion of the state, Hatch Act or other funding could be used to
    support this research.
        The goal of this program is to develop closed recirculating
    aquacultural systems in order to lower production cost, improve product
    quality, and reduce the potential environmental impact of aquacultural
    production systems. An analysis of production costs and risk factors
    has been conducted on a new system design and on commercial systems in
    cooperation with the private sector. Best management practices have
    been developed for these systems. Solid waste management techniques are
    also being evaluated.
        The work supported by this grant began in fiscal year 1992. The
    appropriation for fiscal years 1992-1993 was $200,000 per year; fiscal
    year 1994, $188,000; and fiscal years 1995-1997, $169,000 each year. A
    total of $1,095,000 has been appropriated.
        The university estimates that non-federal funding for this program
    is as follows: in fiscal year 1992, $370,000; in fiscal year 1993,
    $126,389; in fiscal year 1994, $191,789; in fiscal year 1995, $152,682;
    and in fiscal year 1996, $171,970. The primary source of funding is
    from the state with gifts and grants accounting for the remainder. This
    estimate does not include substantial in-kind contributions from
    industry as this program conducts cooperative research with commercial
    producers.
        Research is being conducted at Illinois State University at Normal,
    Illinois, through a subcontract with the University of Illinois. The
    original objectives were to be completed in fiscal year 1995. The
    original specific objectives have been met. The specific research
    outlined in the current proposal will be completed in fiscal year 1997.
    Keeping with the Administration's policy of awarding research grants
    competitively, no further Federal funding for this grant is requested.
        The agency evaluates the progress of this project on an annual
    basis. The university is required to provide an accomplishment report
    each year when the new grant proposal is submitted to CSREES for
    funding. The 1996 review of the project indicated that the project has
    met stated objectives.
                             aquaculture, louisiana
        Research has focused on catfish, crawfish, reddish, and hybrid
    striped bass in commercial aquaculture. Research has included basic and
    applied research in the areas of production systems, genetics, aquatic
    animal health, nutrition, and product quality. The principal researcher
    indicates that there is a need to improve production efficiency for a
    number of important aquaculture species such as catfish, crawfish,
    hybrid striped bass, and reddish in order to enhance the profitability
    and sustainability of the aquaculture industry in the region. The
    research also addresses the issue of food safety and the quality of
    farm-raised products. In view of significant needs for research in high
    priority national interest topics such as improved pest management
    systems, funds are not proposed to continue this Special Research
    Grant. At the discretion of the state, Hatch Act, or other funding
    could be used to support this research.
        The original goal of this research was to expand the technology
    base to enhance the development of aquaculture through a broad research
    program that addresses the needs of the industry. The university has
    completed studies in the area of fish nutrition, fish health,
    production management strategies, alternative species, seafood
    processing and broodstock development. Research has led to improved
    feed formulations, improved production strategies for crawfish, and
    improved processing technologies for aquaculture products.
        Research to be conducted under this program will continue research
    initiated under the Aquaculture General program in fiscal years 1988
    through 1991. The work supported by this new grant category began in
    fiscal year 1992 and the appropriation for fiscal years 1992-1993 was
    $390,000 per year, $367,000 in fiscal year 1994, and $330,000 in fiscal
    years 1995-1997 each year, for a total of $2,137,000.
        The university estimates that non-federal funding for this program
    is as follows: in fiscal year 1991, $310,051; in fiscal year 1992,
    $266,857; in fiscal year 1993, $249,320; in fiscal year 1994, $188,816;
    in fiscal year 1995, $159,810; and in fiscal year 1996, $150,104, The
    primary source of this funding is from state sources with minor
    contributions from industry and other non-federal sources.
        Research is being conducted at Louisiana State University. The
    original specific objectives were to be completed in 1990. These
    specific research objectives have been met. The specific research
    outlined in the current proposal will be completed in fiscal year 1998.
    Keeping with the Administration's policy of awarding research grants
    competitively, no further Federal funding for this grant is requested.
        The agency evaluates the progress of this project on an annual
    basis. The university is required to provide an accomplishment report
    each year when the new grant proposal is submitted to CSREES for
    funding. In addition, the CSREES program manager made a site visit in
    1996 to meet with the scientists involved in the project and review the
    progress of the research. The 1996 review of the project indicated that
    the research is addressing important research needs of the aquaculture
    industry, the proposed research represented a logical progression of
    research previously funded through this program, and that the progress
    on previous research funded under this program is well documented.
                 aquaculture research, stoneville, mississippi
        The primary objectives of this research have been to improve
    practical feeds and feeding strategies and improve water quality in
    channel catfish ponds. Additionally, scientists are evaluating the
    application of acoustical instrumentation in commercial aquaculture.
    The principal researcher indicates that the research findings from this
    project have a direct impact on the profitability and sustainability of
    a significant segment of the domestic aquaculture industry. The farm-
    raised catfish industry accounts for over 55 percent of the total U.S.
    aquaculture industry. Research funded in this program is directed
    towards two of the most important research needs of the industry; water
    quality and improved feeds and feeding strategies. In view of
    significant needs for research in high priority national interest
    topics such as improved pest management systems, funds are not proposed
    to continue this Special Research Grant. At the discretion of the
    state, Hatch Act or other funding could be used to support this
    research.
        The original goal of this research was to address the research
    needs of the catfish industry in the areas of water quality and
    nutrition. The research has led to improved water quality management
    practices in commercial catfish ponds. Research in the area of catfish
    nutrition has led to improved diet formulation and feeding strategies
    that have been widely adopted by the industry. Scientists are currently
    evaluating five protein levels under two different feeding regimes
    using conditions that closely reflect commercial catfish ponds. Studies
    evaluating acoustical instrumentation have demonstrated possible
    applications in commercial aquaculture. Researchers are determining the
    accuracy and effectiveness of upgraded and calibrated acoustical
    monitoring equipment.
        Grants have been awarded from funds appropriated as follows: fiscal
    years 1980-81, $150,000 per year; fiscal year 1982, $240,000; fiscal
    year 1983-84, $270,000 per year; fiscal year 1985, $420,000; fiscal
    years 1986-87, $400,000 per year; fiscal year 1988, $500,000; fiscal
    year 1989, $588,000; fiscal year 1990, $581,000; fiscal year 1991,
    $600,000; fiscal years 1992-1993, $700,000 per year; fiscal year 1994,
    $658,000; and fiscal years 1995-1997, $592,000 each year. A total of
    $8,403,000 has been appropriated.
        The university estimates a total of $2,101,508 in non-federal
    funding to support this research for fiscal years 1991-1994; $1,128,451
    in fiscal year 1995; and $601,473 in fiscal year 1996. The primary
    source of non-federal funding is from the state. Additional funding is
    provided from product sales, industry contributions, and other
    miscellaneous sources.
        The grants have been awarded to the Mississippi Agricultural
    Experiment Station. All research is conducted at the Delta Branch
    Experiment Station, Stoneville, Mississippi. The acoustical research in
    aquaculture will be conducted in cooperation with the National Center
    for Physical Acoustics at the University of Mississippi. The
    anticipated completion date for the specific original research
    objectives was 1984. These specific research objectives have been met,
    however, the broader research objectives of the program are still being
    addressed. The specific research outlined in the current proposal will
    be completed in December 1997. Keeping with the Administration's policy
    of awarding research grants competitively, no further Federal funding
    for this grant is requested. Research could be continued at the State's
    discretion using formula or other funds.
        The agency evaluates the progress of this project on an annual
    basis. The university is required to provide an accomplishment report
    when the new proposal is submitted to CSREES for funding. The 1996
    review indicated that the research addresses important opportunities in
    the farm raised catfish industry, significant progress has been
    reported on specific research objectives, and that the scientists
    involved in the project are leading authorities in this area of
    research.
                          aquaculture, north carolina
        CSREES has requested the university to submit a grant proposal that
    has not been received. The researchers indicate that the research will
    focus on reducing the environmental impact of aquaculture systems,
    reducing the impact of diseases in cultured finfish, and reducing the
    inherent risk of culturing emerging species. The principal researcher
    indicates that there is a need to reduce the environmental impact of
    aquaculture systems, to enhance fish health management strategies, and
    to reduce the impediments to culture selected emerging species.
    Improved environmental quality and improved production efficiency in
    aquacultural systems could have regional and national impacts.
    Diversification of the industry in terms of species cultured is of
    benefit to both the producer and consumer of aquaculture products. In
    view of the significant needs for research in high priority national
    interest topics such as improved pest management systems, funds are not
    proposed to continue this Special Research Grant. At the discretion of
    the state, Hatch Act or other funding could be used to support this
    research. The principal researcher believes this research to be of
    national, regional or local needs.
        The goals of the research are to reduce environmental impacts of
    aquaculture systems by improved system design and improved feeding
    strategies, to evaluate the efficacy of current vaccination methods and
    develop improved methods for vaccine administration, and to develop
    culture techniques for potentially important aquaculture species.
        The work supported by this grant began in fiscal year 1997 and the
    appropriation for fiscal year 1997 is $150,000. The university reports
    a total of $94,000 of non-federal funding to support research carried
    under this program for fiscal year 1997. The primary source of the
    nonfederal funding was from state sources.
        Research is being conducted at North Carolina State University.
    This is the first year of the project. The researchers anticipate that
    the specific research objectives will be completed in 1999. Keeping
    with the Administration's policy of awarding research grants
    competitively, no further Federal funding for this grant is requested.
        The agency will conduct the initial review of this proposal when it
    is submitted to CSREES for funding. Since this is the first year of the
    program, the proposal will be externally peer reviewed as part of the
    CSREES evaluation.
       babcock institute for international dairy research and development
        The Babcock Institute for International Dairy Research and
    Development was established with participation of the University of
    Wisconsin-Madison College of Agriculture and Life Sciences, School of
    Veterinary Medicine and the Cooperative Extension Division. The
    objective of the Babcock Institute is to link the U.S. dairy industry
    with the rest of the world through degree training, continuing
    education, technology transfer, adaptive research, scientific
    collaboration and market analysis. The principal researcher believes
    the need is to strengthen dairy industries around the world, to enhance
    international commercial and scientific collaborative opportunities for
    the U.S. dairy industry, and to draw upon global perspectives to build
    insight into the strategic planning of the U.S. dairy industry. Because
    of the significant need for research in high priority national topics,
    such as the Department's Pest Management Initiative, funds are not
    proposed to continue this Special Research Grant. At the discretion of
    the State, Hatch Act or other funding could be used to support this
    research.
        The goal of the Institute remains the linkage of the U.S. dairy
    industry with the rest of the world through training, continuing
    education and outreach, technology transfer, adaptive research,
    scientific collaboration and market analysis. Initial efforts were
    focused on planning and staffing. An initial activity was, and
    continues to be, the development of multi language extension materials
    about basic management techniques essential to optimize performance of
    U.S. germplasm overseas. This activity has grown to include manuals on
    Breeding and Genetics, Lactation and Milking, and Basic Dairy Farm
    Financial Management published in English, Spanish, French, Russian,
    and Chinese. Research on potential implications of NAFTA and GATT on
    the U.S. dairy industry was completed. A technical workshop on dairy
    grazing in New Zealand and the Midwest was organized and held in
    Madison during the fall of 1993. A technical workshop on Nutrient
    Management, Manure and the Dairy Industry: European Perspectives and
    Wisconsin's Challenges was held in Madison, Wisconsin during September
    1994. A round table was held in January 1995 addressing ``World Dairy
    Markets in the Post-GATT Era.'' Funding from this project also
    supported the Great Lakes Dairy Sheep Symposium in 1995 and 1996, and
    creamed a World Wide Web site in 1996 for distribution of Babcock
    Institute technical dairy fact sheets in four languages. The first
    International Dairy Short Course for a group of producers and
    technicians from Argentina has been organized on the University of
    Wisconsin Campus. Scientist's are being supported in collaborative
    research with New Zealand primarily to gain a better understanding of
    grazing systems as related to dairy management.
        Grants have been awarded from funds appropriated as follows: fiscal
    years 1992 and 1993, $75,000 per year; fiscal year 1994, $250,000; and
    fiscal years 1995-1997, $312,000 per year. A total of $1,336,000 has
    been appropriated.
        During fiscal year 1992, $13,145 of State funds were used to
    support this program and $19,745 of State funds in fiscal year 1993 for
    a total of $32,890 during the first two years of this research.
    Information is not available for fiscal year 1994-1996.
        Research is being conducted at the University of Wisconsin-Madison
    College of Agriculture and Life Sciences. The Babcock Institute's
    overarching mission has been to link the U.S. dairy industry and its
    trade potential with overseas dairy industries and markets. The
    original objectives of this project have remained consistent over the
    years. However, each year specific objectives were proposed to further
    the mission of the Institute and to build on previous accomplishments.
    The Institute has accomplished specific objectives each year in a
    timely manner. This objective remains of increasing importance with
    continued development of international markets for dairy products and
    technologies. The University researchers anticipate that work currently
    in progress will be completed by September 1998. In keeping with the
    Administration's policy of awarding research grants competitively, no
    further Federal funding for this grant is requested.
        The Babcock Institute undergoes two independent review processes
    each year. The first is done by a committee of university and industry
    representatives who review the annual research proposal and amend it
    prior to submission to the agency. The annual proposal is reviewed by
    agency technical staff prior to approval for fund release. In addition,
    the institute was included in a comprehensive review of the programs of
    the Department of Dairy Science at the University of Wisconsin in May
    1995. The agency project officer has conducted two on-site reviews of
    the institute since it's formation in 1992. The most recent review has
    found that the approach proposed by the researchers is appropriate and
    that the researchers are well qualified to perform the objectives as
    stated.
                   barley feed for rangeland cattle, montana
        This project will support research on the nutritional value of
    barley cultivars as feed for beef cattle. This effort will assist with
    the breeding and selection of superior types that can be more
    competitive with other feed grains and improve farmer income from
    barley crops grown in rotational systems in the Northern Great Plains.
    Barley as a feed grain is grown extensively in the United States. Based
    on chemical analyses and the experience of some cattle feeders the
    principal researcher believes it should have a feed value on par with
    corn and wheat. However, it is listed as inferior to both in feeds hand
    books and is therefore discounted in the market. Comprehensive feeding
    studies of various barley types will be conducted to document the value
    as a feed grain for beef cattle. In view of significant needs for
    research in high priority national interest topics such as improved
    pest management systems, funds are not proposed to continue this
    Special Research Grant. At the discretion of the state, Hatch Act or
    other funding could be used to support this research. The principal
    researcher believes this research to be of national, regional or local
    need. The original goal of this research was to determine the true feed
    value of barley for feeder cattle, and thereby improve the economic
    return to barley production.
        The work supported by this grant began in fiscal year 1996 with an
    appropriation of $250,000. For fiscal year 1997, the appropriation is
    $500,000. The total appropriation is $750,000. The Montana State
    Agricultural Experiment Station is estimated to provide $30,000 in
    staff time and operational funds toward this project. The Principal
    investigator has generated an additional $130,000 of grant funding to
    support the work.
        Research will be conducted at Montana State University. The project
    is proposed for completion following fiscal year 2001. Progress toward
    the objectives have been reported by the principal researcher. Keeping
    with the Administration's policy of awarding research grants
    competitively, no further Federal funding for this grant is requested.
    Research could be continued at the State's discretion using formula
    funds.
        The project was peer reviewed in 1996 and judged to be
    scientifically sound and appropriate for the stated objectives.
            binational agricultural research and development program
        The Binational Agricultural Research and Development (BARD) Program
    is a competitive research grants program that supports fundamental
    research in areas of animal and plant sciences, economics, and
    engineering, that is important to both U.S. and Israel agriculture.
    Each application for funding must be a joint effort put forward by a
    team of U.S. and Israel scientists. The requests for proposals for the
    1997 competition was released in the fall of 1996. The proposals
    received are currently under review and funding decisions are expected
    to be completed by May 1997. The funds available through the BARD
    Special Research Grants Program are used to support the U. S. portion
    of approximately twenty joint U. S./Israel proposals each year. All
    proposals awarded by the BARD program must have significance to both
    U.S. and Israel agriculture. Thus, applicants must justify the work in
    terms of its global significance in order to receive funding.
    Fundamental research supported by the program provides the knowledge
    base needed to develop solutions to pressing agricultural problems in
    both nations.
        The goal of the BARD program is to support fundamental research in
    plant and animal sciences, economics, and engineering that are
    important to both U.S. and Israel agriculture. In that, the generation
    of new knowledge is an ongoing process, the original goal of the BARD
    program to produce new knowledge continues today. Much of the research
    supported concentrates on issues of animal and plant health (including
    studies of the pests and pathogens of both plants and animals), and
    responses of plants to environmental conditions (particularly crops
    grown in warm, dry climates). Many accomplishments in fundamental
    sciences have been made in these areas that will lead to the
    development of crop plants resistant to disease, pests, and harsh
    environmental conditions; reduction in livestock diseases; and
    increased livestock production.
        An agreement between the U.S. and Israel governments to establish
    BARD was signed in 1977, and an initial endowment fund of $80 million
    was established through equal contributions from both countries.\1\
    Funds for BARD were available from the interest earned from the
    endowment fund, but a reduction in interest rates and increased
    research costs over the years impeded the ability of the BARD program
    to adequately meet the research needs of each country's producers and
    consumers. In fiscal year 1994, the Department directed that $2.5
    million of funding appropriated for CSREES' National Research
    Initiative (NRI) program be used for the BARD program to supplement the
    interest earned from the endowment fund, and that amount was matched by
    Israel. In fiscal year 1995, Congressional language directed that
    CSREES again use $2.5 million of the NRI appropriation for BARD, and in
    fiscal year 1996, the Department directed that a third $2.5 million
    increment of NRI appropriations be used for BARD. CSREES has received a
    direct appropriation in the amount of $2 million for BARD in fiscal
    year 1997.
    ---------------------------------------------------------------------------
        \1\ Subsequent increase of $30 million to current total of $110
    million.
    ---------------------------------------------------------------------------
        Each BARD grant funded by CSREES is for the U.S. portion of a joint
    U.S./Israel project. The Israeli portion of the joint project is
    supported from either the endowment fund or from supplemental funds
    provided by Israel. Israel matches the supplemental funds provided by
    CSREES. Therefore, a significant portion of each project is supported
    with non-federal funds.
        BARD is an ongoing program designed to support fundamental science
    of importance to agriculture. Each year new projects are supported
    through the competitive process. Therefore, new objectives are set
    forth each year through the support of new and innovative proposals.
    Each proposal is funded for two to three years.
        Each proposal submitted to the BARD program receives a peer review
    evaluation. Only those proposals which review favorably are funded.
    CSREES has not conducted an overarching evaluation of the BARD program.
    However, the BARD program has an administrative council that is chaired
    by the ARS administrator. The council is responsible for providing
    advice as to content and policies of the BARD program.
                          biodiesel research, missouri
        Research on biodiesel involves examining the feasibility of
    producing biodiesel and other higher value products from oilseed crops
    including soybeans, canola, sunflower and industrial rapeseed. It also
    involves identifying and evaluating potential markets for the fuel and
    other products. An important thrust is to identify how biodiesel and
    other environmentally-friendly products can help meet state and federal
    environmental mandates of reduced air and water pollution. The project
    is also evaluating local processing plants whereby farmers could
    produce crops, process the crops locally and use the fuel and high
    protein feed coproducts on their farms or locally. The initial work is
    being done in Missouri. The results may provide the agricultural
    community with alternative crops and more diverse markets, additional
    marketable products and a locally grown source of fuel. This may result
    in increased investment in local communities, additional jobs, and
    increased value added in the farm and rural community sectors. The
    principal investigator believes this research to be of local, regional
    and national importance. However, in view of the significant need for
    research of high-priority national scope, such as integrated pest
    management, additional funding for this project is not proposed. At the
    discretion of the State, this effort could be supported with Hatch Act
    or other funding.
        The goals were to examine the feasibility of producing biodiesel
    and other higher value products from oilseed crops, plus to increase
    the value of coproducts. Results indicate that biodiesel can be
    produced most economically from soybeans, primarily because of the high
    value of soybean meal. Research indicates that with a community based
    biodiesel processing plant, costs of production could be as low as
    $0.59 per gallon, although farmers might increase revenues by selling
    the soybean oil rather than using it to produce biodiesel. Since small
    quantities of biodiesel regularly sell for $4.00 to $9.00 per gallon,
    the structure of the production, marketing and transportation is
    currently under evaluation to identify more efficient and less costly
    ways to produce and market biodiesel. Also, a study of which markets
    might provide the best opportunity to use increased levels of biodiesel
    is underway. Such markets might include underground mining and the
    marine industry in addition to urban mass transit systems and cities
    having problems meeting more stringent air quality mandates. Research
    results indicate that for each one million gallons of biodiesel used in
    a B20 blend (20 percent biodiesel and 80 percent petroleum-based
    diesel) by the Kansas City, Missouri, transit fleet would have the
    following estimated impacts: almost 100 additional jobs; increased
    investment of $500,000; net increase in personal income of $3.2
    million; and increase in total economic activity in the region of $9.6
    million. Research has also identified that rapeseed meal compares
    favorably to soybean meal and blood meal as an animal feed. It has a
    higher escape protein value than soybean meal. This research is carried
    out in close cooperation and coordination with other state and federal
    agencies, plus trade associations such as the National Biodiesel Board,
    the United Soybean Board, American Soybean Association, and others.
        The work began by this program began in fiscal 1993, and the
    appropriation for that year was $50,000. The appropriation for 1994 was
    $141,000; and for fiscal years 1995 through 1997 was $152,000 annually.
    A total of $647,000 has been appropriated.
        The source of non-federal funds is state appropriated funds. The
    level in 1994 was $7,310. The funding level in 1995 was $74,854.
    Additionally, some work funded by this grant has been conducted in
    cooperation with the National Biodiesel Board, plus the Missouri
    Soybean Merchandising Council. The level of those matching funds for
    these two sources are not available.
        The work is being carried out at the University of Missouri-
    Columbia. The principals estimate that the work with biodiesel will
    require an additional two years to complete. Additionally, the work on
    higher value products, such as solvents from biodiesel, is expected to
    be on-going. Successes with the higher value products will help make
    bio-based business more profitable, thus increasing chances for success
    which will result in more value added opportunities for farmers and
    rural communities. Keeping with the Administration's policy of awarding
    research grants competitively, no further Federal funding for this
    grant is requested.
        The CSREES agency scientist reviews the annual proposal submissions
    to evaluate progress to date.
                             biotechnology, oregon
        Research that has been funded under the Biotechnology Oregon
    project includes the use of nematodes for biocontrol of insect pests;
    development of bacterial vectors for vaccines and food additives;
    resistance to crown gall disease in plants; enhancement of anthocyanin
    pigments in plants, and enzymes for degrading lignin and wood waste.
    The principal researcher believes the research funding is requested to
    enhance the biotechnology research infrastructure in basic and applied
    biotechnology within the cooperating institutions, Oregon State
    University, the University of Oregon, and the Oregon Graduate Institute
    of Science and Technology. In view of significant needs for research in
    high priority national interest topics such as improved pest management
    systems, funds are not proposed to continue this Special Research
    Grant. At the discretion of the State, Hatch Act or other funding could
    be used to support this research, including IPM competitive grant and
    emerging pest and disease funds.
        The goal of the program is to improve the biotechnology research
    infrastructure, to foster research discoveries, and to develop
    technologies that lead to agricultural applications. Preference is
    given to research that has the potential for commercial development in
    the near future and that has the potential for additional funding from
    other sources. Five research projects in the areas mentioned above were
    funded under the grant in 1996.
        The work supported by this grant began in fiscal year 1996, and the
    appropriation for fiscal year 1996 was $217,000, and for fiscal year
    1997 is $250,000. A total of $467,000 has been appropriated. In fiscal
    year 1995, the State of Oregon appropriated $1,226,706 for
    biotechnology research at Oregon State University. For fiscal year
    1996, non-federal support amounted to $303,100, mostly from the private
    sector.
        The research is being carried out at three cooperating
    institutions, Oregon State University, the University of Oregon, and
    the Oregon Graduate Institute of Science and Technology. Both the
    overall grant and the individual research projects funded under it are
    funded on a two-year basis. The Biotechnology Oregon grant was first
    awarded in 1996 and the anticipated completion date is July 31, 1998.
    Keeping with the Administration's policy of awarding research grants
    competitively, no further Federal funding for this grant is requested.
    Research could be continued at the State's discretion using formula or
    other funds.
        The agency has not yet received the Biotechnology Oregon proposal
    for fiscal year 1997. The project was last evaluated for scientific
    merit by a Peer Review Panel in the spring of 1996. The Panel
    recommended approval without change in the research approach and plans.
                                broom snakeweed
        Current research addresses several areas for broom snakeweed
    control, including efforts to Understanding more fully the onset of
    invasion and persistence of broom snakeweed, evaluate the toxicology
    and physiological effects of broom snakeweed on livestock, and develop
    an integrated weed management approach for broom snakeweed. Broom
    snakeweed is a serious weed in the southwestern United States and
    adjacent Western States. About 22 percent of rangeland in Texas, and 60
    percent in New Mexico is infested to some degree by the weed. Current
    cost for control of broom snakeweed in the southwestern United States
    is estimated at over $41 million. Dense broom snakeweed stands cause
    significant economic losses in the plains, prairie and desert areas of
    the central and southwestern United States. Snakeweed is a poisonous
    plant causing death and abortion in livestock and reduced productivity
    of associated vegetation. In view of significant needs for research in
    high priority national interest topics such as improved pest management
    systems, funds are not proposed to continue this Special Research
    Grant. At the discretion of the state, Hatch Act or other funding could
    be used to support this research.
        Ground surveys have been conducted statewide from 1989 to map
    snakeweed distribution and relative density patterns throughout every
    county in New Mexico. This project is in its fourth research year. A
    Geographic Information System [GIS] approach is used to relate
    snakeweed populations to plant communities and soil type in areas where
    snakeweed is particularly dense. Research is addressing three general
    areas which are, first, ecology and management; second, biological
    control studies; and third, toxicology and animal health research. A
    considerable amount of useful research and practical application has
    resulted from this special grant. As an example, in biological control,
    several plant pathogens and insects are proving to be effective in
    snakeweed's control. Another area of emphasis, has been grazing
    management techniques and feeding studies to minimize toxicological
    effects on livestock. Feeding trials have demonstrated that, snakeweed
    ingestion at 10 percent of diet did not impair fertility or semen
    characteristics in the test animal which was male rats.
        Grants have been awarded from funds appropriated as follows: fiscal
    year 1989, $100,000; fiscal year 1990, $148,000; fiscal year 1991,
    $150,000; fiscal years 1992 and 1993, $200,000 per year; fiscal year
    1994, $188,000; fiscal years 1995 and 1996, $169,000 each year; and
    fiscal year 1997, $175,000. A total of $1,499,000 has been
    appropriated.
        The non-federal funds and sources provided for this grant were as
    follows: $249,251 state appropriations in 1991; $200,110 state
    appropriations in 1992; $334,779 state appropriations in 1993; $302,793
    state appropriations in 1994; $294,451 state appropriations in 1995,
    and an estimated $300,000 in state appropriations in 1996.
        Research is being conducted at New Mexico State University. The
    project was initiated in 1989. Currently additional and related
    objectives have evolved and anticipated completion date for these is
    1999. Considerable progress has been made on many of the objectives.
    Anticipated completion date of the additional and related objectives
    that have resulted based on the current work, would indicate another
    five years. Keeping with the Administration's policy of awarding
    research grants competitively, no further Federal funding for this
    grant is requested.
        Each year the grant is peer reviewed and reviewed by CSREES's
    senior scientific staff. A summary of those review indicated progress
    in the achieving the objectives.
             canola research special grant, kansas state university
        Rapeseed lines from around the world are being evaluated for
    increased winter hardiness. Elite lines are being used to develop
    canola germplasm lines that will survive the winter in the central
    Great Plains. This will be accomplished using a plant breeding program.
    The domestic demand for canola oil has been increasing rapidly. With
    little domestic production, most of the demand has been met by imports.
    Private seed companies are not devoting time or money to develop the
    cultivars needed for canola production in Kansas and central Great
    Plains. Oil seed crushing facilities in the region are shutting down
    for several months each year due to a lack of sunflowers/soybeans grown
    in the area. A canola harvest in July would precede the sunflower or
    soybean harvest by three months, help crushing facilities continue
    crushing during this slow period, and maintain jobs. A canola industry
    in the area would also help spread the risk of the producers into more
    than just a small grain commodity base and into the oilseed market.
    Germplasm developed at Kansas State University is being evaluated from
    Virginia and Georgia to Wyoming and Texas and may help develop an
    industry in other areas of the country. In view of the significant
    needs for research in high priority national interest topics such as
    improved pest management systems, funds are not proposed to continue
    this Special Research Grant. At the discretion of the state, Hatch Act
    or other funding could be used to support this research. The principal
    researcher believes this research to be of national, regional or local
    need.
        The original goal was to collect germplasm with increased winter
    hardiness and use it to develop cultivars with sufficient winter
    survivability to be grown in the central Great Plains. At present,
    nearly 700 rapeseed and canola quality lines have been acquired and
    tested. The hardiest have been used as parents to produce lines. In the
    past five years, over 800 crosses have been made. Field and laboratory
    testing began during the fall of 1993. In 1993-94, advanced selections
    from these populations had a 30 percent increase in winter survival
    over the best released cultivars in western Kansas and in environments
    where winter survival was not a factor, these same lines had a 20
    percent yield advantage over the best released cultivars. In 1994-95
    this germplasm was tested at 12 locations in seven states throughout
    the Great Plains and Midwest. Over all locations, several experimental
    lines that have shown increased winter hardiness in past years had
    yields equal to the best cultivars used as checks. The winter of 1995-
    96 has been severe in the Great Plains as well as most of the country.
    Severe winter kill is expected in the breeding nurseries with only the
    hardiest plants surviving. Advanced lines continued to demonstrate a
    winter survival advantage over previously released cultivars. Over the
    next several years, surviving plants will be advanced and those lines
    possessing superior traits will become the basis of our second
    generation of released cultivars. In 1995, KS3579 was released to other
    breeders as a germplasm. This line has shown significant improvement in
    winter hardiness and will be beneficial in increasing winter hardiness
    in canola cultivars around the world. A canola quality rapeseed
    cultivar is planned for release in the summer of 1997. It will be used
    as the basis for establishing production in south central Kansas, as
    well as other areas of the Great Plains.
        Work began on this project in 1992. Funding for fiscal year 1992
    and fiscal year 1993, was $100,000 per year; fiscal year 1994 was
    $94,000; and fiscal years 1995 through 1997 were $85,000 each. A total
    of $549,000 has been appropriated.
        Kansas State University has provided $44,960 in fiscal year 1992,
    $21,321 in fiscal year 1993, and $22,336 in fiscal year 1994, $23,399
    in fiscal year 1995, $24,513 in fiscal year 1996 and $25,679 in fiscal
    year 1997. An additional $50,000 was provided through a grant from Dane
    G. Hansen Foundation for fiscal years 1993-1995.
        The work is being conducted at Kansas State University,
    Agricultural Experiment Station, Department of Agronomy. The primary
    research site is at Manhattan with additional field locations at
    Hutchinson, Hays, Colby, Belleville, Kingman, Garden City and Parsons,
    Kansas. Germplasm developed by Kansas State University is also being
    cooperatively tested by researchers in Texas, Missouri, Colorado,
    Nebraska, Illinois, Arkansas, Oklahoma, and Wyoming.
        The original objectives were to develop the factors needed to
    establish canola production in Kansas and the Central Great Plains. The
    primary concern addressed by this project was the lack of cultivars
    adapted to the area. Advanced selections adapted for the growing
    conditions of the Great Plains and representing a significant
    improvement in both winter hardiness and yield potential for our unique
    environment, are being developed. Foundation seed of the best of these
    lines will be increased over the 1996-1997 growing season and released
    to certified seed growers in 1997. Industrial groups have been
    instrumental in developing a market for the area. Improved germplasm in
    the early generations continues to be identified so progress and
    cultivar improvement can continue. The average time between the initial
    cross and a released variety is 8 to 10 years. The first crosses made
    at Kansas State University were in 1993. Germplasm that is currently
    targeted for improvement will be released in year 2007. Keeping with
    the Administration's policy of awarding research grants competitively,
    no further Federal funding for this grant is requested. Research could
    be continued at the State's discretion using formula or other funds.
        This project is reviewed annually, based upon the annual progress
    report and presentation at the Southern Extension and Research Activity
    Information Exchange Group for oilseeds [SERA-IEG-11]. The review is
    conducted by the cognizant staff scientist who has determined that the
    research is in accordance with the mission of the agency.
            center for animal health and productivity, pennsylvania
        This research is designed to reduce nutrient transfer to the
    environment surrounding dairy farms in the Chesapeake Bay watershed.
    Progress to date includes the development of a individual dairy cow
    model which will predict absorbed amino acids and the loss of nitrogen
    in manure. This model has been developed into user friendly software so
    that trained farm advisors can evaluate herd nutrient management status
    while on site. A whole farm model has been developed which integrates
    feeding and agronomic practices to predict utilization of nitrogen and
    farm surpluses. Using these tools, a survey of dairy farms in the
    region has been done to assess nitrogen status on dairy farms and
    potential management practices to reduce nitrogen excesses on dairy
    farms. Refinement of the model tools and research to refine estimates
    of the environmental fate of excess nitrogen from dairy farms is in
    progress.
        The principal researcher believes that reducing non-point pollution
    of ground and surface water by nitrogen from intensive livestock
    production units is of concern nationally, and especially in sensitive
    ecosystems like the Chesapeake Bay. This research is designed to find
    alternative feeding and cropping systems which will reduce net nutrient
    flux on Pennsylvania dairy farms to near zero. In view of significant
    needs for research in high priority national interest topics such as
    improved pest management systems, funds are not proposed to continue
    this Special Research Grant. At the discretion of the State, Hatch Act
    or other funding could be used to support this research. The principal
    researcher believes this research to be of national, regional, and
    local need.
        The original goal of this research remains the development of whole
    farm management systems which will reduce nutrient losses to the
    external environment to near zero. To date the researchers have
    developed their own models to more accurately formulate rations for
    individual dairy cows which permit the comparison of alternative
    feeding programs based upon both maximal animal performance and minimal
    nutrient losses in animal waste. This model is being tested on select
    commercial dairy farms to evaluate the extent to which total nitrogen
    losses in manure can be reduced without impacting economic performance
    of the farm. At the same time, whole farm nutrient models have been
    developed to evaluate alternative cropping systems which will make
    maximum use of nutrients from animal waste and minimize nutrient flux
    from the total farm system. These tools are currently being used to
    survey the current status of nutrient balance on farms in the area and
    efforts to fine tune the tools are in progress.
        A grant has been awarded from funds appropriated in fiscal year
    1993 for $134,000 and in fiscal year 1994 for $126,000. In fiscal years
    1995-1997, $113,000 has been appropriated each year. A total of
    $599,000 has been appropriated.
        Research is being conducted at the University of Pennsylvania,
    College of Veterinary Medicine. The University researchers anticipate
    that work currently underway will be completed by September 1998. This
    will complete the original objectives of the research. The principal
    researcher indicates that consideration has been given to the
    broadening of objectives to include additional nutrients in the model
    system, but this has been dropped because technical expertise required
    is currently not readily available. Keeping with the Administration's
    policy of awarding research grants competitively, no further Federal
    funding for this grant is requested.
        The Center for Animal Health and Productivity project was last
    reviewed in June 1996. An on site review by agency technical staff was
    conducted in June 1995. It was concluded that project objectives are
    within the goals of the program, are within the mission of both USDA
    and CSREES, and the institution is well equipped and qualified to carry
    out the research project.
                  center for innovative food technology, ohio
        Funds from the fiscal year 1996 grant are supporting research
    projects on using neural network/fuzzy logic tools to develop a model
    of a growing and processing cycle for processing tomatoes, developing
    specifications for a system and to optimize the techniques necessary to
    satisfactorily package products sterilized non-thermally with pulsed
    electric field systems, to demonstrate whether an ultrasonic washing
    appliance has the capacity to kill common foodborne pathogens or modify
    it to do so, to demonstrate the feasibility of using enzyme linked
    immunosorbent assays in the measurement of pesticides in Great Lakes
    fish, to refine and optimize the performance of a prototype turkey
    deboning system, to develop a vision based inspection system for baked
    goods, and to develop electrostatic coating processes for applying
    powdered materials to food products.
        The principal researcher believes the value-added food processing
    industry is the largest industry in Midwestern states, including Ohio
    where the industry contributes over $17 billion to the annual economy.
    From an economic development point of view, processing and adding-value
    to crops grown within a region is the largest possible stimulus to that
    region's total economic product. This program aims to partner with and
    encourage small and medium sized companies to undertake innovative
    research that might otherwise not be undertaken due to risk aversion
    and limited financial resources for research and development in these
    companies. In view of significant needs for research in high priority
    national interest topics such as improved pest management systems and
    food safety, funds are not proposed to continue this Special Research
    Grant. At the discretion of the State, Hatch Act or other funding could
    be used to support this research.
        The original goal of the research was to develop innovative
    processing techniques to increase food safety and quality or reduce
    processing costs. The neural network project has led to a model that
    will be used to relate growing and processing variables to product
    quality, resulting in higher product quality at lower cost. The pulsed
    electric field sterilization program has demonstrated the ability to
    produce high quality products with extended shelf stability. The
    research on immunosorbent assays has demonstrated benefits, beyond the
    original scope of the project, to the poultry industry by providing an
    inexpensive and timely method for measuring residual pesticide levels
    in turkeys. The coating project has generated several applications
    where the shelf life of products can be extended.
        The work supported by this grant began in fiscal year 1995. The
    project received appropriations of $181,000 in fiscal years 1995
    through 1997. A total of $543,000 has been appropriated. In fiscal year
    1995, non-federal funds included $26,000 from state funds and $70,000
    from industry memberships. In fiscal year 1996, non-federal funds
    included $26,000 in state funds and $80,000 in industry funds.
        Research is being conducted in the laboratories of the Ohio State
    University and at various participating companies in Ohio, Illinois,
    and Pennsylvania. The principal investigator anticipates that some
    projects supported by the fiscal year 1996 grant will have been
    completed by February 28, 1997, while other projects will not be
    completed until February 28, 1998. Keeping with the Administration's
    policy of awarding research grants competitively, no further Federal
    funding for this grant is requested. Research could be continued at the
    State's discretion using formula funds.
        An agency science specialist conducts a merit review of the
    proposal submitted in support of the appropriation on an annual basis.
    Since the agency has not yet received the proposal in support of the
    fiscal year 1997 proposal, the last review of the proposal was
    conducted on January 22, 1996. At that time, the agency science
    specialist believed that the projects addressed issues relevant to food
    manufacturing, were scientifically sound, and that satisfactory
    progress was being demonstrated using previously awarded grant funds.
                       center for rural studies, vermont
        The University is developing and refining social and economic
    indicators used to evaluate the impact of economic development
    programming and activities. They are also perfecting a delivery format
    for technical assistance for community and small business development.
    A major focus of current research relates to utilizing the World Wide
    Web as a major delivery vehicle. The principal researcher believes that
    the database and analytical capability provide technical indicators and
    timely information to support entrepreneurial and community development
    activities in the State. The program is conducted in concert with other
    University and State agency outreach activities. In view of significant
    needs for research in high priority national interest topics, funds are
    not proposed to continue this Special Research Grant. At the discretion
    of the State, Hatch Act or other funding could be used to support this
    research.
        The original goal was to create a database and analytical
    capability for rural development in Vermont. Examples of past
    accomplishments include thematic maps presented to help target child
    hunger programs and target places for programmatic intervention;
    analytical reports provided to guide the development of retail shopping
    areas; a reference volume, ``Economic Handbook for Vermont Counties,''
    produced for public distribution to help Vermont citizens and leaders
    answer the most frequently asked questions about their State and
    counties; currently utilizing the World Wide Web to disseminate
    information and technical assistance.
        The work supported by this grant began in fiscal year 1992 and the
    appropriation for fiscal years 1992-1993 was $37,000 per year; fiscal
    year 1994, $35,000; and fiscal years 1995-1997, $32,000, for a total of
    $205,000. Prior to receipt of any Federal funds in fiscal year 1991,
    the Center was supported by $91,130 in State and other non-federal
    funds. In fiscal year 1992, these funds increased to $101,298 and to
    $143,124 in fiscal year 1993. The amount of non-federal dollars was
    $3,547 for fiscal years 1995-1996 and $2,931 in fiscal year 1997 plus
    researcher's salary.
        Research is being conducted at the University of Vermont. The
    original completion date was September 30, 1993. The original
    objectives of the research project have been met. The completion of
    additional objectives is scheduled for August 31, 1998. However, in
    keeping with the Administration's policy of awarding research grants
    competitively, no further Federal funding for this grant is requested.
    Research could be continued at the State's discretion using formula
    funds.
        The agency evaluates merit of research proposals as submitted. No
    formal evaluation of this project has been conducted.
                      chesapeake bay aquaculture, maryland
        The objective of this research is to improve the culture of striped
    bass through genetics, reproductive biology, nutrition, health
    management, waste management and product quality. The research provides
    a balance between basic and applied research. The principal researcher
    believes the Mid-Atlantic region of the country has significant
    opportunities to contribute to the overall development of the domestic
    aquaculture industry. Research supported through this program can have
    broad application and enhance production efficiency and the
    sustainability of aquaculture as a form of production agriculture. In
    view of significant needs for research in high priority national
    interest topics such as improved pest management systems, funds are not
    proposed to continue this Special Research Grant. At the discretion of
    the state, Hatch Act or other funding could be used to support this
    research.
        The original research goal was to generate new knowledge that can
    be utilized by the aquaculture industry to address problems limiting
    the expansion of the industry in Maryland and the Mid-Atlantic region.
    The program focuses on closing the life cycle of the striped bass and
    its hybrids, enhancing production efficiency, and improving product
    quality under aquaculture conditions. Research is conducted in the
    areas of growth, reproduction and development, aquacultural systems,
    product quality, and aquatic animal health. Researchers are currently
    evaluating the performance of triploid striped bass. Progress has been
    made in developing controlled artificial spawning techniques and
    refining the nutritional requirements of striped bass. Scientists
    continue studies to characterize waste production as a function of
    feeding levels to reduce waste generation in striped bass production
    systems.
        The work supported under this grant began in fiscal year 1990 and
    the appropriation for fiscal year 1990 was $370,000. The fiscal years
    1991-1993 was $437,000 per year; fiscal year 1994, $411,000; and fiscal
    years 1995-1997, $370,000 each year. A total of $3,202,000 has been
    appropriated.
        The university reports the amount of non-federal funding for this
    program is as follows: in fiscal years 1991 and 1992, $200,000; in
    fiscal years 1993 and 1994, $175,000; in fiscal year 1995, $400,000;
    and in fiscal year 1996, $536,000. The university reports that these
    funds are from direct state appropriations and other non-federal
    funding sources.
        Research is being conducted at the University of Maryland. The
    original specific research objectives were to be completed in 1993.
    These specific research objectives have been met. The specific research
    outlined in the current proposal will be completed in fiscal year 1998.
    Keeping with the Administration's policy of awarding research grants
    competitively, no further Federal funding for this grant is requested.
        The agency evaluates the progress of this project on an annual
    basis. The university is required to submit an accomplishment report
    when the new proposal is submitted to CSREES for funding. The 1996
    review indicated the proposal was well written with objectives clearly
    stated, that adequate progress had been reported on previous work, and
    that the scientific expertise is appropriate for the proposed research.
                               coastal cultivars
        This project will be undertaken to identify new ornamental, fruit,
    and vegetable crops for the lower coastal plain of Georgia and develop
    management systems for profitable production. This effort is designed
    to improve the rural economy and to help supply an expanding market for
    the products in that region and possibly beyond. The research under
    this project has regional significance for coastal zone land in the
    South Eastern U.S. on potential new plants for the growing regional
    market for ornamental and speciality fruits and vegetables. In view of
    significant needs for research in high priority national interest
    topics such as improved pest management systems, funds are not proposed
    to continue this Special Research Grant. At the discretion of the
    State, Hatch Act or other funding could be used to support this
    research. The original goal of this research was to identify new plant
    cultivars to provide alternative crops with economic potential to the
    coastal area.
        The work supported by this grant begins in fiscal year 1997 and the
    appropriation for fiscal year 1997 is $200,000.
        Research will be conducted at the University of Georgia coastal
    garden. The project is projected for three years duration and,
    therefore, should be completed following fiscal year 1999. In keeping
    with the Administration's policy of awarding research grants
    competitively, no further funding for this grant is requested.
              competitiveness of agriculture products, washington
        This grant improves the global competitiveness of value-added
    agricultural and forest products produced in the Pacific Northwest
    region. It identifies and conducts needed research and disseminates the
    results through various activities such as trade shows, international
    conferences, and a variety of media. Research focuses on foreign market
    assessments, product development, and policy and trade barriers.
    Particular attention has been paid to developing the technology that
    can add value to U.S. agricultural and forest products in order to make
    U.S. exports more competitive. The principal researchers believe that
    rural economic development and growth of the Pacific Northwest region
    is dependent upon the ability of the agricultural and forest product
    sectors to penetrate overseas markets, especially in Pacific Rim
    countries. Japan and China present especially attractive prospects for
    evolving U.S. food and forest products exports. In view of significant
    needs for research in high priority, national interest topics such as
    improved pest management systems, funds are not proposed to continue
    this Special Research Grant. At the discretion of the State, Hatch Act,
    or other funding could be used to support this research.
        The original goals were to develop export markets for value-added
    food and forest products produced in the Pacific Northwest and to
    improve competitiveness of these industries. Research at Washington
    State University's International Marketing Program for Agricultural
    Commodities and Trade enables Pacific Northwest producers to grow and
    export Asian and other products never before produced in this country
    on a commercial basis. The Center identified export opportunities in
    East Asia and elsewhere and has developed production and marketing
    systems for Wagyu beef, azuki beans, edamame soybean, and wasabi
    radish, to name a few. Other promising products are in the pipeline
    leading toward commercialization. The Center is also developing
    economical and environmentally-friendly food processing techniques. It
    searches for scientific solutions to trade barriers. It monitors
    progress in multilateral trade agreements, leading to opportunities for
    trade liberalization.
        Research at the University of Washington's Center for International
    Trade in Forest Products has helped open the Japanese housing market to
    U.S. exports. The Center hosted a significant housing export conference
    in Seattle in September 1996 at which U.S. Ambassador Walter Mondale
    and Japanese officials agreed to what has been a major breakthrough in
    U.S. export opportunities. Japanese builders have benefited from the
    Center's research. They have been taught how to lower their costs by
    using U.S. building techniques and products. Valueadded exports have
    grown 200 percent since 1989 as Japan deregulated its housing market
    after recognizing the opportunities set forth by this research. Other
    research at the Center developed export and marketing information for
    prefabricated housing, red cedar, substitute products, Russia/China
    trade potential, impact of climate change on competitiveness, U.S./
    Canadian trade, and impact of Western supply constraints on Southern
    forest products markets.
        The work supported by this grant began in fiscal year 1992. The
    appropriation for fiscal year 1992-1993 was $800,000 each year; fiscal
    year 1994, $752,000; and fiscal years 1995-1997, $677,000 each year. A
    total of $4,383,000 has been appropriated.
        The non-federal funds and sources provided for this grant are as
    follows: $716,986 State appropriations, $209,622 product sales,
    $114,000 industry, and $661,119 miscellaneous for a total of $1,701,727
    in 1991; $727,345 State appropriations, $114,581 product sales,
    $299,000 industry, and $347,425 miscellaneous for a total of $1,488,351
    in 1992; $1,259,437 State appropriations, $55,089 product sales,
    $131,000 industry, and $3,000 miscellaneous for a total of $1,448,526
    in 1993; $801,000 State appropriations, $1,055,000 product sales,
    $1,040,000 industry, and $244,000 miscellaneous for a total of
    $3,140,000 in 1994; $810,000 State appropriations, $42,970 product
    sales, $785,000 industry, and a $2,000,000 gift of a ranch due to the
    IMPACT Center's research on Wagyu Cattle, for a total of $3,637,870 in
    1995; and $844,000 State appropriations, $45,000 product sales,
    $900,000 industry, and $45,000 miscellaneous for a total of $1,789,000
    in 1996. The preliminary allocation for 1997 is $1,305,000 state
    appropriations, $92,000 product sales, $1,000,000 industry, and $85,000
    miscellaneous for a total of $2,542,000.
        The research program is being carried out by the International
    Marketing Program for Agricultural Commodities and Trade at Washington
    State University, Pullman, and the Center for International Trade in
    Forest Products at the University of Washington, Seattle.
        This is a continuing program of research with long-term, crop and
    animal improvement projects, and long-term agricultural and forest
    products market development projects. As projects are completed, new
    projects have begun. Some of the new projects can be completed by 2000,
    but some improvement and development projects will take much longer to
    reach their full potential. Objectives have been met for certain
    products in certain markets, but unmet opportunities abound. With the
    exception of the improvement projects, most of the work can be
    completed by 2000. Keeping with the Administration's policy of awarding
    research grants competitively, no further Federal funding for this
    grant is requested.
        Projects are evaluated annually through review of progress reports
    and periodically through more extensive review. The U.S. Department of
    Agriculture reviewed the Washington State University project in 1991.
    The University of Washington Center is just completing a formal 5-year
    review. The report will be available early in 1997. In addition, the
    Center made comprehensive use of a broadly-construed Executive Board
    having industry, agency, and academic representation to review
    quarterly accomplishment reports and suggest additional activities. The
    last formal on-site Departmental review was in 1991, but the Department
    reviews the project annually and participates in the quarterly
    Executive Board reviews.
                          cool season legume research
        The Cool Season Legume Research Program involves collaborative
    research projects to improve efficiency and sustainability of pea,
    lentil, chickpea and fava bean cropping systems. Scientists from seven
    states where these crops are grown have developed cooperative research
    projects directed toward crop improvement, crop protection, crop
    management and human nutrition/product development. The principal
    researcher believes the original goal of this project was to improve
    efficiency and sustainability of cool season food legumes through an
    integrated collaborative research program and genetic resistance to
    important virus diseases in peas and lentils. Evaluation studies of
    biocontrol agents for root disease organisms on peas are underway.
    Other studies are evaluating integration of genetic resistance and
    chemical control. Considerable progress has been made using
    biotechnology to facilitate gene identification and transfer.
    Management system studies have addressed tillage and weed control
    issues. In view of significant needs for research in high priority
    national interest topics such as improved pest management systems,
    funds are not proposed to continue this Special Research Grant. At the
    discretion of the State, Hatch Act or other funding could be used to
    support this research.
        The work supported by this grant began in fiscal year 1991 with
    appropriations for fiscal year 1991 of $375,000; fiscal year 1992 and
    1993, $387,000 per year; fiscal year 1994, $364,000; fiscal year 1995,
    $103,000; fiscal years 1996 and 1997, $329,000. A total of $2,274,000
    has been appropriated.
        The nonfederal funds provided for this grant were as follows:
    fiscal year 1991, $304,761 state appropriations, $14,000 industry, and
    $18,071 other nonfederal; fiscal year 1992, $364,851 state
    appropriations, $15,000 industry, and $14,000 other nonfederal; fiscal
    year 1993, $400,191 state appropriations, $19,725 industry, and
    $10,063, other nonfederal; and fiscal year 1994, $147,607 nonfederal
    support. Nonfederal support for fiscal year 1995 was $150,607 and for
    fiscal year 1996 it was $386,887.
        Research has been conducted at the Agricultural Experiment Stations
    in Idaho, Oregon, Washington, Wisconsin, Minnesota, New York and New
    Hampshire. The funds have been awarded competitively among
    participating states and not all states receive funds each year. The
    projected duration of the initial project was five years. In keeping
    with the Administration's policy of awarding research grants
    competitively, no further Federal funding for this grant is requested.
    Research could be continued at the State's discretion using formula
    funds.
        The steering committee made up of growers, industry representatives
    and scientists, review this project annually for merit and relevance.
    Each annual proposal is made up of sub-projects that have been peer
    reviewed and selected to address priority issues within each of the
    broad objectives. The combined project is reviewed by CSREES before
    funds are awarded.
              cranberry-blueberry disease and breeding, new jersey
        This work has focused on identification and monitoring of insect
    pests on blueberries and cranberries, the identification, breeding, and
    incorporation of superior germplasm into horticulturally desirable
    genotypes, identification and determination of several fungal
    fruitrotting species, and identification of root-rot resistant
    cranberry genotypes. Overall, research has focused on the attainment of
    cultural management methods that are environmentally compatible, while
    reducing blueberry and cranberry crop losses. This project involves
    diseases having major impacts on New Jersey's cranberry and blueberry
    industries, but the findings here are being shared with experts in
    Wisconsin, Michigan, and New England. In view of significant needs for
    research in high priority national interest topics such as the
    Department's pest management initiative, funds are not proposed to
    continue this Special Research Grant. At the discretion of the State,
    Hatch Act or other funding could be used to support this research.
        The original goal was the development of cranberry and blueberry
    cultivars compatible with new disease and production management
    strategies. Last year, over 75 blueberry selections were moved into
    advanced testing, and wild blueberry accessions resistant to secondary
    mummy berry infections were identified. The biology and seasonal life
    history of spotted fireworm on cranberries was determined. A pheromone
    trap-based monitoring system for cranberry fruitworm was developed and
    further refined for commercialization in 1997. Blueberry fruit
    volatiles attractive to blueberry maggot were identified and tested in
    the field. Seven major fungal fruit-rotting species were identified,
    and their incidence in 10 major cultivars of blueberry and blueberry
    were determined, and it is likely that resistance to fruit rots is
    specific to fungal species. Researchers identified about 20 root rot-
    resistant cranberry genotypes in an artificially inoculated field
    trial.
        Grants have been awarded from funds appropriated as follows: fiscal
    year 1985, $100,000; fiscal year 1986-1987, $95,000 per year; fiscal
    years 1988 and 1989, $260,000 per year; fiscal year 1990, $275,000;
    fiscal years 1991-1993, $260,000 per year; fiscal year 1994, $244,000;
    and fiscal years 1995-1997, $220,000 each year. A total of $2,769,000
    has been appropriated. State and other non-federal sources are
    providing funds in the amount of $93,970 for this grant in fiscal year
    1997.
        This research is being conducted at the New Jersey Agricultural
    Experiment Station. The anticipated completion date for the original
    objectives was 1995. Those objectives have not been met. To complete
    the breeding, disease and insect management and provision of new
    management guidelines for extension and crop consultants, it is
    estimated that an additional three to nine years will be required.
    Keeping with the Administration's policy of awarding research grants
    competitively, no further Federal funding for this grant is requested.
        The last agency evaluation of this project occurred in December,
    1996. In summary, the evaluation stated that the effort has continued
    to be highly productive, with various improved management strategies,
    plant material and environmentally-balanced pesticides being areas of
    major impact.
                                critical issues
        These grant funds support research on critical issues impacting
    agriculture that require immediate attention. These funds are intended
    to initiate research efforts until other resources can be secured to
    address the critical issues. This program started in fiscal year 1996
    when one half of our Critical Issues funds were allocated to initiate
    research on potato late blight, which is caused by a fungus, a new
    strain of which has spread through the nation causing extensive crop
    losses. The objective is to have a better understanding of the fungus
    to enable scientists to predict and in manage the outbreaks using an
    integrated pest management program. The other half of our 1996 Critical
    Issues funds were allocated to initiate research on vesicular
    stomatitis, a disease of horses, cattle, and swine which has symptoms
    very similar to those of food and mouth disease. Livestock producers
    are concerned about the potential adverse impact of quarantine measures
    as a result of the spread of this disease. The objective is to develop
    a better understanding of the disease so more effective control
    measures can be used. Both potato late blight and vesicular stomatitis
    have national impact of a critical nature and are therefore both very
    high priority efforts.
        Six research proposals have been funded to address potato late
    blight, and scientists have initiated their work on aspects of this
    epidemic. The first North American Late Blight Workshop was convened
    which involved potato growers and processors, national potato
    organizations, university scientists, and the chemical industry. The
    major contribution of this workshop was the resulting set of
    recommendations for short-and long-term efforts need to solve this
    problem, and workshop organizers set up a Internet home page which
    invites dialogue on research and education needs for the management of
    late blight.
        Two research proposals have been funded to address vesicular
    stomatitis, which was identified as the highest priority problem in
    1996 in discussions with commodity groups, regulatory veterinarians and
    colleagues in ARS and APHIS. Work has been initiated under the two
    funded projects which are now focusing on transmission of the virus.
        $200,000 was appropriated in both fiscal year 1996 and 1997 for a
    total appropriation of $400,000 to date.
        Potato late blight work is being carried out at Washington State
    University, Oregon State University, the University of Idaho, the
    University of Wisconsin, and Pennsylvania State University. Vesicular
    stomatitis work is being carried out at Colorado State University and
    the University of Arizona. The Critical Issues funds are intended to
    support the initiation of research on issues requiring immediate
    attention until other, longer-term, resources can be secured. The
    objectives of the projects supported with these funds are short-term
    and are therefore expected to be met within 1-2 years.
        All projects were reviewed for scientific merit before funding
    decisions were made. Also, scientists whose work on potato late blight
    and vesicular stomatitis is supported with Critical Issues funding are
    in close contact with CSREES' National Program Leaders so that the
    agency is kept abreast of developments as they occur.
             dairy and meat goat research, prairie view a&m, texas
        The program has addressed a range of issues associated with goat
    production. Research by Scientists at the International Dairy Goat
    Center, Prairie View A&M University focuses on problems affecting goat
    production in the United States. Issues included are the study of
    nutritional requirements of goats, disease problems, methods to improve
    reproductive efficiency in the doe, the use of gene transfer to improve
    caprine genetics and the evaluation of breeding schemes to improve meat
    and milk production. Currently, research is in progress to develop an
    enterprise budget support program for goat production systems in the
    Texas Gulf Coast Region. The principal researcher believes that
    nationally, most of the farm enterprises that include goats are diverse
    and maintain a relatively small number of animals. Responding to
    disease, nutrition, breeding and management problems will improve
    efficiency of production and economic returns to the enterprise. In
    view of significant needs for research in high priority national
    interest topics, funds are not proposed to continue this Special
    Research Grant. At the discretion of the State, other funding could be
    used to support this research.
        The original goal of this research was to conduct research that
    will lead to improvement in goat production among the many small
    producers in the United States. Research has been conducted to develop
    and improve nutritional standards, improve genetic lines for meat and
    milk production and to define mechanisms that impede reproductive
    efficiency in goats. Current efforts focus on the development of
    enterprise budget management tools for goat producers in the Texas gulf
    coast region.
        Grants have been awarded through appropriated funds as follows:
    $100,000 per year for fiscal years 1983-85; $95,000 per year for fiscal
    years 1986-88; no funds were appropriated in fiscal year 1989; $74,000
    for fiscal year 1990; $75,000 per year for fiscal years 1991--1993;
    $70,000 for fiscal year 1994; and $63,000 per year for fiscal years
    1995-1997. A total of $1,143,000 has been appropriated. The University
    reports no non-federal funds expended on this program.
        Research is being conducted at Prairie View A&M University in
    Texas, The overall objective of this research is to support the needs
    of small farms engaged in the production of meat and milk from goats
    along the Texas Gulf Coast. The university researchers continue to
    address those needs on an annual basis and anticipate that work
    currently in progress will be completed by the end of fiscal year 1998.
    Keeping with the Administration's policy of awarding research grants
    competitively, no further Federal funding for this grant is requested.
        The Dairy/Meat Goat Research grant was last reviewed in June 1996.
    The project objectives are within the goals of the program, are within
    the mission of both USDA and CSREES, and the institution is well
    equipped and qualified to carry out the research project.
                    delta rural revitalization, mississippi
        The project has gone through several phases in the delineation of a
    strategy for a long-range development plan for the Mississippi Delta
    region. Phase I was completed with the delivery of a baseline
    assessment of the economic, social, and political factors that enhance
    or impede the advancement of the region. Phase II of the project
    evaluated the potential for entrepreneurship and small business
    creation as mechanisms to improve economic conditions. Phase III is now
    focusing on technical assistance to Delta region manufacturing firms to
    strengthen their ability to provide employment and incomes. Continued
    emphasis on technical assistance and the development of appropriate
    data bases to guide development opportunities. The principal researcher
    believes that the databases, technical assistance, and analytical
    capability will provide more impact in support of entrepreneurial and
    community development activities in the State. The program is conducted
    in concert with other University and State agency outreach activities.
    In view of significant needs for research in high priority national
    interest topics, funds are not proposed to continue this Special
    Research Grant. At the discretion of the State, Hatch Act or other
    funding could be used to support this research.
        The original goal was to develop an analytical baseline for the
    Delta region. A publication titled, ``A Social and Economic Portrait of
    the Delta,'' serves as an analytical baseline for further work. A Delta
    Inventors Society has been created to assist creative individuals in
    developing ideas which can be successfully commercialized. An
    Entrepreneurial Forum was established to help new business ventures
    with start-up advice and assistance. Finally, a venture capital
    association has been formed to help both inventors and businessmen find
    capital resources to carry out their plans. The emphasis of the project
    has now shifted to technical assistance for industrial development.
        Grants have been awarded from funds appropriated as follows: fiscal
    year 1989, $175,000; fiscal year 1990, $173,000; fiscal year 1991-1993,
    $175,000 per year; fiscal year 1994, $164,000; fiscal year 1995-1997,
    $148,000 per year. A total of $1,481,000 has been appropriated. Total
    non-federal funds directed to this project, as reported by Mississippi
    State University, are: fiscal year 1991, $117,866; fiscal year 1992,
    $84,402; fiscal year 1993, $68,961. Reports for later years are
    incomplete at this time.
        Research is being conducted at the Mississippi State University.
    The original completion date was September 30, 1990. The original
    objectives of the research project have been met. The completion of
    additional objectives is scheduled for September 30, 1997. In keeping
    with the Administration's policy of awarding research grants
    competitively, no further Federal funding for this grant is requested.
    Research could be continued at the State's discretion using formula
    funds.
        The agency evaluates merit of research proposals as submitted. No
    formal evaluation of this project has been conducted.
                          drought mitigation, nebraska
        This grant supports the National Drought Mitigation Center program
    in the Department of Agricultural Meteorology at the University of
    Nebraska. The Center is developing a comprehensive program aimed at
    lessening societal vulnerability to drought by promoting and conducting
    research on drought mitigation and preparedness technologies, improving
    coordination of drought-related activities and actions within and
    between levels of government, and assisting in the development,
    dissemination, and implementation of appropriate mitigation and
    preparedness technologies in the public and private sectors. Emphasis
    is directed toward research and outreach projects and mitigation/
    management strategies and programs that stress risk minimization
    measures rather than reactive actions.
        The principal researcher believes drought is a normal part of
    climate for virtually all regions of the United States. The impacts of
    drought are diverse and affect the economic, environmental, and social
    sectors of society. Almost without exception, the occurrence of
    widespread severe drought in the past decade has illustrated the
    inadequacy of existing assessment, mitigation, response, and planning
    efforts at the federal, state, and local level. Rather than the
    ``crisis management'' approach of the past, a ``risk management''
    approach is needed where the emphasis is on preventive measures,
    preparedness, education, and mitigation strategies. Until recently,
    little attention has been focused on drought among the long list of
    natural hazards that affect our nation. The Center is receiving non-
    federal funds in support of this research from the University of
    Nebraska. In view of the significant needs for research on national
    high priority topics, additional funding for this project is not
    proposed. At the discretion of the State, Hatch Act or other funding
    could be used to support this effort.
        The original goal of this research was to create a National Drought
    Mitigation Center and develop a comprehensive program aimed at
    lessening societal vulnerability to drought. The Center has created an
    information clearinghouse for drought mitigation technologies and
    associated informational products. This has been accomplished through
    the development of a national drought management information system, an
    electronic portfolio of information available on the Internet. About
    16,000 users each month connect to the National Drought Mitigation
    Center's home page to gather information on drought conditions and
    management strategies. This home page was used extensively by state and
    federal agencies during the 1996 drought to assist in the evaluation
    and response process. This home page networks potential users of
    drought-related information in the United States and elsewhere with
    information that would otherwise be unavailable or inaccessible to
    users.
        The National Drought Mitigation Center played an important role in
    the response of federal and state government to the 1996 severe drought
    in the Southwest and southern Great Plains states. The Center
    participated in the Multi-state Drought Task Force workshop organized
    at the request of President Clinton and help formulate long-term
    recommendations to improve the way this nation prepares for and
    responds to drought. The Center was also a member of the Western
    Governors' Association's Drought Task Force. This task force has also
    developed recommendations to reduce the risks associated with the
    occurrence of drought in the western United States. The Center is
    actively involved with the Western Governors' Association in the
    implementation of these recommendations.
        The work supported by this grant received an appropriation of
    $200,000 in fiscal years 1995 through 1997, for a total appropriation
    of $600,000, The University of Nebraska contributed $75,737 of non-
    federal funds in support of this research in fiscal year 1995 and
    $58,977 in fiscal year 1996. The University of Nebraska will contribute
    $61,545 in fiscal year 1997.
        The research will be conducted at the University of Nebraska-
    Lincoln. The research conducted under this project is being undertaken
    under a series of 10 tasks that have been addressed, but these
    activities are ongoing. The national drought management information
    system has been established but much of this work is continuing in
    order to expand the information available through the clearinghouse and
    to keep it current. For example, the drought watch section of the
    Center's home page is updated monthly to provide users with up-to-date
    information on water and climate conditions nationwide. Keeping with
    the Administration's policy of awarding research grants competitively,
    no further Federal funding for this grant is requested.
        The activities of the Center are continuously evaluated by users
    that have access to the home page. They provide feedback and
    suggestions on a continuous basis. The Center also solicits input on
    its program and products at workshops and other meetings in which it
    participates. The Center has established a national advisory committee
    that consists of three representatives: on from state government, one
    from federal government, and one from a regional organization. These
    committee members are well known for their expertise in drought
    management. The purpose of this committee is to provide feedback to the
    Center on existing products and program direction. This national
    advisory committee met twice during 1996 to advise the director and
    staff.
                        environmental research, new york
        The environmental research in New York consists of two main thrusts
    which are aimed at understanding the nitrogen flowing from agricultural
    activities and their impacts on adjacent ecosystem components, and the
    agricultural dimensions of global climate change. Included in the
    program are a technology transfer aspect and an environmental
    assessment activity. The principal researcher believes there is a need
    to understand the impacts of ecosystem components upon each other. As
    global change occurs, impacts will become critical. In view of the
    significant need for research on national, high priority topic areas,
    such as integrated pest management, funding for this project is not
    proposed. At the discretion of the State, Hatch Act or other funding
    could be used to support this effort.
        The main objectives of this program are to identify and address
    interactions and feedbacks between agricultural ecosystems, natural
    ecosystems, and natural resources which affect the long-term well being
    of each. Agroecosystem management strategies that maintain agricultural
    productivity and environmental quality will be devised. Policies will
    be established for addressing problems at the interface between
    agriculture and the environment. Ongoing program activities are
    intended to meet the mentioned objectives. Some examples of projects
    are as follows: Several aspects of nitrogen supply interactions with
    crops and the recovery of fertilizer nitrogen at crop harvest. Water
    quality research has been focused on the relation of intensive animal
    production areas and contamination caused by nitrates. Geographic
    Information System capability is being developed to evaluate various
    scenarios regarding the future of agriculture in broad landscape
    changes.
        In the sixth year of the program, the principal investigators
    propose to substantially complete research on the two main themes of
    their program to date, namely nitrogen flows from agricultural
    ecosystems to non-agricultural ecosystems and groundwater. A new
    project on carbon storage in soils will be added to continuing work on
    climate. Continuation of their involvement with the Remington Farms
    Sustainable Agriculture Project on the Eastern Shore of Maryland will
    extend the results of their nitrogen research programs to other farms.
    They will also continue two projects that focus on intervention
    strategies to improve management of agricultural systems; one will
    explore the potential for reducing herbicide use by using weather
    forecasts to predict weed competition, and the second will explore the
    use of constructed wetlands to off-set barnyard run-off. The principal
    investigators will expand their activities in watershed management by
    increasing support to the program that was begun last year.
        The work supported by this grant began in fiscal year 1991 with an
    appropriation of $297,000. The fiscal years 1992-1993 appropriation was
    $575,000 per year; $540,000 in fiscal year 1994; and fiscal years 1995
    through 1997, $486,000 each year. A total of $3,445,000 has been
    appropriated.
        In fiscal year 1991, Cornell University provided $27,893 and the
    State of New York provided $118,014. In fiscal year 1992, Cornell
    University provided $37,476 and the State of New York $188,915. In
    fiscal year 1993, Cornell University provided $13,650 and the State of
    New York $243,251. In fiscal year 1994, the State of New York provided
    $214,989. In fiscal year 1995, the State of New York provided $233,085.
    In fiscal year 1996, the State of New York provided $388,301.
        This research is being conducted at Cornell University. The
    original estimate was for a five-year program and many of the initial
    objectives in the nitrogen and climate change areas have been met. New
    objectives evolved from the original work and the program was also
    oriented to consider broader dimensions of environmental management,
    particularly strategies for community-based watershed management,
    involving linkage of technical knowledge with social and local
    governmental perspectives and needs. Estimated completion dates for
    current program elements are:

    1997-1998 program year:
            Impacts of Nhx deposition on forests
            Landscape evaluation of denitrification
            Nitrogen utilization in agricultural ecosystems
            Contributions of agricultural ecosystems to climate forcing

    1998-1999 program year:
            Nutrient processing in wetlands
            Use of weather forecasts in weed management
            Use of constructed wetlands to remediate barnyard run-off
            Effect of climate variability on crop production
            Carbon storage in soils

    Completion beyond 1999:
            Watershed science and management
            Effects of elevated CO2 on crop yield potential
            Remington farms sustainable ag. project (a 10-year project)

        Keeping with the Administration's policy of awarding research
    grants competitively, no further Federal funding for this grant is
    requested.
        The agency evaluates this project through the review of an annual
    proposal submission.
                  environmental risk factors/cancer, new york
        The Cooperative State Research, Education, and Extension Service
    has requested the university to submit a grant proposal that is
    currently being reviewed. The American Cancer Society has estimated
    that over 184,000 women in the United States will be diagnosed with
    breast cancer in 1996. The role of environmental risk factors, such as
    pesticides, is of concern to women, the agricultural community, and
    policymakers. While some data exist in the scientific literature,
    little has been done to synthesize and evaluate these studies and make
    this research information available to the people who need it--the
    general public. This project, emphasizing risk reduction prevention
    information, will work at filling that void. However, in view of the
    significant needs for research on national high priority topics, such
    as integrated pest management, funding for this project is not
    proposed. At the discretion of the State, Hatch Act or other funding
    could be used to support this effort.
        The original goals of this research are:
        1. To establish a database of critical evaluations on the current
    scientific evidence of breast carcinogenicity and effects on breast
    cancer risk for selected pesticides.
        2. To effectively communicate database information to the
    scientific community, federal agencies, public health professionals,
    the agricultural community, and the general public using innovative
    electronic methods of communication, in-service training sessions, and
    printed materials.
        3. To further develop the Breast Cancer Environmental Risk Factors
    World Wide Web to improve ease of use, add informational materials and
    hyperlinks, and determine the feasibility of developing an online,
    searchable bibliography on pesticides and breast cancer risk accessible
    through this Web site.
        The work supported by this grant is scheduled to begin in fiscal
    year 1997. The appropriation requested for fiscal year 1997 is
    $100,000. The non-federal funds and sources provided for this grant
    were as follows: $150,000 state appropriations for fiscal year 1996;
    $250,000 in state funds (New York) has been requested for fiscal year
    1997.
        This research will be conducted at the Cornell University, Ithaca,
    New York. This is a new project--not yet funded--scheduled to begin in
    April 1997. The anticipated completion date is March 31, 1998. Keeping
    with the Administration's policy of awarding research grants
    competitively, no further Federal funding for this grant is requested.
        As a new project, an evaluation has not been conducted, although
    the proposal is currently under review. Periodic progress reports are
    made throughout the year. A final evaluation will be made after March
    31, 1998.
                        expanded wheat pasture, oklahoma
        This project was designed to develop improved supplementation
    programs and new systems for technology delivery to reduce production
    risk of raising cattle on wheat pasture. The work involves evaluation
    of grazing termination date on grain and beef production, assess the
    impact of wheat cultural practices and develop an economic model to
    evaluate alternative decisions on grain/beef production. Additional
    effort is directed toward development of cool season perennial forage
    grasses to complement wheat pasture. The proposal for fiscal year 1996
    has been received and is being processed. The principal researcher
    believes that this work addresses the needs of wheat/cattle producers
    of Oklahoma as a primary focus. However, it would appear to have some
    application regionally in adjacent states. In view of significant needs
    for research in high priority national interest topics such as improved
    pest management systems, funds are not proposed to continue this
    Special Research Grant. At the discretion of the State, Hatch Act or
    other funding could be used to support this research. The principal
    researcher suggests the research will indicate mutual benefit to wheat
    grower and livestock producer.
        The original goal of this research was to develop economically
    viable management systems for use of wheat for supplemental pasture for
    beef cattle before the crop starts making grain. This work has already
    shown how the use of feed supplements can increase net profit from
    cattle grazing on wheat pasture. The study has identified management
    practices, e.g. date of planting, cultivar selection, grazing intensity
    and date of cattle removal that produce the optimum grain yield and
    cattle gain. A Wheat/Stocker Management Model has been developed as a
    decision aid to help producers assess income risk in the operation.
    Work is underway on a Wheat Grazing Systems simulation model.
        The work supported by this grant began in fiscal year 1989 and
    appropriations were as follows: fiscal year 1989, $400,000; fiscal year
    1990, $148,000; fiscal year 1991, $275,000; fiscal years 1992-1993,
    $337,000 per year; fiscal year 1994, $317,000, and fiscal years 1995-
    1997, $285,000 each year. A total of $2,669,000 has been appropriated.
        The nonfederal funds and sources provided for this grant were as
    follows: $175,796 state appropriations in 1991; $174,074 state
    appropriations in 1992; and $236,584 state appropriations in 1993. The
    non-federal support for 1994 was $238,058 for state appropriations.
    Funds for fiscal year 1995 were $275,426, and for 1996 were $120,000.
        The research is being done at Oklahoma State University. This
    project started in 1989 with a projection of 10 years to complete the
    research objectives. Some objectives are nearing completion while
    others will probably require further study. A number of wheat cultivars
    have been identified which will tolerate grazing and still produce
    economic grain yields. The grazing cut off date for grain production
    has been established. However year to year variation need additional
    study in order to develop a reliable decision support system. In
    keeping with the Administration's policy of awarding research grants
    competitively, no further Federal funding for this grant is requested.
    Research could be continued at the State's discretion using formula
    funds.
        This program has not been subjected to a comprehensive review.
    However, each year's funding cycle is reviewed internally and by CSREES
    scientist for scientific merit and relevance.
                       expert ipm decision support system
        A prototype information and decision support system was developed
    in collaboration with Purdue University and the Department of Energy's
    Argonne National Laboratory that integrates and manages information
    from multiple data sources. Information on the status of, EPA review of
    pesticides, losses caused by pests, status of alternative tactics,
    status of minor use registrations, current research in progress, and
    priorities of IPM implementation teams are integrated in the Pest
    Management Information Decision Support System (PMI/DSS). Information
    on the genetic resistance of pests has been planned with Michigan State
    University but the resources to implement the plan have not been
    available to date. With the information in the current data base,
    commodity/pest problems are prioritized using a science-based logic
    developed by Argonne National Laboratory personnel based on key policy
    concerns. The need for decision support and information is greater than
    in the past with the passage of the Food Quality Protection Act [FQPA]
    of 1996. The act requires the Environmental Protection Agency (EPA) to
    place greater reliance on science, dietary exposure to pesticides,
    reasonable risks, and emphasis on children's diets and exposure. The
    Act also recognizes IPM as helping to provide workable solutions to
    pest problems. The decision support system is incorporating increased
    information to address these needs. The data fields and sources of the
    data bases that will contribute to additional information are: Risk
    Assessments (EPA), Registered Alternatives by Commodities for
    Pesticides Under EPA Review (EPA Registration Tapes), Critical Pest
    Problems with Removal of Suspect Pesticides (State IPM Teams and NAPIAP
    State Liaison Coordinators; Commodity Groups), State Crop Production
    (U.S. Census), Pesticide Tolerances on Commodities (EPA Data Bases),
    Market Basket Residues on Commodities (AMS and EPA Analyses), Dietary
    Habits of Adults and Children (1977 data base, and data bases to be
    developed), Method of Use and Reduction of Risk (State IPM Teams and
    NAPIAP State Liaison Coordinators; Commodity Groups), IPM Dependence
    (State IPM Team Data Bases).
        The PMI/DSS serves national, regional, and local needs for research
    and extension activities. At the national level, the system supports
    the USDA/USEPA Memorandum of Understanding (MOU) to find alternatives
    to pesticides under regulatory review or being lost due to genetic
    resistance. The data base has identified priorities for the Pest
    Management Alternatives request for proposals for the past two years
    and interacts with the project system of the IR-4 Minor Use
    Registration Program. It also is interacting with the identification of
    priorities for research and extension activities in the regional IPM
    Special Grant and Special Projects. It provides a mechanism for growers
    and grower organizations to interact with the priority process and the
    ultimate result is to help insure that farmers have alternatives for
    managing pests at the specific local level.
        The goal of the PMI/DSS is to refine the process to identify IPM
    needs of USDA, EPA, and states by addressing critical needs, reinforce
    state and federal partnerships to disseminate important pest management
    information for improved decision making, profitability, and
    environmental quality, and to address future applications and needs. In
    1996 and 1997, the program addressed priority commodity pest management
    needs due to voluntary pesticide cancellations and regulatory
    cancellations responding to the MOU and supplemental MOU between EPA
    and USDA, The supplemental MOU was signed in April, 1996, at which time
    there were 58 pesticides and 374 uses identified and prioritized. The
    process included information on cancellations furnished by EPA,
    selected uses were sent to the states NAPIAP and IPM network and
    impacts of cancellations effecting individual state agriculture
    reported back for compilation in the decision support system. The
    results were used in the 1996 and 1997 request for proposals for the
    Pest Management Alternatives Program. Twenty-five minor commodities on
    which 40 specific pest were identified in the 1997 request for
    proposals. This was the first time that we have identified specific
    commodity/pest combinations for which proposals were limited. Results
    were also used by the regional IPM request for proposals. As previously
    stated, the program is currently addressing issues associated with the
    FQPA which increases the information requirements significantly.
        In fiscal year 1994, we expended $40,000 of CSREES administrative
    funds and $90,000 from Science and Education Evaluation Funds to
    initiate collaborative work with the Argonne National Laboratory. In
    fiscal year 1995, we expended $172,000 as a Cooperative Agreement with
    Purdue University and Argonne National Laboratory from the Pest
    Management Alternative Special Grant Funds and $5,000 from NAPIAP
    funds. In fiscal year 1996, we expended $177,000 in a cooperative
    agreement with Purdue University and Argonne National Laboratory from
    Pest Management Alternative Special Grant Funds, $21,000 from Research,
    Extension, and Education Evaluation Funds, and $40,000 from NAPIAP
    funds (for development of NAPIAP data fields). In fiscal year 1997, we
    are expending $165,425 to Purdue University and Argonne National
    Laboratory. The total resources to date are $710,425.
        It is difficult for us to estimate the amount of non-federal funds
    supporting the Pest Management Information, Decision Support System.
    Purdue University and Cornell University have contributed non federal
    resources to the oversight of the information, decision support system
    as well as a number of states that have provided information that is
    part of the information base. Many program areas are contributing data
    bases that are run on the Pest Management Information, Decision Support
    System.
        The bulk of the work is carried out in Washington, D.C. CSREES has
    National Program Leaders in IPM, NAPIAP, and IR-4 program areas working
    on the Pest Management Information, Decision Support System. The
    Argonne National Laboratory has a Washington, D.C. office where
    information, decision support personnel are housed and there are daily
    interactions between CSREES and other USDA staff personnel on a daily
    basis. Interactions and information is provided by every state in our
    system. We are in the process of institutionalizing this program by
    hiring and assigning dedicated staff to this area.
        Our original estimate was two-to-three years with adequate
    resources to complete the developmental work. However, the design
    considerations become more complex as program needs dictate expansion
    of the information base such as the developments under FQPA. In
    addition, the technology is moving so swiftly that we must continue to
    do updating. We feel we are reasonably meeting our objectives with
    resources that are available. As indicated, we are institutionalizing
    this activity and it will become an ongoing activity of the agency of
    increasing importance.
        We have a guidance committee that gives us input on an ongoing
    basis. We conduct an annual evaluation of this progress in this
    program. A specific technical evaluation was made of the Toulmin-based
    logic which is policy-question driven that under lines the design and
    decision support process in fiscal year 1996. It was concluded that
    this science-based logic has significant relevance to decision making
    in agricultural pest management systems. We are currently developing
    plans for an intensive outside review of the system and proposed
    directions involving personnel in participating program areas, research
    and extension partners, and grower organizations. The review includes
    World Wide Web activities and evaluation input from a wide community of
    users and potential users.
             farm and rural business finance, illinois and arkansas
        The long-range plan of work for this program focuses on three
    principal areas. One is the financial management and performance of
    rural businesses which includes on-going research into financial
    management and decisionmaking by farm and agribusiness firms
    complemented by evaluation of the performance of existing firms and
    training programs for farm and rural business owners. The second area
    includes research on financial markets and credit institutions serving
    rural America with emphasis on pricing and credit evaluation of loans,
    evaluation of credit relationships, identification of key factors
    affecting the supply and demand for financial capital, and evaluation
    of financial innovations for farm and rural business finance. The third
    area addresses the impact of public policies and programs on the
    financial health of rural America, measures the effect of regulatory
    changes on the performance of financial institutions, evaluates
    organizational alternatives for rural credit markets and analyzes the
    effects of geographical liberalization of commercial banking on
    structure and performance. The principal researcher believes
    traditional characteristics of agriculture such as capital intensive
    businesses, variable prices and production and seasonality present
    unique risks with important implications for the cost and availability
    of financial capital for farm and rural businesses. In the present
    uncertain policy and budget environment, identification of new sources
    of financial capital and innovative programs are essential to enhance
    the financial capacity for undertaking rural development programs and
    responding to growth opportunities in rural businesses. In view of
    significant needs for research in high priority national interest
    topics, funds are not proposed to continue this Special Research Grant.
    At the discretion of the State, Hatch Act or other funding could be
    used to support this research.
        The goal is to assist farmers and rural businesses with research-
    based information on financial management as they deal with changing
    and increasingly complex financial markets. The program has completed
    projects on the financial structure and efficiency of grain farms, risk
    and financial implications of vertical coordination in hog production,
    commercial bank access to agency market funds through government
    sponsored enterprises, and competitive challenges for bankers in
    financing agriculture. Additional projects in various stages of
    completion include investigate the financial implications of property
    tax reform at the State level and investment options for farmers and
    businesses during high income periods. Other projects weigh regulatory
    costs in rural lending, conduct statistical analysis of Chapter 12
    bankruptcy filing data, and identify determinants of the type and terms
    of leases used in agriculture.
        The work has been underway since 1992. Appropriations were $125,000
    in fiscal year 1992, $125,000 in fiscal year 1993, $118,000 in fiscal
    year 1994, and $106,000 in fiscal year 1995 through fiscal year 1997.
    Appropriations through fiscal year 1997 total $686,000.
        The non-federal sources and funds provided for this program in
    fiscal year 1992 totaled $259,427 with $58,427 in State appropriations,
    $189,000 from industry and $12,000 from miscellaneous sources. In
    fiscal year 1993, the total was $287,890 with $94,588 in State
    appropriations, $133,000 from industry and $25,000 from miscellaneous
    sources. In fiscal year 1994, the total was $$391,000 with $221,000
    coming from State appropriations, $45,000 from industry and $125,000
    from miscellaneous sources. In fiscal year 1995 the total was $185,000
    where $46,000 came from State appropriations, $62,500 from industry and
    $76,500 from miscellaneous sources. In fiscal year 1996, the total was
    $344,000 where $294,000 was appropriated from State sources and $50,000
    from private sources. In fiscal year 1997, $177,000 is being
    appropriated from State sources.
        The work is being carried out at the University of Illinois and
    University of Arkansas. The original objectives of the program were
    amended with additional funding and new termination dates which now
    extend to fiscal year 1998. While many of the objectives have been met,
    the principal researcher believes that new dimensions of the originally
    proposed objectives need to be addressed as a result of changing
    conditions and new financial environments. Anticipated completion date
    of these related objectives will extend into fiscal year 1998. In
    keeping with the Administration's policy of awarding research grants
    competitively, no further Federal funding is requested for this grant.
    Research could be continued at the State's discretion using formula
    funds.
        The project is evaluated with the submission of the annual proposal
    and as progress reports are received. The program has supported
    projects which cover topics involving farm and rural business finance.
    During this past year, the projects have been responsive to the
    changing policy and financial risk environment including the
    examination of financial impacts of vertical coordination in the
    livestock industry and impacts of structural change within the rural
    finance sector. Evaluation of the program considers methodologies used
    to conduct specific projects, the impact the projects have on current
    issues, and products resulting from the projects.
                              floriculture, hawaii
        The research carried out with these funds involves wholesale and
    retail US and Japan market research, development of new varieties for
    aesthetic values and pest resistance, and pest and disease management
    strategies to meet quarantine needs and consumer expectations. The
    researcher believes the tropical cut flower and foliage industry in
    Hawaii, which includes antilurium, orchids, flowering gingers, bird of
    paradise, heliconia, protea, and cut foliage--ti leaves and other
    greens--is worth over $50 million primarily in out-of-state sales.
    Development of disease resistant cultivars and quarantine pest and
    disease management strategies which reduced pesticide usage are
    included in the national high priority improved pest management
    systems. In view of significant needs for research in high priority
    national interest topics such as improved pest management systems,
    funds are not proposed to continue this Special Research Grant. At the
    discretion of the State, Hatch Act or other funding could be used to
    support this research.
        The original goal of the research was to develop superior Hawaii
    anthuriums, orchids, prolea, and exotic tropical flower varieties with
    disease resistance, particularly to anthurium blight which devastated
    the Hawaii anthurium industry through the mid-1980's and reduced
    Hawaii's market share. Additionally, research focused on development of
    post-harvest handling practices and quarantine pest control. To date, a
    new anthurium cultivar has been patented and released. Additional
    blight resistant cultivars are being propagated and tested by the
    anthurium industry. Disease resistant protea germplasm has been
    obtained from South Africa and is being used in the protea breeding
    program. A post-harvest hot water dip treatment has been developed and
    is being used commercially on tolerant cutflower species to meet
    quarantine requirements.
        Grants have been awarded from funds appropriated as follows: fiscal
    year 1989, $300,000; fiscal years 1990-1993, $296,000 per year; fiscal
    year 1994, $278,000; and fiscal years 1995-1997, $250,000 each year. A
    total of $2,512,000 has been appropriated. The non-federal funds and
    sources provided for this grant were as follows: State appropriations
    of $87,937 in 1995 and $87,937 in 1996.
        Research is being conducted by the University of Hawaii at Manoa
    and Hilo. The objectives in the original project were to maintain
    Hawaii floricultural industry competitive. This objective continues to
    be the principal direction for the projects. Because the industry and
    the markets are changing, pests are becoming either resistant or newer
    strains, and quarantines are changing with technology the objective
    remains valid. Keeping with the Administration's policy of awarding
    research grants competitively, no further Federal funding for this
    grant is requested. Research could be continued at the state's
    discretion using other funds.
        The individual projects funded under this Special Research Grant
    are evaluated through merit review to ensure that good science is being
    used. This evaluation is the major tool used to award funds to the
    projects.
            food and agriculture policy institute, iowa and missouri
        The Food and Agriculture Policy Research Institute (FAPRI) was
    established by Iowa Stale University and the University of Missouri,
    Columbia, in 1984. The purpose of the institute is to conduct
    comprehensive analyses and disseminate results about the economic
    impacts of U.S. food, farm, and trade policies to agricultural
    producers, agribusinessmen, and public policymakers. Iowa State
    conducts research on the economic interrelationships within and between
    domestic and foreign food and agricultural markets from the farm gate
    to market destinations; develops and maintains databases and analytical
    support systems to facilitate the analysis of agricultural and trade
    policy issues; and evaluates the impacts of U.S. and foreign commodity
    supply, demand, and public policy programs on agricultural trade. The
    University of Missouri maintains models of the domestic agricultural
    economy and directs its efforts primarily to the analysis of domestic
    policy issues. The two universities maintain linkages with a number of
    other universities who provide data and analytical support to the
    system. The universities maintain a comprehensive analytical modeling
    system of the U.S. and international food and agricultural sectors to
    evaluate near-and long-term economic implications of alternative farm
    policies for the basic commodities. The system is capable of providing
    economic information on potential impacts out to 10 years in the future
    of farm policies on farm prices, income, output, government program
    costs and means to enhance the management of farm programs at the
    national level.
        The Nation's agricultural sector and its components are subject to
    numerous Federal policies and programs. FAPRI is the only publicly
    supported, non-federal organization with the analytical capability to
    assess and evaluate the numerous public policies and programs affecting
    the agricultural sector and report results to a broad constituency
    including farmers, agribusinessmen, and Federal and State policymakers.
    However, in view of significant needs for research in high priority
    national interest topics such as improved pest management systems,
    funds are not proposed to continue this Special Research Grant. At the
    discretion of the State, Hatch Act or other formula funding could be
    used to support this research.
        The original goal was to develop the analytical capability to
    assess farm policies on the U.S. agricultural sector and disseminate
    this information to farmers, agribusinessmen, and public policymakers.
    The mission has been expanded to include assessment of trade and
    environmental policy impacts and their interaction with the
    agricultural sector at national, regional, and farm levels. The models
    in place are also used to assess fiscal and monetary policy
    implications and impacts of new technologies such as biotechnological
    innovations on the agricultural sector. Both institutions maintain
    large econometric models and data sets which are regularly updated to
    analyze farm and trade policy alternatives and the impacts of various
    programs on the several sub sectors of the agricultural economy. During
    the past year, the FAPRI completed over 45 studies addressing policy
    issues such as assessments of the 1996 Farm Bill and alternative ways
    of implementing its provisions. Numerous studies were completed
    addressing improvements made to the empirical modeling system to
    improve domestic and international policy capabilities. The FAPRI
    professionals made numerous public appearances throughout the U.S. to
    agricultural groups and Congressional committees and Executive branch
    groups addressing policy issues. New thrusts include development of two
    new baselines to complement the existing agricultural baseline used for
    agricultural policy analysis. These are the resource and environmental
    baseline and the food-nutrition-health baseline. Completion and
    incorporation of these baselines into the existing model framework will
    provide an integrated procedure to assess environmental and health
    policies on the agricultural and food sectors and implications of
    agricultural policies on the environment and public health.
        Grants have been awarded from funds appropriated as follows: fiscal
    years 1984-1985, $450,000 per year; fiscal years 1986-1987, $357,000
    per year; fiscal year 1988, $425,000; fiscal year 1989, $463,000;
    fiscal year 1990, $714,000; fiscal years 1991-1993, $750,000 per year;
    fiscal year 1994, $705,000; fiscal years 1995-1996, $850,000 each year,
    and fiscal year 1997, $80,000. The total amount appropriated is
    $8,671,000.
        The non-federal funds and sources provided for this grant are as
    follows: $260,355 State appropriations, $113,565 industry, and $37,913
    miscellaneous for a total of $411,833 in fiscal year, 1991; $321,074
    State appropriations, $51,500 industry, and $35,100 miscellaneous for a
    total. of $407,674 in fiscal year 1992; $234,796 State appropriations
    and $70,378 industry for a total of $305,174 in fiscal year 1993;
    $78,286 State appropriations, $43,925 industry, and $29,750
    miscellaneous in fiscal year 1994 for a total of $151,961; $80,155
    State appropriations, $37,128 industry, and $42,236 miscellaneous for a
    total of $159,519 for fiscal year 1995; $124,123 in State
    appropriations with no other funding for fiscal year 1996; and $79,000
    in State appropriations, $50,000 industry and $25,000 miscellaneous for
    a total of $154,000 in fiscal year 1997.
        The program is carried out at the Center for Agriculture and Rural
    Development, Iowa State University and the Center for National Food and
    Agricultural Policy, University of Missouri. This is a continuing
    program of research and analysis for the purpose of assessing farm and
    related policy actions and proposed actions likely to affect the
    agricultural sector and its components. However, in keeping with the
    Administration's policy of awarding research grants competitively, no
    further Federal funding is requested for this grant.
        We have conducted no formal evaluation of this program. However,
    the project proposal is carefully reviewed for adherence to stated
    objectives and annual progress.
                             food irradiation, iowa
        Since the Linear Accelerator Facility was placed in operation in
    March 1993, studies on the effect of irradiation on shelf-life
    extension, safety and quality of ground beef, beef steaks, ham, pork
    chops from loins, chicken breasts, and turkey have been conducted.
    Studies combining irradiation with high hydrostatic pressure and
    cooking, using whole chicken breasts, turkey and ham, have been
    conducted to determine the combination of these treatments that will
    yield a shelf-stable product while maintaining high eating quality.
    Several studies were conducted to determine whether consumers can
    detect a difference between irradiated and nonirradiated ground beef
    patties. Experiments were also conducted to investigate consumer
    acceptance of pork products irradiated to prevent trichinosis. Test
    markets of irradiated chicken breasts were conducted to determine
    consumers' willingness to pay for irradiated products. The principal
    researcher believes consumers' attention and concern about the safety
    of fresh meat and poultry has increased with recent outbreaks of
    foodborne illness from E. coli 0157:H7. The meat industry has also
    expressed interest regarding the quality of irradiated products, and
    how this process can be used to yield high quality fresh meats that are
    free of pathogens. With the recent outbreak of illness of thousands of
    Japanese due to E. coli 0157:H7 and the subsequent drastic reduction of
    U.S. beef exports to Japan, irradiation of beef could have significant
    economic impact on the nation's export of this high value product.
    Additionally, researchers from eight other research institutes have
    used the irradiation facility for research projects. In view of
    significant needs for research in high priority national interest
    topics such as improved pest management systems and food safety, funds
    are not proposed to continue this Special Research Grant. At the
    discretion of the State, Hatch or other funding could be used to
    support this research.
        The original goal of the research was to generate knowledge
    necessary to develop a research and technology transfer program leading
    to commercial use of irradiation of foods, whereby consumers would be
    provided with food products with enhanced safety. The effectiveness of
    irradiation, using an electron beam accelerator, in destroying known
    pathogenic bacteria in pork and beef has been determined. Mathematical
    models have been developed to predict the growth of bacteria in low-
    dose irradiated ground pork. Demonstration of irradiation technology
    has been presented to some commercial firms, and plans are being
    developed for some large scale test markets.
        The work supported by this grant began in fiscal year 1991 when
    $100,000 was appropriated for this project. The appropriations for
    fiscal years 1992 and 1993 were $237,000 per year; fiscal year 1994,
    $223,000; and fiscal years 1995-1997, $201,000 each year. A total of
    $1,400,000 has been appropriated.
        The project received $1,037,270 in State of Iowa funds--$1 million
    of which was for capital construction--in fiscal year 1991; $37,942 in
    state funds and $67,800 in industry grants in fiscal year 1992; $68,897
    in state funds, $78,300 in industry grants and $9,666 in user fees in
    fiscal year 1993; $70,652 in state funds, $35,420 in industry grants
    and $47,788 in user fees in fiscal year 1994; and $72,772 in state
    funds, $100,000 in industry grants and $55,211 in user fees in fiscal
    year 1995; and $81,540 in state funds, $115,300 in industry grants.
        Research is being conducted at Iowa State University. The principal
    investigator anticipates that the project will continue through June
    1998. Since irradiation continues to be viewed skeptically by many non-
    scientists as a tool for improving shelf-life and preserving food, and
    because optimal dose and use parameters are still being defined,
    additional research will be needed to move this technology to broader
    consumer acceptance and industry use to enhance safety of food
    products. Until irradiation of red meat is approved by the Food and
    Drug Administration, research on the factors affecting the quality of
    irradiated red meat will be primarily conducted using the Iowa State
    University facility. Keeping with the Administration's policy of
    awarding research grants competitively, no further Federal funding for
    this grant is requested. Research could be continued at the State's
    discretion using formula funds.
        An agency science specialist conducts a merit review of the
    proposal submitted in support of the appropriation on an annual basis.
    A review of the proposal was conducted on December 20, 1996. Previous
    studies funded under this project have provided useful information
    toward understanding how irradiation can be useful in eliminating or
    reducing foodborne pathogens in meat products. It is anticipated that
    the proposed research will continue to further the understanding of how
    irradiation can be used to improve shelf-life and enhance safety of
    meats and meat products.
                   food marketing policy center, connecticut
        The Food Marketing Policy Center was established in 1988 at the
    University of Connecticut at Storrs. The Center conducts
    interdisciplinary research on food and agricultural marketing and
    related public policy issues that influence economic performance of the
    food marketing system. The Center studies how public policies and
    private sector organization and strategies affect food industry
    competitiveness and the delivery of food and services, their costs,
    prices, and safety. The Center works closely with the University of
    Massachusetts to carry out the research program. The research proposal
    identifies an ongoing national need to continually improve the economic
    efficiency and operation of the U.S. food marketing system to benefit
    farmers, merchants, and consumers. In view of significant needs for
    research in high priority national interest topics such as improved
    pest management systems and food safely, funds are not proposed to
    continue this Special Research Grant. At the discretion of the State,
    Hatch Act or other funding could be used to support this research.
        The ongoing research goal is to identify marketing problems and
    assess alternatives that improve economic performance of the U.S.
    agricultural and food marketing sector. The Center conducts research in
    conjunction with the Hatch regional research project NE-165, ``Private
    Strategies, Public Policies and Food System Performance.'' The Center
    performs studies on food marketing, including a description of food
    quality issues and enhancement policies; private label food brands;
    advertising strategies of agricultural cooperatives; assessment of food
    retailing mergers and competition; and evaluation of state dairy
    regulations, branded product marketing strategies, supermarket chain
    entry, oligopsony in agricultural markets, and the impact of
    agricultural cooperatives on food processor market performance. The
    Center develops analytical methods to assess market performance. It has
    sponsored workshops on industrial organization issues. Food safety
    economic issues are addressed in two books and at workshops that
    summarize research done at the center and the regional research
    project.
        This grant will be used to support research on 12 projects with
    research targeted at three problem areas. They are factors shaping
    decisions by food firms and the consequent effects; impact assessment
    of public intervention on firm food safety and quality strategies; and
    analysis of public policies affecting competition in food markets.
    Projects include analyses of the effects of trade agreements on food
    quality and trade in food products; an assessment of the efficiency
    aspects of ex ante versus ex post approaches to food safety problems;
    firm strategic responses to food safety and nutrition regulation and
    effects on competition, market structure and food price levels;
    demographic patterns of food borne illness for high risk populations;
    market structure on food advertising activity; competitive strategies
    of cooperatives; basic research on oligopoly theory; and publication of
    new data sets on the food industry.
        Grants have been awarded from funds appropriated as follows: fiscal
    year 1988, $150,000; fiscal year 1989, $285,000; fiscal year 1990,
    $373,000; fiscal years 1991-1993, $393,000 per year; fiscal year 1994,
    $369,000; and fiscal year 1995 through 1997, $332,000 each year. A
    total of $3,352.00 has been appropriated. The non-federal funds and
    sources provided for this grant are State appropriations as follows:
    $234,259 in fiscal year 1991; $231,741 in fiscal year 1992; $201,288 in
    fiscal year 1993; $234,557 in fiscal year 1994; $219,380 in fiscal year
    1995; and $134,399 in fiscal year 1996.
        The research is being carried out by the Connecticut Agricultural
    Experiment Station at Storrs and at the University of Massachusetts.
    The original proposal in 1987 was for 24 months. The objective of
    conducting policy-oriented research on food manufacturing and
    distribution industries to assist state and Federal policy decision
    makers in improving the performance of the food system is still an
    ongoing public concern, given increasing levels of concentration in
    food processing according to the principal researcher. The current
    phase, as funded in fiscal year 1997, will be completed in 2001.
    However, in keeping with the Administration's policy of awarding
    research grants competitively, no further Federal funding is requested
    for this grant. Research could be continued at the state's discretion
    using formula funds.
        CSREES annually reviews project reports, succeeding annual project
    proposals, research studies and educational programs.
                        food processing center, nebraska
        The University of Nebraska Food Processing Center has been
    conducting short-term, highly applied research projects to assist small
    and mid-sized food processing companies and entrepreneurs to develop or
    improve processes and products and to develop new food processing
    enterprises. Projects were selected based on the estimated economic
    impact of the technical assistance or the criticality of the technical
    assistance to the future of the firm or venture. Priorities were placed
    on projects relating to the safety of the food product or process and
    to the fulfillment of regulatory mandates such as nutrition labeling,
    use of approved and effective ingredients, and adherence to regulations
    imposed by foreign governments. In addition, several research projects
    were conducted to improve or assess the quality, extend the shelf-life,
    or assess or improve the processing efficiency of specialty food
    products which impacted several processors or used alternative
    agricultural products. The principal researcher believes the primary
    impact of this project will be statewide. Small and mid-sized food
    processing companies and entrepreneurs have limited technological
    capabilities for addressing issues related to product development,
    process development, product and process evaluation, food safety,
    quality assurance, and regulatory mandates. The short-term research and
    technology transfer projects conducted as part of this overall project
    will aid these companies in appropriately addressing these oftentimes
    complicated issues. In view of significant needs for research in high
    priority national interest topics such as improved pest management
    systems and food safety, funds are not proposed to continue this
    Special Research Grant. At the discretion of the State, Hatch Act or
    other funding could be used to support this research.
        The goal of the research, as stated previously, is to assist small
    and mid-sized food processing companies and entrepreneurs to develop or
    improve processes and products and to develop new food processing
    enterprises. Technological evaluations were conducted for 210
    individuals or companies interested in developing new food processing
    businesses. These evaluations included formulations, processes,
    processing equipment, packaging, shelf-life, sensory, nutritional
    attributes, microbiological quality, regulatory considerations, and
    other factors. Additionally, microbiological analyses, shelf-life
    assessments, sanitation audits, and nutritional analyses were conducted
    for numerous Nebraska food companies.
        The work supported by this grant began in fiscal year 1992. The
    appropriations were $50,000 per year for fiscal years 1992-1993 ;
    $47,000 for fiscal year 1994; and $42,000 for fiscal years 1995-1997
    each year. A total of $273,000 has been appropriated. The Food
    Processing Center received $288,421 in State funds and $1,303,685 in
    food industry grants and miscellaneous sources from 1992 through 1996.
        Research is being conducted at the University of Nebraska. Because
    this project supports ongoing technical assistance to clients, the
    objectives are ongoing. Keeping with the Administration's policy of
    awarding research grants competitively, no further Federal funding for
    this grant is requested. Research could be continued at the State's
    discretion using formula funds.
        An agency science specialist conducts a merit review of the
    proposal submitted in support of the appropriation on an annual basis.
    A review of the proposal was conducted on December 20, 1996. Progress
    under previous grants for this project appears to be satisfactory.
                     food systems research group, wisconsin
        The Group conducts research on contemporary issues affecting the
    organization and competitiveness of the U.S. food system in domestic
    and international markets. The issues include new technologies, market
    structure, and government policies and programs. Studies have been
    completed on pricing of cheddar cheese, fed cattle and hogs; changes in
    private label product markets; causes of structural change in the flour
    milling, soybean oil milling, wet corn milling, cottonseed milling,
    beef packing, and broiler processing industries; competition in U.S.
    food markets; and the relationship between U.S. food market structure
    and the industry's performance in global markets. The principal
    researcher believes that the U.S. food system is changing rapidly in
    response to a large number of global economic-social-technical changes.
    Research is needed to determine the effects of these change on the
    system's organization and performance, and to ascertain needed
    adjustments in public policies based upon sound research. In view of
    significant needs for research in high priority national interest
    topics such as improved pest management systems and food safety, funds
    are not proposed to continue this Special Research Grant. At the
    discretion of the state, Hatch Act or other funding could be used to
    support this research.
        The original goal was to conduct research to assess and evaluate
    the organization and performance of the U.S. food industry and provide
    recommendations for improvements. The Food Systems Research Group
    recently completed a study of the National Cheese Exchange which
    resulted in a major public report, Congressional hearings, and a
    Wisconsin task force. Alternative pricing mechanisms are being
    developed to avoid the problems of a very thin market which is used to
    price a large volume of off-market sales. The group is also examining
    the impact of ``tough competition'' policies on industry performance.
    Deregulation in the United States and privatization in the U.K.,
    Mexico, and Eastern Europe provide empirical bases for evaluating the
    impact. The Group has completed numerous studies on economic structure
    and performance issues of the U.S. food manufacturing and distribution
    system. Basic research is conducted on market theories; effects of
    mergers, new technologies, and firm conduct on industry structure and
    organization; factors affecting industry prices, profits, efficiency
    and progressiveness; and impact of public policies and regulations on
    food system organization and performance.
        Grants have been awarded from funds appropriated as follows: fiscal
    years 1976-1981, $150,000 per year; fiscal years 1982-1985, $156,000
    per year; fiscal years 1986-1989, $148,000 per year; fiscal year 1990,
    $219,000; fiscal years 1991-1993, $261,000 per year; fiscal year 1994,
    $245,000; and fiscal years 1995-1997, $221,000 per year. A total of
    $4,026,000 has been appropriated.
        The non-federal funds and sources provided for this grant are as
    follows: State appropriations of $120,304 in fiscal year 1991; $119,448
    in fiscal year 1992; $85,188 in fiscal year 1993; $96,838 in fiscal
    year 1994; $100,869 in fiscal year 1995; $101,272 in fiscal year 1966;
    and $112,842 in fiscal year 1997.
        The grant supports research at the University of Wisconsin,
    Madison. The original proposal in 1976 was for a period of 36 months.
    The current phase of the program will be completed in 1999. In keeping
    with the Administration's policy of awarding research grants
    competitively, no further Federal funding is requested for this grant.
        CSREES performed a merit review of the project in January 1997 as
    it evaluated the project proposal for 1997 and concluded that, under
    this project, researchers conduct unique studies on the structure,
    conduct and performance of selected segments of the food industry. In
    spite of the growing concentration in food production-processing and
    increasing public policy questions concerning the performance of this
    industry, few organizations are providing the research needed for
    public and private decision-making. Research results appear in several
    professional journals and popular press and researchers have ongoing
    dialog with private and public decision-makers.
                          forestry research, arkansas
        The Arkansas Forest Resources Center has offered programs of
    teaching and research to the landowners of Arkansas and the surrounding
    region. This has been done through offering continuing education
    workshops for landowners. The educational thrust has combined Center
    and private dollars to establish computer software capability capable
    of use in the education of landowners and students. The Center includes
    one of only three Arc View learning centers for natural resources. The
    Center has acquired quality staff, well versed in the use of advanced
    technologies. Projects address issues of species diversity, richness,
    redundance, and the resilience of disturbed and undisturbed hardwood
    stands. Furthermore, evidence exists that neotropical migratory birds
    are indicators of ecosystem health. Factors implicated as influencing
    their breeding range include habitat destruction/alteration, forest
    fragmentation, etc. Thus, issues of reestablishment and the structure
    of regenerated hardwood stands are important for timber, non-timber
    values, and the quality of life enjoyed regionally, nationally, and
    internationally. These issues will grow in importance as Southern
    forests assume greater proportions of the national demand for hardwood
    fiber and wood. The principal researcher believes that with the reduced
    levels of production of wood products from the Northwest, Southern
    forests are increasingly bearing the brunt of providing the majority of
    wood products for the United States. This increased production makes
    more imperative the appropriate and efficient balance in the use of
    Southern forests in producing timber and non-timber outputs. This would
    prevent these conflicts, or at least reduce them significantly.
    However, with the limited resources available and the possibility that
    at the discretion of the state, Hatch Act or other funding could be
    used to support this research, funds are not proposed to continue this
    Special Research Grant.
        Developing alternative forest management strategies for achieving
    multi-resource objectives; i.e., joint production of timber, wildlife,
    recreation, and other outputs of the forest on private, industrial, and
    non-industrial forest lands and public forest lands, is the thrust of
    goal one of the project. In the last year, significant progress has
    been made in several areas. Some examples include: developing intensive
    fiber farming systems as alternatives to soybeans for Mississippi
    farmers, taking the first step toward biological control of the
    Southern pine beetle by discovering the nutrient needs of predators of
    the beetle so they can be grown and studied in artificial cultures, and
    conducting the first survey of nonindustrial landowners in Arkansas for
    15 years. The survey shows some areas for concern, such as the fact
    that the average age of forest landowners is over 60. There will be a
    massive change in ownership in the next 10-20 years. Landowners
    continue to not be aware of assistance programs and a concern about
    government programs and intervention on private land. This is
    information needed to prepare our institutions for transitions and to
    design more effective programs. Ongoing projects include a broad array
    of topics, competitively awarded within the Center, concerned with best
    management practices, ecological characteristics, effects of different
    management intensities, streamside buffer zone effectiveness, as well
    as the efforts mentioned previously.
        The work supported by this grant began in fiscal year 1994. The
    appropriation for fiscal year 1994 was $470,000 and for fiscal year
    1995 through 1997, $523,000 each year. A total of $2,039,000 has been
    appropriated. During fiscal year 1994, more than $380,000 was funded by
    forest and related industries and private foundations. For fiscal years
    1995 and 1996, these figures were $815,000 and $910,000, respectively.
        This research is being conducted at the School of Forest Resources,
    the University of Arkansas at Monticello. The primary project
    objectives are to be completed by the end of the fifth year of funding,
    and the specific objectives of each project will be met. Some projects
    have long-term objectives, typical of forestry research. These projects
    and objectives will be continued using the infrastructure and capacity
    developed with these Special Research Grants. Keeping with the
    Administration's policy of awarding research grants competitively, no
    further Federal funding for this grant is requested. Research could be
    continued at the State's discretion using formula or other funds.
        In 1991, a Cooperative State Research, Education, and Extension
    Service team visited Monticello and reviewed faculty qualifications,
    supporting sources, and the feasibility of the proposal. The team exit
    report indicated the faculty was highly capable, the infrastructure
    needed strengthening, and the proposal concepts were feasible. Since
    1991, there has not been a formal program review.
           fruit and vegetable market analysis, arizona and missouri
        The purpose is to provide timely knowledge of the impacts of trade,
    environmental, monetary, and other public policies and programs upon
    the Nation's fruit and vegetable industry to farmers, agribusinessmen,
    and policymakers through a program of empirical assessment and
    evaluation. The U.S. fruit and vegetable sector is experiencing
    increased growth from greater domestic and export demand. However, the
    growth of this sector depends upon its ability to compete domestically
    and internationally and to conform with the regulatory environment in
    which it operates. This program of research provides information to
    farmers and policymakers on the implications and impacts of various
    policies and programs. However, in view of significant needs for
    research in high priority national interest topics such as improved
    pest management systems, funds are not proposed to continue this
    Special Research Grant. At the discretion of the State, Hatch Act or
    other funding could be used to support this research.
        The goal is to develop the analytical capability to assess and
    evaluate public policies and programs impacting the U.S. fruit and
    vegetable industry and disseminate the results to users. Proposals have
    been submitted that outline long-range plans and specific projects for
    funding. Models have been developed for potatoes, fresh market
    tomatoes, onions, broccoli, lettuce, cauliflower, oranges and apples.
    This grant will be used to develop models for processing market
    tomatoes, strawberries, celery, cucumbers and green peppers. Trade
    models for those commodities with a significant import and/or export
    sector will also be developed. These models feed in to a larger food
    and agricultural sector model to support analyses of cross commodity
    and policy effects.
        The work supported by this grant began in fiscal year 1994. The
    appropriation for fiscal year 1994 was $329,000, and for fiscal years
    1995-1997, $296,000 each year. A total of $1,217,000 has been
    appropriated.
        The non-federal finding provided to this grant in fiscal year 1994
    was $50,073 State appropriations and $11,000 industry for a total of
    $61,073; $21,876 State appropriations and $36,624 industry for a total
    of $58,500 for fiscal year 1995; a total of $62,400 from State and
    industry sources expected for fiscal year 1996; and approximately
    $50,000 from these sources in fiscal year 1997.
        The work is being carried out at Arizona State University and the
    University of Missouri. The university researchers anticipate that work
    is an ongoing project to look at the impact of various public policy
    proposals on the U.S. fruit and vegetable industry. However, in keeping
    with the Administration's policy of awarding research grants
    competitively, no further Federal funding for this grant is requested.
        We have conducted no formal evaluation. However each annual
    proposal is carefully reviewed and work progress is compared with prior
    year's objectives.
                     generic commodity promotion, new york
        The grant supports, in part, the National Institute on Commodity
    Promotion Research and Evaluation which provides objective analyses of
    national and state commodity checkoff programs designed to enhance
    domestic and export demand. The principle researcher believes that
    producers are contributing about $1 billion annually to commodity
    research and promotion funds designed to expand the domestic and export
    markets for their products. The number of commodity groups
    participating and the size of the funds available could continue to
    grow. There are national and regional needs to ascertain the
    effectiveness of such programs because of the large number of dollars
    involved and several questions about their effectiveness. In view of
    significant needs for research in high priority national interest
    topics such as improved pest management systems, funds are not proposed
    to continue this Special Research Grant. At the discretion of the
    state, Hatch Act or other funding could be used to support this
    research. The goal is to determine the economic effectiveness of
    generic promotion programs designed to increase the sales of
    agricultural commodities in domestic and international markets. Recent
    accomplishments include: the impact of promotion and other factors on
    the sales of almonds, beef exports, pork exports, and wheat exports;
    development of a major database of commodity advertising expenditures
    for future research; new methods of measuring advertising wearout; and
    comparisons of research techniques to determine sensitivity of results
    based on various methods used.
        The work supported by the grant began in fiscal year 1994. The
    appropriation for fiscal year 1994 was $235,000 and for fiscal years
    1995-1997, $212,000 each year. A total of $871,000 has been
    appropriated. The non-federal matching funds and sources allocated to
    this grant by Cornell University are as follows: $97,333 a year in
    State appropriations for fiscal year:, 1994-1996; $97,333 for fiscal
    year 1997. Collaborating institutions performing work under subcontract
    agreements have not provided information.
        The work is being carried out at Cornell University in
    collaboration with eight other land-grant universities. The original
    proposal in 1994 was for a period of 21 months, however, the objectives
    for evaluating the benefits of promotion programs is a growing regional
    and national concern as producers take on greater responsibility for
    marketing their products. The current phase of the program will be
    completed in 1998. In keeping with the Administration's policy of
    awarding research grants competitively, no further Federal funding is
    requested for this grant.
        CSREES performed a merit review of the project in January 1997, as
    it evaluated the project proposal for 1997, and determined that the
    project provides leadership for a unique body of research and education
    on the impact of commodity promotion programs. Research results appear
    in several professional journals and popular press and researchers have
    ongoing dialog with private and public decision makers.
                                 global change
        Radiation from the sun occurs in a spectrum of wavelengths with a
    majority of wavelengths being beneficial to humans and other living
    organisms. A small portion of the short wavelength radiation, what is
    known as the Ultraviolet or UV-B Region of the spectrum, is harmful to
    many biological organisms. Fortunately, most of the UV-B radiation from
    the sun is absorbed by ozone located in the stratosphere and does not
    reach the surface of the earth. The discovery of a deterioration of the
    stratospheric ozone layer and the occurrence of an ozone hole over
    polar regions has raised concern about the real potential for increased
    UV-B irradiance reaching the surface of the earth and the significant
    negative impact this could have on all biological systems including man
    plus animals and plants of agricultural importance. There is an urgent
    need to determine the amount of UV-B radiation reaching the earth's
    surface and to learn more about the effect of this changing
    environmental force. The Cooperative State Research, Education and
    Extension Service, CSREES, is in the process of establishing a network
    for monitoring surface UV-B radiation which will meet the needs of the
    science community of the United States, and which will be compatible
    with similar networks being developed throughout the world. The fiscal
    year 1996 grant supports work through July 1997. This grant is part of
    a government-wide initiative. The research is closely coordinated with
    other Federal agencies involved in the U. S. Global Change Research
    Program UV-Monitoring Network Plan.
        The principal researcher believes destruction of the stratospheric
    ozone layer, our shield from the full intensity of solar radiation,
    continues to increase. This creates a high priority need for
    information to document not only the levels of UV-B radiation reaching
    the earth's surface, but the climatology of that radiation. The United
    States, and the rest of the world, needs to know the strength of the
    UV-B radiation reaching the earth and the potential impact on all forms
    of life, especially animal and plant life of agriculturally important
    species.
        The principal researcher believes this research to be of national
    as well as regional and local importance.
        The USDA UV-B Network is to provide accurate, geographically
    dispersed data on UV-B radiation reaching the surface of the earth and
    to detect trends over time in this type of radiation. A primary problem
    which had to be overcome in order to reach this goal is the development
    of instrumentation adequate to make the measurements required for the
    monitoring network. A major advance occurred during 1996 with the
    availability to the network of a new multi-band instrument which will
    provide the spectral information needed to support both biological and
    atmospheric science research and to serve as ground-truth for satellite
    measurements. These instruments have been deployed and are currently in
    operation at ten monitoring sites across the United States. The
    researchers plan to have twenty sites operational by the summer of
    1997. Two grants to design and build advanced spectroradiometers have
    been awarded under the National Research Initiative Competitive Grants
    Program. These instruments are to be used in a research network to make
    precise measurements of the total UV-B spectra at selected sites. The
    first of these instruments failed to meet spectral performance
    standards when tested and calibrated by the National Institute of
    Science and Technology. An alternative design which will result in a
    much larger and difficult instrument to deploy is currently under
    development. To gain network experience, broadband instruments along
    with ancillary instruments have been installed at ten selected field
    sites and operated for the last 28-36 months. An additional ten sites
    have been developed during the last 12 months, including those equipped
    with the new multi-band UV instrument. Data from all sites is
    transmitted daily to Colorado State University for analysis,
    distribution and archiving. These data are available, within 24 hours
    of collection, on the Internet via a World Wide Web Site located in the
    Natural Resources Research Laboratory at Colorado State University. The
    Department of Agriculture is also a participant in the development of a
    central calibration facility located at Department of Commerce
    facilities in Boulder, Colorado to ensure uniform and acceptable
    calibration and characterization of all instruments used in interagency
    UV-B monitoring programs.
        The work supported by this grant began in fiscal year 1992, and the
    appropriation for fiscal years 1992-1993 was $2,000,000 per year;
    fiscal year 1994 was $1,175,000; fiscal year 1995 was $1,625,000;
    fiscal year 1996 was $1,615,000; and fiscal year 1997 is $1,567,000. A
    total of $10,072,000 has been appropriated. The non-federal funds and
    sources provided for this grant are as follows: $162,000 state
    appropriations in 1993; $183,106 state appropriations in 1994; and
    $285,430 provided by Colorado State University in 1995.
        Colorado State University is managing the operating network which,
    when completed, will include all regions of the country. At least
    thirty sites are planned for the climatological network including sites
    in Hawaii, Alaska and Puerto Rico in order to provide broad geographic
    coverage. Ten sites have been operational with broad band instruments
    for up to three years and it is planned to have at least twenty sites
    operational with new generation instruments by the summer of 1997. The
    research level network will begin with the first instrument to be
    installed at the Department of Energy Solar Radiation site near Ponca
    City, Oklahoma, as part of the Atmospheric Radiation Measurements field
    network. As with other weather and climate observations, this network
    will address an ongoing need for the predictable future. These
    measurements will provide information-nation on the nature and
    seriousness of UV-B radiation in the United States and will provide
    ground truth validation to other predictions of UV-B irradiance.
        The agency has assigned two technical staff to continuously monitor
    activities in the global change research program. A team of three
    experts in UV-B radiation measurement technology reviewed
    specifications for the development of the advanced spectroradiometers
    in July 1996 prior to the procurement of major components of the
    instrument. A panel of radiation spectra scientists was brought in to
    review data derived from the new multi-band instruments in December
    1996 to advise on the interpretation and analysis of data derived from
    these instruments. Agency staff are in contact with program management
    on a weekly basis and have visited the program headquarters four times
    during the last year.
                  global marketing support services, arkansas
        This grant supports the University of Arkansas Global Marketing
    Support Services program to provide research and service to
    agribusinesses. The objective of the university research is to identify
    potential foreign markets for Arkansas products and to conduct and
    disseminate foreign market assessment and evaluation studies to
    agribusiness firms. The principal researcher believes the emerging
    importance of global trade to the nation's economy and the reduction of
    trade barriers world-wide presents unprecedented opportunities for
    cooperative public-private-university research to develop expertise in
    world markets. In view of significant needs for research in high
    priority national interest topics such as improved pest management
    systems, funds are not proposed to continue this Special Research
    Grant. At the discretion of the state, Hatch Act or other funding could
    be used to support this research.
        The goal is to develop a university research and service
    organization to support international trade development activities by
    local area businesses. Research is conducted to determine the demand
    for specific Arkansas products in selected countries. Recent results
    include: twelve ``Industry/Company Opportunity Reports'' that provided
    local businesses with information about potential export markets; a
    report on consumer attitudes in Mexico and Columbia toward imported
    products; an evaluation of the food system in China, with emphasis on
    poultry sector; two new fact sheets; and additions to an electronic
    export information database that is accessed by local firms.
        The work supported by this grant began in fiscal year 1994. The
    appropriation for fiscal year 1994 was $47,000; and for 1995 through
    1997, $92,000 a year. A total of $323,000 has been appropriated. The
    non-federal funds and sources provided for this grant are $90,000 per
    year in State appropriations for fiscal years 1994-1996. Private funds
    also support this grant but an estimate is not available.
        This research is being conducted at the University of Arkansas,
    Fayetteville. The original proposal in 1994 requested funding for a
    period of 12 months, but the objectives for expanding the export
    capacity of small to medium-sized agribusiness firms will not be fully
    met until 1999. In keeping with the Administration's policy of awarding
    research grants competitively, no further Federal funding is requested
    for this grant.
        CSREES performed a merit review of the project in January 1997 as
    it evaluated the project proposal for 1997. CSREES scientists are
    currently working with the university researchers to enhance the 1997
    proposal so that it adequately reflects the kind of work being
    conducted and to address timelines for the initiation of new research
    and the distribution of results.
                             grain sorghum, kansas
        This project was designed to address the lack of yield improvement
    in grain sorghum cultivars, particularly when grown under dryland
    conditions where a considerable portion of this crop is grown, The
    research will focus on identification of early maturing lines which
    will shift more of the production to grain and less to vegetative
    growth and thereby making more efficient use of the limited water
    supply. The focus of this research is toward the non-irrigated lands of
    Kansas where sorghum can produce a grain crop under conditions that
    would not be possible with corn and is therefore very important in the
    rotation with wheat. While the research is directed toward Kansas
    conditions, it would also apply to adjoining states. However, in view
    of significant needs for research in high priority national interest
    topics such as improved pest management systems, funds are not proposed
    to continue this Special Research Grant. At the discretion of the
    state, Hatch Act or other funding could be used to support this
    research. The original goal of this research is to identify/develop
    grain sorghum cultivars that mature earlier with more of the production
    in grain rather than vegetative growth. This is a new project starting
    in fiscal year 1997, so no significant accomplishments can be reported
    at this time.
        The work supported by this grant begins in fiscal year 1997 and the
    appropriation for fiscal year 1997 is $106,000.
        Research will be conducted at Kansas State University. This is a
    new project starting in fiscal year 1997, so the objectives have not
    yet been met. Keeping with the Administration's policy of awarding
    research grants competitively, no further Federal funding for this
    grant is requested.
        The research proposal will be peer reviewed prior to awarding of
    funds.
            grass seed cropping systems for sustainable agriculture
        This program was developed to provide management systems for
    sustainable grass seed production without field burning of the straw
    residue following harvest which results in adverse air quality
    problems. Grass seed yields are often significantly reduced the
    following season if the residue is not burned. Fiscal year 1996 grant
    proposal has been received and is being processed. The principal
    researcher believes that according to information provided by technical
    committees representing researchers and the grass seed industry, the
    need for this research is to develop sustainable systems of seed
    production that do not depend on field burning of straw residue. Much
    of the grass seed for the United States including lawn grasses is
    produced in the area. Field burning of straw residue creates
    unacceptable levels of air pollution and yields of some cultivar
    decline without burning. In view of significant needs for research in
    high priority national interest topics such as improved pest management
    systems, funds are not proposed to continue this Special Research
    Grant. At the discretion of the state, Hatch Act or other funding could
    be used to support this research, The original goal for this project is
    to develop grass seed production systems that do not depend on field
    burning of straw residue. To date, joint planning by state experiment
    station administrators and researchers from the three states with
    industry input for an integrated regional research effort to solve the
    problem.
        The work supported by this grant began in fiscal year 1994. The
    appropriation for fiscal year 1994 was $470,000, and for fiscal years
    1995-1997, $423,000 each year. A total of $1,739,000 has been
    appropriated. The nonfederal support for this project in fiscal year
    1994 was $266,055, $298,052 for fiscal year 1995 and $282,053 in 1996.
        The research will be conducted by the three state agricultural
    experiment stations in Idaho, Oregon and Washington. Completion of the
    initial objectives was anticipated to take 5 years and therefore should
    be completed in 1999. In keeping with the Administration's policy of
    awarding grants competitively, no further Federal funding for this
    grant is requested. Research could be continued at the State's
    discretion using formula funds.
        The entire project is reviewed annually by a steering committee for
    focus and relevance. The combined proposal is reviewed by CSREES before
    funds are awarded.
                             human nutrition, iowa
        This research aims to develop animal and plant foods with
    nutritionally optimal fat content and to improve utilization of foods
    containing non-nutrient health protectants, components that may reduce
    health risks. The research includes human and animal nutrient
    utilization, consumer food choices, and economic impacts of nutritional
    optimization of food production and processing. The fiscal year 1996
    grant supports research efforts of 25 investigators from six
    disciplines through June 1997. The research addresses food quality,
    nutrition and optimal health. Much of the research focuses on improving
    the nutritional quality of foods important to the economy of the
    Midwest, while making those improvements economically feasible. This
    work may be a model for the nation with regards to designing foods to
    improve human nutrition. In view of significant needs for research in
    high priority national interest topics such as improved pest management
    systems, funds are not proposed to continue this Special Research
    Grant. At the discretion of the state, Hatch Act or other funding could
    be used to support this research.
        The goal of the Center for Designing Foods to Improve Nutrition,
    the administrative unit for this grant, is to improve human nutrition
    and health maintenance by determining how to improve animal and plant
    food fat content and how to increase availability of health-protectant
    factors in the human food supply. The research includes food
    production, processing, consumer choices, biological utilization, and
    economic impacts. This research has identified soy oils which can be
    naturally hardened and early results indicate potential feasibility of
    processing these oils into shortenings, which may provide human health
    benefits in comparison with chemically saturated vegetable fats
    containing trans fatty acids. Additional work further verifying the
    feasibility of production of more highly unsaturated pork fat has also
    been conducted, with human feeding trials underway. A novel health-
    protective, cholesterol-lowering component of soy, the isoflavone
    daldzein, has been identified in a mouse feeding study. Further
    evidence has been found that oxygenated carotenoids potentially found
    in processed fruits and vegetables have greater antioxidant ability
    than the parent carotenoids. This greater antioxidant ability might be
    expected to decrease cancer and heart disease risk.
        The work supported by this grant began in fiscal year 1991 with an
    appropriation of $300,000. The fiscal years 1992-1993 appropriation was
    $500,000 per year; $470,000 in fiscal year 1994; $473,000 in fiscal
    years 1995 through 1997. A total of $3,189,000 has been appropriated.
        The non-federal funds and sources provided for this grant were as
    follows: $293,000 university, $312,869 industry, and $14,000
    miscellaneous in 1991; $90,000 state appropriations, $473,608
    university, $131,160 industry, and $116,560 miscellaneous in 1992;
    $307,500 state appropriations, $472,081 university, and $222,267
    industry in 1993; $486,000 university, and $254,000 private in 1994;
    $210,000 university, and $200,000 private in 1995; and $613,770
    university and $207,811 private in 1996.
        Research is being conducted at the Center for Designing Foods to
    Improve Nutrition, Iowa State University. The original overall
    objective to design foods to improve nutrition is continuing to be
    addressed. A set of related objectives will be completed in 1999.
    Keeping with the Administration's policy of awarding research grants
    competitively, no further Federal funding for this grant requested.
        The grant proposal for fiscal year 1996 was subjected to extensive
    peer review and the recommendations will be incorporated into the
    proposed renewal.
                           human nutrition, louisiana
        Obesity is a major problem in the United States. This grant,
    entitled Dietary Fat and Obesity, will help answer three issues about
    this problem. Is there a specific preference for fat in some people,
    and if so, how is it controlled? Why do thin people adapt differently
    to a high fat diet than obese people? How do specific fatty acids in
    the diet influence body metabolism of lean and obese people
    differently? Obesity is one of the most important and preventable
    problems in America today and its prevalence in Louisiana is among the
    highest in the nation. The results will expand the foundation for
    setting national dietary guidelines for individual fat intake. In view
    of significant needs for research in high priority national interest
    topics such as improved pest management systems, funds are not proposed
    to continue this Special Research Grant. At the discretion of the
    state, Hatch Act or other funding could be used to support this
    research.
        The overall goal of this grant is to identify the basis for the
    susceptibility to obesity of some people who eat high fat diets and to
    understand how they differ from those people who are resistant to
    becoming obese when eating a high fat diet. The first project is aimed
    at identifying people who eat large amounts of fat and those who eat
    small amounts of fat. The researchers are taking several approaches to
    this problem, including specific laboratory tests and evaluations of
    people in free choice environments. In the second project, they have
    examined the effect of different levels and distributions of body fat
    on the way foods with different amounts of fat are used by the body.
    This will be followed by detailed studies on the processes by which
    adjustments to changes in body fat are made. The third project will
    evaluate the effect of different types of dietary fat on the metabolism
    and response to insulin. These studies have just begun.
        The work supported by this grant began in fiscal year 1991 and the
    appropriation for fiscal years 1991-1993 was $800,000 per year; for
    fiscal years 1994-1997 was $752,000 per year. A total of $5,408,000 has
    been appropriated.
        The non-federal funds and sources provided for this grant were as
    follows: $523,100 state appropriations in 1991; $515,100 state
    appropriations and $2,216,606 private in 1992; $536,100 state
    appropriations and $940,000 private in 1993; $627,000 state
    appropriations and $3,775,000 private in 1994; $546,100 state
    appropriations and $3,100,000 private in 1995; and $1,471,000 state
    appropriations and $2,488,000 private in 1996.
        Research will be conducted at the Pennington Biomedical Research
    Center, Louisiana State University. The anticipated completion date for
    the original objectives is fiscal year 1999. Keeping with the
    Administration's policy of awarding research grants competitively, no
    further Federal funding for this grant is requested.
        The grant proposal for fiscal year 1996 was subjected to extensive
    peer review, and in December 1996 an on-site panel of researchers
    evaluated the proposed objectives and experimental protocols. On the
    basis of the written comments from the reviewers, the proposal for
    fiscal year 1997 was revised.
                           human nutrition, new york
        The work focuses on the basic biological roles of selected
    nutrients and other food components which are expected to increase or
    fall as consumption patterns move toward dietary guidelines. The
    objectives are to develop strategies for improving methods to monitor
    plant-based food consumption; approaches to increase their consumption
    by school-aged children; and an integrated analysis of availability,
    accessibility, and consumption of plant-based foods at the community
    level. The research will contribute to the knowledge base needed by
    consumers to make informed decisions, businesses to plan for
    maintaining the world's most efficient food system, and those who make
    and implement policies related to agriculture, food and health outcomes
    as eating patterns shift to predominantly plant-food based diets. In
    view of significant needs for research in high priority national
    interest topics such as improved pest management systems, funds are not
    proposed to continue this Special Research Grant. At the discretion of
    the state, Hatch Act or other funding could be used to support this
    research.
        The newly revised dietary guidelines reemphasize expected health
    benefits from the increased consumption of fruits, vegetables, and
    grain products. As pointed out in the response to the first question,
    investigations are carried out at the basic, clinical, and community
    levels. Brief synopses typifying the accomplishments are reported.
    Changes in the American diet are expected to alter lipid metabolism by
    impacting fat levels and composition. Lipoprotein lipase is a pivotal
    enzyme that regulates lipid metabolism. New understandings about the
    enzyme were reported. Researchers cloned a larger portion of the human
    lipoprotein lipase promoter than had been isolated previously. The
    activity, synthesis and secretion of lipoprotein lipase is decreased
    ten fold in young fat cells transfected with the hormone leptin, which
    suggests a new function for this hormone. In addition, investigators
    demonstrated that fatty acids enhance the differentiation of young fat
    cells and possible mechanisms are being explored. Work also has been
    done on strategies for improving the quality of school lunch programs.
    This work builds on an earlier study which showed the reluctance of
    children to consume unfamiliar foods to be a significant barrier. A
    coordinated effort by food service personnel, teachers, and cooperative
    extension has resulted in a successful program that introduces
    unfamiliar to school children by a variety of methods, such as the
    introduction of various ethnic foods as part of lessons on cultural
    diversity. Another portion of the work focuses on the
    interrelationships among the factors that influence food choice at the
    community, family and individual levels. The approach involves a unique
    integration of research and intervention. Results indicate that use of
    fruits and vegetables is positively associated with the previous
    consumption of fresh produce from a home garden; regional, cultural, or
    family traditions that emphasize these food groups, and health
    concerns. Limited access to low cost and preferred types of fruits and
    vegetables, and lack of time and skill for food preparation are
    significant barriers to consumption. A ``Life Course Model of Fruit and
    Vegetable Choices'' has been developed to guide further research and
    intervention efforts.
        Grants have been awarded from funds appropriated as follows: fiscal
    year 1989, $450,000; fiscal years 1990-1991, $556,000 per year; fiscal
    years 1992-1993, $735,000 per year; fiscal year 1994, $691,000; fiscal
    years 1995-1997, $622,000 each year. A total of $5,589,000 has been
    appropriated.
        The non-federal funds and sources provided for this grant were as
    follows: $154,056 state appropriations and $2,456 private in 1991;
    $238,430 state appropriations and $60,746 private in 1992; $19,401
    state appropriations and $22,083 private in 1993; $202,441 state
    appropriations and $1,175 private in 1994; $296,794 state
    appropriations in 1995; and $348,127 in state appropriations and
    $39,593 private in 1996.
        Research is being conducted at Cornell University, New York. The
    original overall objective to integrate nutrition goals and food
    systems is continuing to be addressed. A set of retained objectives
    will be completed in 1997 and a set of new related objectives are
    planned for an additional three years. Keeping with the
    Administration's policy of awarding research grants competitively, no
    further Federal funding for this grant is requested.
        The grant proposal for fiscal year 1995 was subjected to extensive
    peer review, and the recommendations were incorporated into the ensuing
    experimental designs.
                  illinois-missouri alliance for biotechnology
        The Illinois-Missouri Alliance has initiated a competitive grants
    program in agricultural biotechnology for research in targeted priority
    areas of need related to corn and soybeans. The scope of interest
    includes production, processing, marketing, utilization, inputs and
    support services, along with economic, social, environmental, and
    natural resource concerns. The Alliance has solicited research project
    proposals from scientists at Illinois and Missouri and other Midwestern
    institutions, and have conducted peer reviews for science quality,
    commercial feasibility and potential economic impact to select the
    proposals that will be funded. In 1996 the Alliance awarded four
    research grants at three institutions totaling $1,012,859. The Alliance
    also issued a second request for proposals and received fifteen
    proposals which are being reviewed by an external review panel of
    scientists employed by agribusinesses. The principal investigator has
    indicated that the goal of the Alliance is the pre-commercial
    development of emerging biotechnology discoveries for agriculture. The
    Midwestern region produces more than half of the nation's output of
    corn and soybean crops, and the principal investigator believes it is
    critical to domestic food security and United States competitiveness in
    global agricultural markets. The Alliance is implementing a research
    strategy that it hopes will generate important biotechnological
    developments that are rapidly adaptable to unique local soil, climatic
    and socioeconomic conditions of the region. In view of significant
    needs for research in high priority national interest topics such as
    improved pest management systems, funds are not proposed to continue
    this Special Research Grant. At the discretion of the State, Hatch Act
    or other funding could be used to support this research.
        Fiscal year 1996 was the second year of funding for the Alliance.
    The research program focuses on the two major commodity crops, corn and
    soybeans, as produced, processed and marketed in the Midwest. The goal
    of this biotechnology program is to fund integrated research and
    development projects that will lead to specifically defined practical
    technologies for commercialization. The projects funded in fiscal year
    1996 include efforts to: (1) produce soybeans free of phytic acid to
    improve nutritional value and reduce phosphate pollution, (2) improve
    the protein quality of corn by increasing its lysine and tryptophan
    content, (3) increase oil content and change the fatty acid composition
    of soybeans to add value, and (4) commercialize a fast-acting
    recombinant baculovirus for control of European corn borer.
        The work supported by this grant began in fiscal year 1995 and the
    appropriations for fiscal years 1995 and 1996 were $1,357,000 each
    year, and for fiscal year 1997, $1,316,000. Thus a total of $4,030,000
    has been appropriated.
        The Alliance has not specified a required amount of matching funds,
    but it is expected that most projects will have commitments for
    significant direct and in-kind non-federal support. Since Alliance
    projects are only now getting underway, the exact amount of the non-
    federal contribution is still unknown. The non-federal contribution is
    expected to be substantial, and a system for accounting for future non-
    federal contributions is in place.
        The research projects identified for funding in fiscal year 1995 is
    being conducted at the University of Illinois, the University of
    Missouri, and Iowa State University. Each project proposal for Alliance
    funding has a target date for completion. The four initial projects
    were three-year studies with anticipated completions at the end of
    fiscal year 1998. Most of the second round of projects are also three-
    year studies with anticipated completions at the end of fiscal year
    1999. Keeping with the Administration's policy of awarding research
    grants competitively, no further Federal funding for this grant is
    requested. Research could be continued at the State's discretion using
    formula or other funds.
        The Illinois-Missouri Biotechnology Alliance was evaluated for
    scientific merit by an agency peer review panel on January 7, 1997. The
    panel recommended approval of the project pending receipt of
    supplemental information on administrative aspects of the project.
               improved dairy management practices, pennsylvania
        The research focuses on developing methods to help dairy farmers in
    the adoption of new technology and management practices which lead to
    improved dairy farm profitability. The principal researcher believes
    the local need is the identification and implementation of profit
    enhancing management strategies for Pennsylvania dairy farms in
    response to changing market conditions and emerging technologies. The
    current focus is to develop economically-viable solutions to issues
    confronting Pennsylvania dairy farmers such as dealing with animal
    waste in an environmentally-friendly manner, reducing the cost of
    forage production systems, including grazing systems, and to develop a
    better understanding of decision processes by dairy farmers. In view of
    significant needs for research in high priority national interest
    topics such as improved pest management systems, funds are not proposed
    to continue this Special Research Grant. At the discretion of the
    State, Hatch Act or other funding could be used to support this
    research.
        The original goal of this research remains the same, which is the
    development of methods to help dairy farmers in the adoption of new
    technology and management practices which lead to improved dairy farm
    profitability. A farm management survey is complete and analysis of
    results is in progress. Farm financial models have been developed and
    are undergoing field test on selected farms. Workshops to teach
    elements of business management to dairy farmers have been conducted,
    and survey instruments are in place to monitor effectiveness of
    workshops. Research is currently underway to develop improved models
    for nutrient management on northeastern dairy farms, to evaluate the
    potential role of intensive grazing systems to replace harvested
    forage, and to better understand how decisions are made by dairy farm
    families. Refinements of an expert computer based system to assist
    dairy farmers in controlling the udder disease, mastitis, is underway.
    A study to evaluate the induction of lactation on dairy profitability
    is underway. An additional study to evaluate the impact of improved
    protein nutrition during late gestation on dairy cow performance has
    been initiated.
        The work supported by this grant began in fiscal year 1992 and the
    appropriation for fiscal years 1992 and 1993 was $335,000 per year. The
    fiscal year 1994 appropriation was $329,000 and $296,000 each year in
    fiscal years 1995-1997. A total of $1,887,000 has been appropriated.
    During fiscal year 1992, $354,917 were from State funds, $16,000 from
    Industry, for a total of $370,417. During fiscal year 1993, $360,374
    were from State funds and $16,000 from Industry for a total of
    $376,374. Information is not available for fiscal years 1994-1996.
        Research is being conducted at Pennsylvania State University. The
    principal researcher anticipated completion of the original objectives
    by March 1994. The original objectives were met. Availability of
    continued funding has permitted the institution to develop a
    competitively awarded grant program within the institution to address
    priority issues related to management of dairy farms. Proposals are
    reviewed and ranked by peers in other institutions prior to award. It
    is anticipated that awards from the fiscal year 1997 appropriation will
    be complete in September 1999. Keeping with the Administration's policy
    of awarding research grants competitively, no further Federal funding
    for this grant is requested.
        The agency accepts technical review of specific proposals funded by
    this grant on an annual basis. The overall proposal is reviewed by the
    agency on an annual basis. In addition, technical staff conducted on-
    site reviews of the program in 1993 and in 1995. The overall objectives
    of the work funded by this grant has direct relationship to the
    development of an Integrated Management System as well as to aspects of
    animal production systems on animal well-being and impact on the
    environment. The activities of this grant lie within the mission of
    USDA and CSREES.
                       improved fruit practices, michigan
        This research will involve a multidisciplinary approach to reduce
    chemical use on apple, blueberry, and sour cherry, three important
    Michigan fruit crops, and improve the management of dry edible beans
    and sugar beets. Research will be conducted on crop management
    techniques and reduced chemical use. The principal researcher believes
    Michigan's need for this research is to develop and maintain/expand
    their tree fruit and small fruits industry. There is a need to improve
    the culture and management of dry edible beans and sugar beets. In view
    of significant needs for research in high priority national interest
    topics such as improved pest management systems, funds are not proposed
    to continue this Special Research Grant. At the discretion of the
    state, Hatch Act or other funding could be used to support this
    research. The planned objectives of the research are to reduce the
    chemical contamination of the environment from fruit production and
    improve production practices for beans and beets through
    multidisciplinary research, including pesticides, and the development
    of new nonchemical production methods.
        The work supported by this grant began in fiscal year 1994. The
    appropriation for fiscal year 1994 was $494,000, and for fiscal years
    1995-1997, $445,000 each year. A total of $1,829,000 has been
    appropriated. The nonfederal funds and sources provided for this grant
    in fiscal year 1994 were $437,338 from state appropriations and
    $135,000 from industry, for fiscal year 1995 were $574,494 from state
    appropriations and $127,000 from industry and a total of $908,969 for
    1996.
        Research will be conducted at Michigan State University. The
    anticipated completion date of this project is 1998. The PI's have
    reported significant progress toward improved cultural practices for
    these speciality crops which is expected to reduce the need for
    chemical pesticides. Keeping with the Administration's policy of
    awarding grants competitively, no further Federal funding for this
    grant is requested. Research could be continued at the State's
    discretion using formula funds.
        This project has not been subjected to a comprehensive review. The
    annual proposals including all of its sub projects are subjected to
    CSREES review before they are approved.
              institute for food science and engineering, arkansas
        As the flagship center for the Institute for Food Science and
    Engineering, the Center for Food Processing and Engineering has as its
    objectives to facilitate and encourage value-added research and improve
    the efficiency and effectiveness of processing agricultural products.
    Its research program includes seventeen projects which have been funded
    and are underway or complete. The Center requires that researchers
    acquire the financial support of industry to support their research.
    Thus, five additional research projects have been approved but are
    awaiting funding from industry. The next request for proposals by the
    Institute will be issued on April 4, 1997. The Center for Food Safety
    and Quality, with a mission to conduct research on the safety and
    quality of foods relative to microbiological and chemical hazards, will
    be activated during this grant period. The principal researcher
    believes the Institute will provide technical support and expertise to
    small and mid-sized food processors that usually do not possess
    adequate expertise in-house. The economy of the southern region will be
    improved through the creation of new jobs. The Institute will develop
    and disseminate scientific information and provide educational programs
    related to value-added further processing, storage and marketing of
    food products. In view of significant needs for research in high
    priority national interest topics such as improved pest management
    systems and food safety, funds are not proposed to continue this
    Special Research Grant. At the discretion of the State, Hatch Act or
    other funding could be used to support this research.
        The original goal of this research is to establish an Institute of
    Food Science and Engineering at the University of Arkansas-
    Fayetteville. As noted in an earlier response, the Institute for Food
    Science and Engineering and the flagship Center for Food Processing and
    Engineering were established and several research projects were funded
    through the Center. Research demonstrated promise for a high pressure
    water spray to remove phomopsis decay and brown rot tissue from peaches
    for processing. Considerable progress was made in modifying
    commercially produced rice hull silicate to create silica gel. Other
    research results indicated that holding green and ripe peaches in
    elevated carbon dioxide atmospheres could reduce acidity and decay,
    possibly allowing fruits to ripen prior to processing without excessive
    losses to decay. The Institute provided information to new food
    business entrepreneurs on food regulations, safety, labeling,
    ingredients, packaging, and financial aspects of starting a food
    business and on marketing products. Several products were evaluated and
    specific recommendations made to those entrepreneurs.
        The work supported by this grant began in fiscal year 1996, and the
    appropriation for fiscal years 1996 and 1997 was $750,000 each year. A
    total of $1,500,000 has been appropriated. The non-federal funds and
    sources provided for this grant include $184,700 in state funds and
    $93,000 from industry in fiscal year 1996, and $187,357 in state funds
    and $166,752 in industry funds in fiscal year 1997. The Institute
    received, as a donation worth $200,000 from industry, a trained sensory
    panel to qualify and quantify sensory properties of foods. Industry has
    pledged an additional $109,628 which has not yet been received.
        Research will be conducted at the University of Arkansas at
    Fayetteville. The principal researcher anticipates that work will be
    completed on the original goals in fiscal year 2005. The goals of this
    project related to establishing the centers of the Institute are
    sequential and have not been fully met. The Center for Human Nutrition
    is scheduled to be activated in 1999. It is expected that objectives
    related to research and service to food entrepreneurs will be ongoing
    and require ongoing support. Keeping with the Administration's policy
    of awarding research grants competitively, no further Federal funding
    for this grant is requested. Research could be continued at the State's
    discretion using formula funds.
        An agency science specialist conducts a merit review of the
    proposal submitted in support of the appropriation on an annual basis.
    A review of the proposal was conducted on January 13, 199'7. The
    assessment was that satisfactory progress was demonstrated in meeting
    the goals of the Institute, noting that the timetable for activating
    the Center for Food Safety and Quality had been accelerated.
                 integrated pest management/biological control
        Research supported by Integrated Pest Management special grants
    continues to provide a science basis for the development of alternative
    approaches for managing pests including insects, mites, weeds, plant
    pathogens, and ectoparasites. Emphasis of the program has been on
    enhanced natural control. Enhanced natural control emphasizes increased
    use of biological control, cultural control, and host resistance
    practices and the management of genetic resistance of pests. Most of
    the research projects emphasize the development of natural control
    practices used in conjunction with selective pesticides and
    biopesticides when pest monitoring programs and pest populations
    warrant a pesticide application. In recent past years, a limited number
    of joint research/extension projects were initiated in the North
    Central Region, and in fiscal years 1996 and 1997, three to four joint
    projects were funded in each of the four regions. The extension
    component of the joint project, focusing on the education component for
    implementing new approaches, is funded by extension IPM funds for
    special projects. These joint projects are having an impact on the
    entire research community. Researchers are planning for the
    implementation of research from the beginning and throughout the
    research.
        This research program addresses the national priority to implement
    IPM on 75 percent of the nations cropland by the year 2000. In
    particular, the research will provide the tools to take IPM to more
    bio-intensive levels which will have greater impact on environmental
    quality and consumer safety while maintaining the agricultural
    productivity, sustainability of protection practices, and
    competitiveness of American agriculture. This research program
    addresses the regional needs. The program is organized by regional
    competitive grant programs, and the request for proposals address both
    the national and regional needs and priorities. In the past year,
    jointly funded research and extension production region commodity teams
    with grower and private sector participation have identified priority
    protection needs. This research program addresses local needs. State
    IPM commodity interdisciplinary teams working with growers and private
    consultants have identified priority local needs which are addressed in
    the regional request for proposals. The fiscal year 1997 requests for
    proposals in all four regions have made measurable shifts in emphasis
    based on these priority setting activities.
        The original goal and current goal is to bring IPM into the 21st
    Century with a paradigm shift from past sole dependence on pesticides
    to an emphasis on natural control integrated with selective pesticides
    and biopesticides when pest population densities warrant their use. The
    more recent increase in joint research/extension collaboration has
    assisted bringing the accomplishments of research into implementation
    reality. It has also provided for better documentation and measurement
    of impacts of research and extension efforts. All four regions have
    produced 12 to 15 page brochures documenting the impacts of research
    and extension efforts. The titles are indicative of the goals:
    Integrated Pest Management in the North Central States, a sustainable
    approach to managing crop pests, using a combination of biological,
    cultural, and chemical tactics that reduce pests to tolerable levels
    that minimize economic, health, and environmental risks; Integrated
    Pest Management in the Northeast Region, 1996 update Involving
    Stakeholders; Integrated Pest Management in the Southern Region, At the
    heart of Integrated Pest Management is its dual focus on improving
    profitability and protecting vital natural resources; and Integrated
    Pest Management in the Western Region. IPM advances on 2530 commodities
    are described in these brochures.
        Grants have been awarded from funds appropriated as follows: fiscal
    year 1981, $1,500,000; fiscal years 1982 through 1985, $3,091,000 per
    year; fiscal years 1986 through 1980, $2,940,000; fiscal year 1990,
    $2,903,000; fiscal year 1991, $4,000,000; fiscal years 1992 and 1993,
    $4,457,000 per year; fiscal year 1994, $3,034,000; and fiscal years
    1995-1997, $2,731,000 each year. A total of $52,668,000 has been
    appropriated. Non-federal funds are as follows: for fiscal year 1993,
    state appropriations, $841,017; product sales, $33,987; industry
    grants, $17,081; and other, $31,737; for fiscal year 1994, state
    appropriations, $2,303,458; product sales, $77,157; industry grants,
    $210,110; and other, $216,552.
        This research is being carried out in practically all of the State
    Agricultural Experiment Stations. There is a high priority for
    continuation of IPM research and for collaborative linkages with other
    research, extension, technology transfer, regulatory, and incentive
    programs to accomplish the transitions called for in the
    administration's policy for reducing overall risks from the use of
    pesticides through integrated pest management programs which lead to
    more sustainable agricultural production strategies and reduction in
    the use of pesticides. The future will bring more collaboration between
    program areas that address pest management building on the increased
    collaboration between research and extension. Integration is currently
    focused on the commodity production system. These are highly complex
    systems involving a network of organizations that impact on the system.
    Future levels of integration will address whole farm planning where
    issues of landscape ecology can be addressed and better interactions
    with water quality programs can take place. The rate of progress will
    be determined by the availability of resources.
        Due to the complexity of the program, evaluations are done at a
    number of levels. All grants awarded are evaluated by peer scientists
    in the multiple disciplines comprising IPM. These peer reviews are
    conducted in the four regional IPM programs. Peer scientists are drawn
    from regions outside of the region conducting the review. State IPM
    commodity teams, with growers and private consultants, review plans and
    priorities for commodities programs. Production region commodity
    development programs have been reviewed by peer scientists at the
    national level.
                    integrated production systems, oklahoma
        This grant focuses on the development of efficient management
    systems for production of watermelons and blackberries under
    intensively managed conditions. The work will address biotic and
    abiotic production components under Southeastern Oklahoma conditions
    for use in production guidelines. This will include planting densities,
    fertilizer studies, weed management and insect and disease control. The
    proposal for fiscal year 1996 has been received and is being processed.
    The principal researcher believes the need for this research is focused
    on the local area of Southeastern Oklahoma, an area that is
    economically depressed and in need of alternative crops to diversify
    the dominant cow/calf livestock production. In view of significant
    needs for research in high priority national interest topics such as
    improved pest management systems, funds are not proposed to continue
    this Special Research Grant. At the discretion of the state, Hatch Act
    or other funding could be used to support this research. The original
    goal of this research was to develop new and alternative crops to
    supplement and diversify the cow/calf livestock agriculture of
    Southeastern Oklahoma with emphasis on horticultural crops. Work to
    date has shown promise for strawberries, blackberries, cabbage, melons
    and blueberries. CD-ROM technology transfer to research results to
    support an expert system will be developed for grower use.
        Work supported by this grant started in fiscal year 1984 and the
    appropriations were: fiscal, year 1984, $200,000; fiscal year 1985,
    $250,000; fiscal year 1986, $238,000; fiscal years 1987-1989, $188,000
    per year; fiscal years 1990-1991, $186,000 per year; fiscal year 1992,
    $193,000; fiscal year 1993, $190,000; fiscal year 1994, $179,000;
    fiscal years 1995-1997, $16 1,000 each year. A total of $2,669,000 has
    been appropriated.
        The non-federal funds and sources provided for this grant were as
    follows: $165,989 state appropriations in 1991; $160,421 state
    appropriations in 1992; and $164,278 state appropriations in 1993.
    Nonfederal support for 1994 was $141,850 for state appropriations.
    Funds for fiscal year 1995 were $129,552, and for 1996 were $146,000.
        This research is being done at the Wes Watkins Agricultural
    Research and Extension Center at Lane, Oklahoma, a branch of the
    Oklahoma State Agricultural Experiment Station. The original objectives
    of this project were to develop production system for alternative crops
    with economic potential for southeastern Oklahoma. Each year's funding
    cycle has address specific crop and management objectives to be
    completed over two years time. These short term objectives have been
    met for each of the completed two year projects. However the original
    objective of developing alternative cropping systems is very long term
    and has not been completed. In keeping with the Administration's policy
    research grants competitively, no further Federal funding for this
    grant is requested. Research could be continued at the State's
    discretion using formula funds.
        Each of the annual project proposals has been put through the
    institutions review and is also reviewed by a CSREES scientist before
    approval. In addition to the annual review of individual proposals, a
    comprehensive review of the Lane Agricultural Center, where this
    research is conducted, was conducted in 1993. This review revealed that
    work supported by this grant is central to the mission of that station
    and represents an important contribution to the agriculture of the
    area.
                      international arid lands consortium
        Fiscal year 1996 was the third year that CSREES funded the
    International Arid Lands Consortium. The Forest Service supported the
    program during fiscal year 1993 to develop an ecological approach to
    multiple-use management and sustainable use of and semiarid lands.
    Projects that began in 1994-1996 will continue to be funded to address
    issues of land reclamation, land use, water resources development and
    conservation, water quality, and inventory technology, e.g. remote
    sensing. The principal researcher believes the Consortium is devoted to
    the development, management and reclamation of and semi-arid lands in
    the United States, Israel, and elsewhere in the world. The
    International Arid Lands Consortium will world to achieve research and
    development, educational and training initiatives, and demonstration
    projects. The current member institutions are the University of
    Arizona, The University of Illinois, Jewish National Fund, New Mexico
    State University, South Dakota State University, Texas A&M University,
    Kingsville. The United States Department of Agriculture's Forest
    Service works very closely with The International Arid Lands Consortium
    through a service-wide memorandum of understanding. The IALC's
    affiliate members include Egypt's Ministry of Agriculture and Land
    Reclamation Undersecretarial for Afforestation and Jordan's Higher
    Council for Science and Technology. In view of significant needs for
    research in high priority national interest topics such as improved
    pest management systems, funds are not proposed to continue this
    Special Research Grant. At the discretion of the state, Hatch Act or
    other funding could be used to support this research.
        The original goal of this consortium is to be acknowledged as the
    leading international organization supporting ecological sustainability
    of arid and semi-arid lands. To date, 35 projects have been funded, 25
    of which are to conduct research and development, 6 for demonstration
    projects, and 4 for international workshops. Funds approximating $1.91
    million have been used to fund these projects.
        International Arid Lands Consortium was incorporated in 1991. Funds
    were appropriated to the Forest Service in 1993. Additional funds were
    received during each of the years that followed. $329,000 has been
    appropriated from CSREES for fiscal years 1994 through 1997 for total
    appropriations of $1,316,000 for the 4-year period.
        Members of the International Arid Lands Consortium have provided
    funds to support the consortium office in Tucson, Arizona, and for
    printed materials as needed. Each member has provided travel and
    operations support for semi-annual meetings, teleconferences, and other
    related activities. In fiscal years 1993-1996, $60,000 in state
    appropriations were provided. Industry provided $84,083 and $100,000
    and $25,000 in fiscal years 1993, 1995 and 1996, respectively. Amounts
    are not yet available for fiscal year 1997.
        Research is currently being conducted at the University of Arizona,
    South Dakota State University, Texas A&M University, Kingsville, New
    Mexico State University, University of Illinois, and several research/
    education institutions in Israel. Research projects started in 1993
    have been completed. The projects started in 1994 and 1996 are expected
    to be completed within 6 months to 3 years depending upon the nature of
    the research or demonstration projects. Several demonstration projects
    were completed and 4 international workshops were held during 1994
    through 1996. Keeping with the Administration's policy of awarding
    research grants competitively, no further Federal funding for this
    grant is requested.
        This project is evaluated annually based on an annual progress
    report and agency participation in the Consortium Board of Directors
    meeting. The cognizant staff scientist has reviewed the project and
    determined that the research is conducted in accordance with the
    mission of the agency.
                         iowa biotechnology consortium
        This consortium is the focal point for cooperative biotechnology
    research endeavors between Iowa State University, the University of
    Iowa and the City of Cedar Rapids, Iowa to develop and test methods to
    improve wastewater treatment processes for agricultural wastes, and
    when possible, to convert by-product materials in agricultural wastes
    into useful new products. The overall objectives of this research are
    to conduct fundamental and applied research aimed at enhancing the
    recovery and utilization of byproduct materials through studies
    involving fermentation, enzyme catalysis and bioprocessing. The
    expectation is that technologies will be developed from the research to
    reduce the burden of agricultural bioprocessing wastes on municipal
    waste management systems and to transform these wastes into
    commercially viable products. Developments in biotechnology have
    allowed for the development of improved management systems that
    increase the capacity and sophistication of agricultural waste
    processing. These researchers believe that technological breakthroughs
    are possible to deal effectively with the increasing burden of
    agricultural wastes and that useful byproduct materials can be
    recovered and recycled through bioprocessing of wastes, especially
    fermentation wastes. In view of significant needs for research in high
    priority national interest topics such as pest management systems,
    funds are not proposed to continue this Special Research Grant. At the
    discretion of the State, Hatch Act or other funding could be used to
    support this research.
        The original goals of this project were aimed at enhancing the
    recovery and utilization of by-product materials arising from new and
    emerging industries using biotechnology. Recycling agricultural wastes,
    isolating useful byproducts and developing value added processing
    remain the primary thrusts of the project. The Consortium has
    established a network of researchers to assist them in finding uses for
    the by-product streams as concentrated steepwater and to find methods
    to concentrate by-products for industrial uses. The Consortium is also
    making important progress in the bioconversion, biocatalysis, membrane
    concentration, and bioseparation of fats and carbohydrates.
        Grants have been awarded from funds appropriated as follows: fiscal
    year 1989, $1,225,000; fiscal year 1990, $1,593,000; fiscal year 1991,
    $1,756,000; fiscal year 1992, $1,953,000; fiscal year 1993, $2,000,000;
    fiscal year 1994, $1,880,000; fiscal years 1995-1996 $1.,792,000 each
    year; and in fiscal year 1997, $1,738,000. A total of $15,729,000 has
    been appropriated.
        Non-federal funds and sources provided for this grant were as
    follows: $623,803 from the State of Iowa, $42,813 from the city of
    Cedar Rapids in 1991; $768,287 from the State of Iowa, and $365,813
    from the city of Cedar Rapids in 1992; $858,113 from the State of Iowa,
    and $170,000 from the city of Cedar Rapids in 1993; $841,689 from the
    State of Iowa, and $36,000 from the City of Cedar Rapids in 1994; and
    $1,016,505 from the State of Iowa, and $36,000 from the city of Cedar
    Rapids in 1995.
        Research is being conducted at Iowa State University and the
    University of Iowa, in collaboration with the City of Cedar Rapids. The
    Consortium was originally formed between the City of Cedar Rapids and
    the participating universities to assist the City in dealing with
    wastes associated with corn and oat processing and milling,
    biocatalysis to produce high-fructose syrups, and one of the largest
    fermentation facilities in the world. No firm date was established to
    complete this work. The researchers have worked closely with the City
    and the industries generating these wastes and have made significant
    progress in analyzing the waste streams and in devising laboratory
    procedures for extracting useful products. The City of Cedar Rapids is
    planning to invest funds from other sources in special waste treatment
    facilities to conduct large scale tests of new treatment methods.
    Keeping with the Administration's policy of awarding research grants
    competitively, no further Federal funding for this grant is requested.
        The Iowa Biotechnology Consortium was evaluated for scientific
    merit by an agency peer review panel on January 7, 1997. The panel
    recommended approval of the project pending receipt of supplemental
    information. The Consortium was also featured in a biotechnology
    special grant seminar hosted by the agency on December 16, 1996 at
    which the principal investigator presented research progress and
    highlights to an audience of agency scientists, administrators, and
    awards management staff.
                               jointed goatgrass
        Research is being conducted on control systems for jointed
    goatgrass in wheat production including integrated cultural management,
    seed bank studies, and modeling for management conducted as sub-
    projects by several states. The premier research project continues to
    be an ``Integrated Management'' study being conducted across states in
    the Midwest and west. In this study, jointed goatgrass management is
    being evaluated based on planting dates, planting density, economic
    thresholds, and competitive varieties. Research is also being conducted
    on crop rotations, biological control, seed production and spread, and
    the development of computer-based decision aids. All funded work has a
    technology transfer plan and a national coordinator for technology
    transfer to insure that growers are fully informed about all options
    for managing this devastating weed. The National Technology Transfer
    Coordinator has been hired, with the concurrence of a steering
    committee, and that person is housed at the University of Nebraska. To
    maximize cooperation among scientists, an annual meeting is held among
    all investigators and the national steering committee to strengthen
    collaborations and optimize the distribution of limited funds.
        Jointed goatgrass infests nearly five million acres of winter wheat
    in the west and Midwest and is spreading unchecked. It costs U.S. wheat
    growers an estimated $145 million annually. Control of jointed
    goatgrass in wheat is impossible with current methods because its seed
    survives in the soil for five or more years. Jointed goatgrass has
    increased rapidly in the past 20 years because of the widespread
    adoption of conservation tillage systems. Jointed goatgrass
    proliferated in such reduced tillage systems, and it seriously impedes
    the universal adoption of such practices. The research involves
    scientists from other states. In view of significant needs for research
    in high priority national interest topics such as pest management
    systems, funds are not proposed to continue the Special Research Grant.
    At the discretion of the state, Hatch Act or other funding could be
    used to support this research. The principal researcher and the
    National Wheat Growers Association believe this research is of national
    and regional importance.
        The goal of this project is to reduce the devastating effect of
    jointed goatgrass on wheat production and quality and to prevent its
    continued spread into new, non-infested areas. A jointed goatgrass
    population model has been constructed including a post-harvest (fall)
    seed bank, spring seed band, and fall and spring germination, seeding
    mortality, mature plants and seed production. The underlying jointed
    goatgrass population model has been constructed with a vision that the
    weed management strategies are going to be long-term in nature and be
    focused on the impact of crop rotation, tillage and weather on jointed
    goatgrass population dynamics.
        The work supported by this grant began in fiscal year 1994. The
    appropriation for fiscal year 1994 was $329,000, and for fiscal years
    1995-1997, $296,000, each year. A total of $1,217,000 has been
    appropriated.
        The non-federal funds and sources provided for this grant were as
    follows: for 1994, $82,198 state appropriations, $82,256 from industry,
    and $14,871 miscellaneous; for fiscal year 1995, $67,442 state
    appropriations, $38,496 from industry and $13,304 miscellaneous; and
    for fiscal year 1996, an estimated $70,000 state appropriations,
    $50,000 from industry, and $14,000 miscellaneous.
        The research is being conducted by University scientists in the
    states with serious infestations including Washington State
    University--the principal coordinating institution--Colorado, Kansas,
    Nebraska, Oklahoma, Utah, Oregon, Idaho, Montana, Wyoming, and South
    Dakota. The project was initiated to accomplish significant results in
    about five years. The original objectives are being met, and the
    researchers anticipate that the original work may be completed in
    fiscal year 1999. Keeping with the Administration's policy of awarding
    research grants competitively, no further funding for this grant is
    requested.
        Each year the grant is peer reviewed and reviewed by CSREES's
    senior scientific staff.
                     landscaping for water quality, georgia
        The project is a comprehensive multi-institution, multi-agency,
    private producer partnership directed by the University of Georgia. The
    researchers believe it will lead to development of management and
    siting guidelines for animal agriculture based on landscape and
    watershed scale environmental quality considerations. Participating
    institutions and agencies are the University of Georgia, the Joseph W.
    Jones Ecological Research Center, the Middle South Georgia Soil and
    Water Conservation District, the USDA Agricultural Research Service,
    the USDA Natural Resources Conservation Service, the USDA Cooperative
    State Research, Education, and Extension Service, and the Georgia
    Department of Natural Resources. Growers from Brooks and Thomas
    counties, Georgia are key partners in the project. The
    multidisciplinary research team believes that the efficiency of modem
    confinement-based livestock feeding and production facilities and
    prevailing economies of scale have led to concentration of these
    facilities in several regions of the United States, including the
    Southeast. This regional concentration of animal production and
    processing has frequently led to degradation of regional water quality
    resulting from the excessive discharge of nutrients, organic matter,
    and pathogens to receiving waters. One factor contributing to these
    problems in the Southeast has been the historical concentration of
    animal processing and confinement production facilities in regions with
    inadequate crop land for proper management of manure resources. This
    research project may provide the knowledge base for the integration of
    increased animal production into a regional agricultural system without
    sacrificing water quality. The findings will be immediately applicable
    to the Southeast. In view of significant needs for research in high
    priority national interest topics such as pest management systems,
    funds are not proposed to continue this Special Research Grant. At the
    discretion of the state, Hatch Act or other funding could be used to
    support this grant.
        The goal of this research project is to provide the knowledge base
    for the integration of increased animal production into a regional
    agricultural system without sacrificing water quality. The goal will be
    met by completing five specific objectives over a period of five years.
    The proposed research is on schedule. Since the project began on
    February 1, 1996, significant progress has been made on three of the
    five objectives. Work on the final two objectives will begin once
    fiscal year 1997 funds become available. Specific accomplishments
    include:
        1. Completed installation and began sampling for chemical and
    biological water quality parameters at seven stream monitoring sites in
    the 390 square kilometer Piscola Creek Watershed, and continued
    sampling eight stream monitoring sites in the 340 square kilometer
    Little River Research Watershed.
        2. Nearing completion of Geographical Information System databases
    for these two watersheds including information on soils, hydrography,
    topography, and landcover.
        3. Began compiling a database listing all regulations, guidelines,
    and recommended management practices pertaining to animal agriculture
    and environmental quality in the southeast region.
        The work supported by this grant began in fiscal year 1996 and the
    appropriation for fiscal years 1996 and 1997 was $300,000. A total of
    $600,000 has been appropriated. Information provided by the University
    indicates that $202,000 in state funds will be provided to support this
    grant during fiscal years 1996 and 1997. Similar amounts of state
    support are anticipated for future years. In addition, funds will be
    expended by the other participating nonfederal institutions in support
    of this grant.
        This research is being conducted by an interdisciplinary team of 19
    scientists led by researchers at the University of Georgia's National
    Environmentally Sound Production Agriculture Laboratory in Tifton and
    Athens, Georgia. The experimental aspects of the project are being
    conducted in the coastal plain region of Georgia in watersheds that are
    representative of southern Georgia, southeast Alabama, and north
    central Florida. The anticipated completion date for the original
    objectives of the project was January 31, 1998. As discussed earlier,
    significant progress has been made on these objectives and they are on
    schedule. The anticipated completion date of additional or related
    objectives is January 31, 2001. Keeping with the Administration's
    policy of awarding research grants competitively, no further Federal
    funding for this grant is requested. Research could be continued at the
    State's discretion using formula or other funds.
        As this project is still in its first year, a comprehensive
    external evaluation has not yet been conducted. However, the principal
    researcher is working with us to schedule an evaluation during 1997.
                 livestock and dairy policy, new york and texas
        The purpose of this grant is to assess the possible economic
    impacts on the U.S. livestock, poultry, and dairy sectors from various
    macroeconomic, farm, environmental, and trade policies and new
    technologies. Both Cornell University and Texas A&M University conduct
    analyses of these policies and disseminate the information to
    policymakers, farmers, and agribusinessmen. Cornell focuses on dairy
    policies, and Texas A&M focuses on policies affecting livestock and
    poultry. Information on the implications of new and alternative farm,
    trade, and macroeconomic policies affecting the livestock and dairy
    sectors is of special interest to policy-making officials, farmers, and
    others. Such information enables farmers and agribusinessmen to make
    necessary adjustments to their operations to enhance profitability and
    for public officials to consider alternatives to sustain adequate
    supplies and minimize public program costs. In view of significant
    needs for research in high priority national interest topics such as
    improved pest management systems, funds are not proposed to continue
    this Special Research Grant. At the discretion of the States, Hatch Act
    or other formula funding could be used to support this research.
        The original goal was to establish a specialized research program
    that could provide timely and comprehensive analyses of numerous policy
    and technological changes affecting livestock and dairy farmers and
    agribusinessmen and advise them and polieymakers promptly of possible
    outcomes. This goal has been achieved. The program continues to provide
    assessments and evaluations of provisions and proposed changes in
    agricultural policies, the General Agreement on Tariffs and Trade, and
    the North American Free Trade Agreement; various income and excise tax
    measures; and alternative pricing measures for milk. The institutions
    are involved in several current studies relating to dairy provisions in
    the 1996 farm legislation. Both institutions maintain extensive
    outreach programs to disseminate results throughout the United States.
        Grants have been awarded from funds appropriated as follows: fiscal
    year 1989, $450,000; fiscal year 1990, $518,000; fiscal years 1991-
    1993, $525,000 per year; fiscal year 1994, $494,000; and fiscal years
    1995-1997, $445,000 each year. A total of $4,372,000 has been
    appropriated.
        The non-federal funds and sources provided for this grant are as
    follows: $37,420 State appropriations in fiscal year 1991; $162,086
    State appropriations and $133,278 product sales for a total of $295,364
    in fiscal year 1992; and $301,817 State appropriations, $1,412
    industry, and $7,121 miscellaneous for a total of $310,350 in fiscal
    year 1993; $24,702 State appropriations, and $5,961 industry for a
    total of $30,663 in fiscal year 1994; $235,526 State appropriations for
    fiscal year 1995; $250,000 in State appropriations for fiscal year
    1996; and approximately $245,000 in State funding for fiscal year 1997.
        The research is being conducted at Cornell University and Texas A&M
    University. The original objectives of this project have been achieved.
    In keeping with the Administration's policy of awarding research grants
    competitively, no further Federal funding for this grant is requested.
        We have conducted no formal evaluations of this project. Annual
    proposals for funding, however, are carefully reviewed and work
    progress is noted. Our agency contact is also in regular contact with
    principal researchers at each institution to discuss progress toward
    project objectives.
                       lowbush blueberry research, maine
        Interdisciplinary research is being conducted on many aspects of
    lowbush blueberry culture and processing includes investigation into
    factors affecting processing quality, biological control of insect
    pests, sustainable pollination, weed, disease and fertility management,
    cold hardiness and ground water protection. Maine produces 99 percent
    of all lowbush blueberries or 33 percent of all blueberries in the
    United States. This work is of major local interest, and helps maintain
    the continued availability and high quality of this native fruit
    commodity. In view of significant needs for research in high priority
    national interest topics such as improved pest management systems,
    funds are not proposed to continue this Special Research Grant. At the
    discretion of the State, Hatch Act or other funding sources could be
    used to support this research. In addition, future efforts will be made
    to collaborate with IPM regional and state representatives in finding
    solutions to the specified pest concerns.
        The original research goal was to provide research answers to
    unique lowbush blueberry production, pest and processing problems.
    Research to date indicates that the field sanitizer was able to use
    heat to control insect pests without adversely affecting plant growth,
    providing a nonchemical alternative to pest management. Eumenid wasps
    were found to control red striped fireworm, providing a potential
    biological control. Native leafcutter bees and alfalfa leafcutter bees
    were found to increase lowbush blueberry fruit set and yield, providing
    an alternative to imported honeybees. Clonal variation was found to
    affect stem and flower bud hardiness that will prove to be important in
    clonal selection for planting. Control of monolina disease was found in
    using 4 ounces of propiconazole instead of 24 ounces of triforine
    thereby reducing the chemical needed for control of this disease. Boron
    and calcium were found to have more influence on the ability of the
    stigma to stimulate pollen germination than the germinability of the
    pollen grains themselves. A mechanical harvester was found to be
    effective and had yields and fruit quality comparable to hand harvest,
    providing growers with a more efficient tool to harvest blueberries.
    Economic weed thresholds have been determined for weed species, thereby
    giving growers a method to determine when to use control measures.
    Mowing proved as effective as wiping to suppress two of these species,
    providing a non-chemical control alternative. A rope wick wiper
    effectively controls weeds growing higher than blueberry plants without
    injuring the crop. Pesticide residues in lowbush blueberries were found
    to be well below federal tolerances. Carboxymethyl cellulose and
    various gums were found to control berry leakage, thereby improving
    quality for use in baked products. Products for use in food industry
    are being extracted from cull berries, thereby improving utilization
    and reducing waste.
        Grants have been awarded from funds appropriated as follows: fiscal
    year 1990, $170,000; fiscal year 1991, $202,000; fiscal years 1992 and
    1993, $185,000 per year; fiscal year 1994, $208,000; and fiscal years
    1995, 1996, and 1997 at $220,000 each year. A total of $1,610,000 has
    been appropriated. Direct industry support from blueberry tax funds for
    1996 is about $65,000.
        Research is being conducted at the University of Maine. The
    original objectives have not yet been met. The University of Maine
    researchers estimate that the project will be concluded at the end of
    fiscal year 2001. Keeping with the Administration's policy of awarding
    research grants competitively, no further Federal funding for this
    grant is requested. Research could be continued at the State's
    discretion using formula funds.
        The agency evaluates this project on a yearly basis as funding is
    renewed. Project proposals are peer reviewed by the University of Maine
    review mechanism. Progress reports are submitted to the Cooperative
    State Research, Education, and Extension Service on a yearly basis as
    part of the review of the proposed project.
                            maple research, vermont
        The research increased understanding of how water moves from the
    soil into and through the maple trees, affecting tree growth and sap
    production. It examined the relationship of maple decline to acid
    precipitation. It measured the effectiveness of various fertilizer
    combinations in improving the health of declining maple trees. It
    identified sources of lead contamination in maple products and began
    testing lead-free equipment and possible commercial methods for
    removing lead from maple syrup. Maple products are an important source
    of seasonal income in maple-growing areas of rural America. Identifying
    the source of contamination during processing and identifying
    commercial methods to remove lead from products is important to
    assuring consumers that these food products are not harmful. In view of
    significant needs for research in high priority national interest
    topics such as improved pest management systems, funds are not proposed
    to continue this Special Research Grant. At the discretion of the
    State, Hatch Act or other funding sources could be used to support this
    research. The goal of this research is to conduct research on maple
    tree physiology, management of sugar maple stands, and related aspects
    of the maple industry to benefit the maple industry in Vermont and the
    Northeast. The U.S. Department of Agriculture approved an amendment to
    these goals to permit the research to focus on lead in maple products.
        Grants have been awarded from funds appropriated as follows: fiscal
    year 1985, $100,000; fiscal years 1986-1987, $95,000 per year; fiscal
    years 1988-1989, $100,000 per year; fiscal years 1990-1993, $99,000 per
    year; fiscal year 1994, $93,000; and fiscal years 1995-1997, $84,000
    each year. A total of $1,231,000 has been appropriated.
        The non-federal funds and sources provided for this grant were as
    follows: $52,220 state appropriations and $10,345 product sales in
    1991; $49,450 state appropriations and $18,950 product sales in 1992;
    $49,575 state appropriation and $23,860 product sales in 1993; $44,543
    state appropriation, $29,321 product sales, and $25,000 local support
    in 1994; $60,856 state appropriation, $12,000 product sales, and
    $19,090 local support in 1995; $83,000 state appropriation and $15,000
    product sales in 1996; and $67,000 state appropriation, $11,000 local
    support, and $15,000 product sales in 1997.
        This research is being conducted at the Vermont Agricultural
    Experiment Station. The work relative to maple tree physiology and
    management of maple stands has been completed so far as this project is
    concerned, but it continues under sponsorship of the U.S. Forest
    Service. The new objective of identifying sources of heavy metals in
    maple products and reducing them is underway. Anticipated completion
    date is 1999. Keeping with the Administration's policy of awarding
    research grants competitively, no further Federal funding for this
    grant is requested.
        This project is evaluated annually by the U.S. Department of
    Agriculture through review of the project proposal and any previous
    accomplishments. Although satisfactory progress was being made on the
    tree physiology and maple tree management aspects of the project, the
    project was amended to focus on lead in maple products.
                       michigan biotechnology consortium
        The objective of the Michigan Biotechnology Consortium's research
    program is to develop bioprocessing technology to manufacture products
    from agricultural raw materials, to increase the utilization of raw
    materials, reduce surpluses, and to degrade agricultural and associated
    wastes, thereby decreasing environmental costs of agricultural products
    and processes. Bioprocessing may include fermentation, an enzymatic
    step, chemical catalysis, or physical modification of agricultural raw
    materials. The principal researcher believes the results from the
    research to develop bioprocessing technology to manufacture value-added
    products from agricultural raw materials, which increases their
    utilization and reduces agricultural commodity surpluses and
    environmental costs, will contribute to regional and national
    priorities. In view of significant needs for research in high priority
    national interest topics such as improved pest management systems,
    funds are not proposed to continue this Special Research Grant. At the
    discretion of the State, Hatch Act or other funding could be used to
    support this research.
        The original goal of this research remains to select and develop
    market-viable technologies that will form the basis of new companies,
    new jobs, and additional tax revenues produced for state, local and
    Federal governments. The Michigan Biotechnology Institute and Michigan
    State University have succeeded in developing numerous technologies
    that are now in the marketplace.
        Examples include the following: A process was developed to produce
    lactic acid through fermentation using corn as the feedstock resulting
    in a polymer for biodegradable plastics and a disinfectant. The
    properties of the polymer make it useful for non-woven applications
    such as medical packaging, clear blister bags, diapers, etc. Corn was
    used as a feedstock to develop plant growth formulations to enhance
    plant growth and productivity and reduce nitrogen fertilizer
    requirements. Growth promoters for high volume or high value crops have
    the potential for productivity increases of 15 percent and a reduction
    in nitrogen fertilizer use of 25 percent. Biodegradable plastic resins
    developed from cornstarch were made to produce compostable films for
    agricultural mulch and other soluble films, and for cellulase-base
    engineered thermoplastic resine. Biodegradable plastic resins from
    cornstarch were also developed for moldable products such as disposable
    cutlery, plastic containers, toys and toothbrushes. The market for
    resins for use in formulation and extrusion of plastics for all
    applications is in excess of $2 billion annually. Corn was also used
    for the development of all-natural flavors and derivatives including a
    salty flavor compound that can be produced to taste in non-sodium and
    non-potassium forms. Low-cost, readily-available carbohydrates were
    used to produce high-quality, high-value optically-pure chiral
    intermediates for the pharmaceutical and agrochemical industries. A
    sand/manure separation system for dairy farmers was developed to cost-
    effectively separate manure from sand and recycle both components. Many
    of these products are being explored for commercial development through
    licensing agreements with industrial partners or new company startups.
    In addition, there are many agri-based industrial products under
    development including: several succinate-based green chemicals for
    surfactants and detergents, new food ingredients and flavors, paint
    removers, adhesives, lubricants, and plastic resins; green solvents
    from fermentation of corn-derived materials; ethanol produced from
    cellulose; natural food preservatives, improved enzymes for processing
    starch and fructose production, food flavors and pigments, feed
    ingredients to improve digestibility of forage-based animal feed;
    biomass-based animal feeds; and agricultural waste treatment processes
    to improve methods to clean up herbicides and pesticides.
        Grants have been awarded from funds appropriated as follows: fiscal
    year 1989, $1; fiscal year 1990, $2,160,000; fiscal year 1991,
    $2,246,000; fiscal years 1992-1993, $2,358,000 per year; fiscal year
    1994, $2,217,000; fiscal year 1995, $1,995,000; and fiscal years 1996
    and 1997, $750,000 per year. A total of $16,584,000 has been
    appropriated.
        The non-federal funds and sources provided for this grant were as
    follows: $1,750,000 in State of Michigan appropriations, $160,000 from
    industry, and $1,000,000 from miscellaneous in 1991; $1,750,000 in
    State of Michigan appropriations, $175,000 from industry, and
    $1,000,000 from miscellaneous in 1992; $1,750,000 in State of Michigan
    appropriations and $100,000 from industry in 1993; $1,750,000 in State
    of Michigan appropriations, $175,000 from industry, and $100,000 from
    miscellaneous in 1994; and $200,000 in State of Michigan appropriations
    and $2,035,000 from industry in 1995; $1,250,000 in State of Michigan
    appropriations and $350,000 from industry in 1996. A total of
    $13,545,000 has been provided to support this work by non-federal
    sources.
        The research is being conducted on the campus of Michigan State
    University and at the Michigan Biotechnology Institute. The Institute
    had reported specific milestones that it intended to be accomplished
    within the five-year period ending in fiscal year 1998. Keeping with
    the Administration's policy of awarding research grants competitively,
    no further Federal funding for this grant is requested. Research could
    be continued at the State's discretion using formula or other funds.
        The Michigan Biotechnology Institute was evaluated for scientific
    merit by an agency peer review panel on January 7, 1997. The panel
    recommended approval of the project pending receipt of supplemental
    information on administrative aspects of the project. The Institute was
    also featured in a biotechnology special grant seminar hosted by the
    agency on December 16, 1996 at which the principal investigator
    presented research progress and highlights to an audience of agency
    scientists, administrators, and awards management staff.
             midwest advanced food manufacturing alliance, nebraska
        The stated purpose of the Midwest Advanced Food Manufacturing
    Alliance is to expedite the development of new manufacturing and
    processing technologies for food and related products derived from
    United States produced crops and livestock. The Alliance involves
    research scientists in food science and technology, food engineering,
    nutrition, microbiology, computer science, and other relevant areas
    from 12 leading Midwestern universities and private sector researchers
    from numerous U.S. food processing companies. Close cooperation between
    corporate and university researchers assure that the latest scientific
    advances are applied to the most relevant problems and that solutions
    are efficiently transferred and used by the private sector. Fiscal year
    1997 funds will support research from June 1, 1997 through May 31,
    1998. The principal researcher believes the food manufacturing industry
    is the number one manufacturing industry in the Midwestern region and
    that opportunities for trade in high value processed food products will
    grow exponentially on a worldwide basis. The researcher believes the,
    Alliance is positioned to fill the void in longer range research and
    development for the food industry. In view of significant needs for
    research in high priority national interest topics such as improved
    pest management systems, funds are not proposed to continue this
    Special Research Grant. At the discretion of the State, Hatch Act or
    other funding could be used to support this research.
        The goal, as stated previously, was to expedite the development of
    new manufacturing and processing technologies for food and related
    products derived from United States produced crops and livestock. This
    is accomplished by conducting research proposal competition among
    faculty from the 12 participating universities to find research
    projects where matching funds are available from industry. Fourteen
    (14) projects were funded from fiscal year 1994 funds with completion
    and final reports due by May 1, 1996. Ten (10) projects were funded
    from fiscal year 1995 funds with anticipated completion and final
    reports due by August 31, 1997. Ten (10) projects were also funded from
    fiscal year 1996 funds with anticipated completion and final reports
    due by May 31, 1998. Proposals are reviewed for scientific merit by
    independent scientists, and final selection of projects includes
    consideration of industrial interest and commitment of non-Federal
    matching funds.
        The work supported by this grant began in fiscal year 1994. The
    appropriation for fiscal year 1994 was $470,000, and for fiscal years
    1995-1997, $423,000 each year. A total of $1,739,000 has been
    appropriated. Industry matching funds were $823,148 in fiscal year
    1994, $414,164 in fiscal year 1995, and $576,600 in fiscal year 1996.
        The work is being coordinated by the Nebraska Agricultural
    Experiment Station at Lincoln. Specific research projects are also
    being conducted at seven (7) other universities that are part of the
    Alliance. Keeping with the Administration's policy of awarding research
    grants competitively, no further Federal funding for this grant is
    requested. Research could be continued at the State's discretion using
    formula funds.
        An agency science specialist conducts a merit review of the
    proposal submitted in support of the appropriation on an annual basis.
    A review of the proposal was conducted on December 20, 1996. The
    principal investigator has provided descriptions of projects funded by
    this grant.
                      midwest agricultural products, iowa
        The Midwest Agribusiness Trade Research and Information Center does
    applied research to improve the global competitiveness and
    marketability of agricultural products produced in the Midwest and
    disseminates the results to small and medium-sized agribusinesses.
    Projects include analyses of potential markets for U.S. agricultural
    products and equipment/technology in several countries; attitudes of
    foreign consumers; and development of new/improved U.S. products to
    meet foreign needs. The principal researcher believes that agribusiness
    firms in the United States, especially small to medium-sized firms,
    have a large unrealized potential to expand export sales and foreign
    business ventures. These untapped opportunities exist in well-
    established growth markets in the Pacific Rim and in newly opening
    markets such as Mexico, China, and Eastern Europe. The reluctance of
    small to medium-sized firms to explore these market opportunities is,
    in part, due to the high cost of market information and analysis and
    the perceived high risk of doing business in new markets with
    unfamiliar partners. In view of significant needs for research in high
    priority national interest topics such as improved pest management
    systems, funds are not proposed to continue this Special Research
    Grant. At the discretion of the state, Hatch Act or other funding could
    be used to support this research.
        The goal is to enhance the export of agricultural commodities,
    value-added products, and equipment produced by Midwestern agribusiness
    firms through research and education programs utilizing close-working
    relationships with those firms. In the past year, several studies were
    completed and distributed to interested firms, and new ones were
    initiated. Completed studies included: an analysis of conditions and
    prospects for agribusiness ventures in Egypt; market analyses for U.S.
    agricultural products in Cameroon, Senegal, and Cote d'Ivoire; an
    assessment of market opportunities for food processing equipment in
    China; Mexican consumer response to U.S. pork products; comparative
    advantage of U.S. pork in North American markets; impact of NAFTA on
    Midwest beef industry; an evaluation of the need for government
    regulation for maintaining or improving the quality of 12 export
    commodities; case studies of 16 outstanding food and agricultural
    exporters; evaluation of 60 varieties of corn for dry milling for the
    Mexican market; suitability of microsoy flakes for markets in Pacific
    Rim and African countries; and use of the Internet for marketing goods
    and services. In addition several seminars and conferences were held,
    ``Global Connections'' newsletter was published regularly, and business
    contacts database kept up to date. As a result of much work to
    establish trading relationships with China, the Des Moines sister-city
    of Shijiazhuang, China established a trade office in Des Moines.
        The work supported by this grant began in fiscal year 1992. The
    appropriation for fiscal years 1992-1993 was $700,000 per year; fiscal
    year 1994, $658,000; and fiscal years 1995-1997, $592,000 per year. A
    total of $3,834,000 has been appropriated.
        The non-federal funds and sources provided for this grant are as
    follows: $185,495 State, appropriations and $373,897 industry for a
    total of $559,392 in fiscal year 1992; $183,192 State appropriations
    and $318,966 industry for a total of $502,158 in fiscal year 1993;
    $127,948 State appropriations and $500,394 industry for a total of
    $628,342 in fiscal year 1994; $258,053 State appropriations and
    $389,834 industry for a total of $647,887 for fiscal year 1995;
    $165,425 State appropriations for fiscal year 1996; and $162,883 State
    appropriations for fiscal year 1997. Industry contributions continue
    but were not reported for 1996 and 1997.
        The program is carried out by Iowa State University. The original
    proposal in 1994 was for a period of 24 months, however, the objectives
    for expanding the export capacity of small to medium-sized agribusiness
    firms is an ongoing regional and national concern. The current phase of
    the program will be completed in 1999. In keeping with the
    Administration's policy of awarding research grants competitively, no
    further Federal funding is requested for this grant.
        CSREES performed a merit review of the project in January 1997 as
    it evaluated the project proposal for 1997 and concluded that the
    Midwest Agribusiness Trade and Research Center at Iowa State University
    has a record of producing research and trade information for
    agribusinesses in the Midwest and other states. Research results appear
    in several professional journals and popular press.
                           milk safety, pennsylvania
        The overall goal of the milk safety program is to provide insight
    into factors that help ensure an adequate and safe milk supply. Toward
    that end, the research has focused on factors that affect milk
    production, processing, manufacturing, and consumption. Special
    attention has been given to ways of preventing and/or treating
    pathogens that enter the milk supply.
        The principal researcher believes that the question of microbial
    safety is of paramount interest to the milk/dairy industry at all
    levels. Dairy products such as milk, nonfat dry milk, cheese, butter,
    and cream have been associated with several large outbreaks of
    staphylococcal food poisoning, and coagulase negative Staphylococcus
    infections are one of the most common intramammary infections of dairy
    cattle. Listeria monocytogenes is present in about 4 percent of raw
    milk, and it has the potential to grow to dangerous levels during
    refrigeration and storage, making pasteurization critical in preventing
    foodborne illnesses from this organism. Bovine mastitis is the most
    important infectious disease affecting the quality and quantity of milk
    produced in the nation, costing producers an average $180 per cow per
    year. The researchers believe ensuring safety of dairy products impacts
    not only consumer health and confidence in the safety of the food
    supply, but economic viability as well. In view of significant needs
    for research in high priority national interest topics such as improved
    pest management systems, funds are not proposed to continue this
    Special Research Grant. At the discretion of the State, Hatch Act or
    other funding could be used to support this research.
        The research is aimed at minimizing or eliminating future foodborne
    disease outbreaks from milk and dairy products. A key accomplishment
    includes the discovery of potential approaches of enhancing natural
    defense mechanisms of the bovine mammary gland through vaccination and
    immunoregulation. Discoveries of factors influencing growth of
    Staphylococcus aureus could be used to prevent or contain growth of
    this pathogen in foods. Researchers have identified and sequenced a
    gene from this bacterium that is essential for growth under stressful
    conditions. A computer model of Listeria monocytogenes growth in dairy
    foods under dynamic refrigeration conditions and during extended
    storage is under development to provide producers and processors with a
    proven technology for further enhancing the safety of fluid milk and
    related products. Researchers have elucidated conditions that
    significantly enhance the survival of Listeria monocytogenes during
    heat challenge. Research also revealed that consumers having high
    general concern about milk and dairy product safety and nutrition were
    more likely to be female, to have lower levels of education, be non-
    white and report more attention to scientific news, health and
    nutrition news and news about government food safety regulatory
    attention.
        Grants have been awarded for milk consumption and milk safety from
    funds appropriated as follows: fiscal years 1986 through 1989, $285,000
    per year; fiscal year 1990, $281,000; fiscal year 1991, $283,000;
    fiscal year 1992, $284,000; fiscal year 1993, $184,000; fiscal years
    1994-1997, $268,000 per year. A total of $3,244,000 has been
    appropriated for milk safety and milk consumption.
        The University estimates that non-federal funds contributed to this
    project include the following costs and salaries: $265,000 for fiscal
    year 1991; $224,700 for fiscal year 1992; $142,600 for fiscal year
    1993; and $252,168 for fiscal year 1995. No data are currently
    available for fiscal years 1994 and 1996.
        The research is being conducted at the Pennsylvania State
    University. The researchers anticipate that research supported by this
    grant should be concluded in 1999. Keeping with the Administration's
    policy of awarding research grants competitively, no further Federal
    funding for this grant is requested. Research could be continued at the
    State's discretion using formula or other funds.
        An agency science specialist conducts a merit review of the
    proposal submitted in support of the appropriation on an annual basis.
    Since the agency has not yet received the proposal in support of the
    fiscal year 1997 proposal, the last review of the proposal was
    conducted on March 8, 1996. At that time, the agency science specialist
    believed that the projects addressed issues retained to safety of milk
    and dairy food products, were scientifically sound, and that
    satisfactory progress was being demonstrated using previously awarded
    grant funds.
                             minor use animal drugs
        The National Agricultural Program to Approve Animal Drugs for Minor
    Species and Uses (NRSP-7) was established to obtain Food and Drug
    Administration clearance of animal drugs intended for use in minor
    species and for minor uses in major species. The funds for the special
    research grant are divided between the four regional animal drug
    coordinators and the headquarters at Michigan State University for
    support of the drug clearance program. The NRSP-7 funds are being
    utilized by the regional animal drug coordinators and by allocation to
    State Agricultural Experiment Stations to develop data required for
    meeting clearance requirements. Participants in the research program
    consist of the regional coordinators, State Agricultural Experiment
    Stations, USDA's Agricultural Research Service (ARS), the U.S.
    Department of Interior, schools of veterinary medicine, and the drug
    industry. Each year priorities are established for the various species
    categories including small ruminants, game birds, fur-bearing animals,
    and aquaculture species. The fiscal year 1996 grants terminate between
    April 1997 and September 1998. The 1997 grant proposals have been
    received and are being reviewed.
        Animal agriculture throughout the U.S. has relied on chemical and
    pharmaceutical companies to provide their industry with safe
    efficacious drugs to combat diseases. The need for approval from FDA's
    Center for Veterinary Medicine (CVM) for drugs to control diseases in
    minor species and for minor uses in major species has increased with
    intensified production units and consumer demand for residue-free meat
    and animal products. The high cost incurred to obtain data required by
    federal, regional, and local regulations to approve these drugs, when
    coupled with limited economic returns, has limited the availability of
    approved drugs for minor uses and minor species. The program provides
    research needed to develop and ultimately culminate in drug approval by
    FDA/CVM for the above purposes. The goals are accomplished through the
    use of regional animal drug coordinators as well as a national
    coordinator to prioritize the need, secure investigators at federal,
    state and private institutions, and oversee the research and data
    compilation necessary to meet federal regulations for approval. All
    drug approvals are national, although industry use may be regional. For
    example, aquaculture is concentrated in specific geographic sections of
    the country. The Administration believes this research to be of
    national, regional and local need.
        The original NRSP-7 goal to obtain FDA clearance of animal drugs
    intended for use in minor species and for minor uses in major species
    remains as the dominant goal. In recent years, the research program has
    expanded or given additional emphasis to aquaculture species, veal
    calves and sheep. In addition, several new animal drug requests from
    the game bird industry were received during the past year. The
    importance of environmental assessment, residue withdrawals and
    occupational safety have increasingly been given more attention during
    the approval process to help assure consumer protection. To date, 282
    drug requests have been submitted to the Minor Use Animal Drug Program
    for clearance. Working in conjunction with many universities, the U.S.
    Department of Interior, ARS, and numerous pharmaceutical companies, 24
    research projects are now active and will be continued through 1997 to
    establish data for clearances. Twenty four public master files have
    been published in the Federal Register providing clearance for drug use
    in minor species. Two additional public Gmaster files are currently
    being completed and several others are under review by FDA. The Center
    for Veterinary Medicine is cooperating and supporting this program to
    the fullest extent. The program is a prime example of Federal
    interagency cooperation in coordination with academic institutions,
    pharmaceutical industries and conunodity interests to effectively meet
    an urgent need.
        Grants have been awarded from appropriated funds in the amount of
    $240,000 per year for fiscal years 1982-85; $229,000 per year for
    fiscal years 1986-1989; $226,000 for fiscal year 1990; $450,000 for
    fiscal year 1991; $464,000 per year for fiscal years 1992 and 1993;
    $611,000 for fiscal year 1994; and $550,000 for fiscal years 1995-1997.
    A total of $5,7'41,000 has been appropriated.
        The non-federal funds and sources provided for this grant were as
    follows: $156,099 state appropriations. $29,409 industry, and $11,365
    miscellaneous in 1991; $265,523 state appropriations, $1,182 product
    sales, $10,805 industry, and $59 miscellaneous in 1992; $212,004 state
    appropriations, $315 industry; and $103 miscellaneous in 1993; $157,690
    state appropriations, and $7,103 miscellaneous in 1994; $84,359 state
    appropriations in 1995; and $191,835 non-federal support in 1996.
        The grants have been awarded to the four regional animal drug
    coordinators located at Cornell University, the University of Florida,
    Michigan State University and the University of California-Davis, and
    to program Headquarters at Michigan State University. Research is
    conducted at these universities and through allocation of these funds
    for specific experiments at the State Agricultural Experiment Stations,
    ARS, the U.S. Department of Interior, and in conjunction with several
    pharmaceutical companies.
        Selected categories of the Special Research Grants program address
    important national/regional research initiatives. The overall
    objectives established cooperatively with FDAL and industry are still
    valid. However, specific objectives continually are met and revised to
    reflect the changing priorities for FDA, industry, and consumers.
    Research projects for this program have involved 20 different animal
    and aquaculture species with emphasis given in recent years to research
    on drugs for the expanding aquaculture industry and increasing number
    of requests from the sheep, veal calf, and game bird industries. The
    minor use animal drugs program involves research on biological systems
    that by their nature are ever changing and representing new challenges
    to agriculture. Especially with the new sensitivities about safety and
    the environment, there is a high priority for continuation of these
    ongoing projects.
        The agency conducted a formal review of the Minor Use Animal Drug
    Program in 1991. The program was found to be very productive and it was
    recommended that increased financial support should be sought in order
    to meet the national needs identified for the program. GAO also
    conducted a review of the program in 1991 and recommended additional
    support for the program. Each year the project is peer reviewed and
    twice a year the agency and representatives of the program meet with
    FDA to evaluate progress and to prioritize research. Biannually, a
    workshop is held to identify priorities for the program whereby
    producers, pharmaceutical companies, FDA, and researchers participate.
                          molluscan shellfish, oregon
        The research under this program was initiated in fiscal year 1995.
    A repository for the conservation of genetic material of molluscan
    shellfish was established during the first year of the project. This
    repository is serving as a source of genetic material for current
    breeding programs aimed at commercial production of shellfish with
    desirable traits. The researchers indicate that there is a national
    need for a molluscan broodstock development program to benefit the
    commercial industry through conservation, genetic manipulation and wise
    management of the genetic resources of molluscan shellfish. In view of
    the significant research needs in high priority national interest
    topics such as improved pest management systems, funds are not proposed
    to continue this research. At the discretion of the state, Hatch Act
    funds or other funding sources could be used to support this research.
    The goals of this research program are to establish a repository for
    genetic materials of molluscan shellfish, to establish breeding
    programs for commercial production of molluscan shellfish, and to
    establish a resource center for the industry, researchers, and other
    interested parties in the United States and abroad.
        The work supported by this grant began in fiscal year 1995 with an
    appropriation of $250,000; fiscal year 1996 was $300,000; and fiscal
    year 1997 is $400,000. A total of $950,000 has been appropriated. The
    university estimates a total of $135,454 of non-federal funding in
    fiscal year 1995 primarily from state sources; in fiscal year 1996 no
    cost sharing was provided.
        Research will be conducted at Oregon State University, Rutgers
    University, and the University of California at Davis. Although the
    specific research objectives outlined in the original proposal were to
    be completed in 1996, researchers anticipated that the original broad
    objectives would be completed in 1999. Progress has been made on major
    components of the research program. The anticipated completion date is
    for the broad research objectives is still 1999.
        The specific research outlined in the present proposal will be
    completed in fiscal year 1997. Keeping with the Administration's policy
    of awarding research grants competitively, no further Federal funding
    for this grant is requested.
        The agency evaluates the progress of this project on an annual
    basis. The university is required to submit an accomplishment report
    when the new proposal is submitted to CSREES for funding. The 1996
    review indicated that the researchers were well qualified to conduct
    the research, the research is being conducted in close cooperation with
    the private sector.
                        multi-commodity research, oregon
        The purpose of this research program is to provide agricultural
    marketing research and analysis to support Pacific Northwest producers
    and agribusiness in penetrating new and expanding Pacific Rim markets
    for value-added products. The program examines the potential for
    increasing the competitiveness and economic value added of Pacific
    Northwest agriculture through improvements in food production,
    processing, and trade by assisting decision makers in developing
    economic and business strategies. The principal researcher believes
    that Oregon and the other Pacific Northwest States produce a wide
    variety of agricultural commodities and products with commercial
    potential for export to Pacific Rim countries. Research and analysis is
    necessary to guide agricultural producers and processors in assessing
    these markets and developing market strategies and value-added
    products, and marketing strategies tailored to specific Pacific Rim
    markets. In view of significant needs for research in high priority
    national interest topics such as improved pest management systems,
    funds are not proposed to continue this Special Research Grant. At the
    discretion of the State, Hatch Act or other funding could be used to
    support this research. The principal researcher believes this research
    to be of national, regional and local need.
        The goal of this proposed research project is to gain better
    scientific understanding of the Technical, economic and social
    relationships that define Oregon's value-added agricultural sector, and
    examine how these factors affect the economic performance of this
    sector. Project objectives were to:
        1. develop a pilot agricultural economic growth assessment model
    for Oregon's farm and value-added agricultural products. While
    developed as an Oregon-specific model, it is anticipated that the
    resulting approach and methodologies will be applicable to other
    Pacific Northwest state economies.
        2. conduct and coordinate applied research focused on understanding
    the factors affecting the global competitiveness of Oregon agriculture
    and the roles of public policies influencing the long-term success of
    the industry.
        3. reassess and modify as necessary existing economic performance
    benchmarks designated for the Oregon agricultural industry, and create
    strategies and actionable targets for industry performance to be
    achieved within defined time periods.
        4. encourage and facilitate applied, industry-level research into
    value-added agricultural trade, marketing and policy issues affecting
    Oregon and the Pacific Northwest.
        5. assess, on an on-going basis, related agricultural trade and
    marketing research across multidisciplinary fields at Oregon State
    University and other universities throughout the region. This will
    include work with affiliated universities to establish research
    projects that further the development of agricultural products,
    processes, or international markets.
        6. establish, in collaboration with the Asian wheat foods industry,
    criteria for development of noodle of varieties best suited to Asian
    markets. This will enhance the competitiveness of U.S. wheats in the
    Asian wheat foods markets through the accurate description of wheat
    quality characteristics and the exploitation of wheat blends, an
    inherent strength of the U.S. multi-class wheat delivery system.
        The research began in fiscal year 1993 with an appropriation of
    $300,000. The fiscal year 1994 appropriation was $282,000, and fiscal
    years 1995 through 1997 appropriations are $364,000 for each year. The
    total amount appropriated is $1,674,000. The non-federal funding
    provided for this grant was $168,824 State appropriations in fiscal
    year 1992; $177,574 State appropriations in fiscal year 1993; and
    $162,394 State appropriations in fiscal year 1994. Due to a change in
    university policy, the university has not reported the amount of non-
    federal funds appropriated for fiscal years 1995-1997.
        The research program will be carried out at Oregon State University
    in Corvallis, and at the Agricultural Marketing and Trade Program in
    Portland, Oregon. This Special Grant is awarded on a year-by-year
    basis. Thus, Oregon State University has traditionally requested funds
    for this project on an annual basis and has budgeted the funds to
    individual sub-projects on that basis. Progress on original objectives
    is as follows: baseline data has been accumulated, an economic growth
    assessment model is being formulated and tested, global competitiveness
    is being assessed for value-added Pacific Northwest agricultural
    products, targets for performance are being worked out with
    agricultural industries, and many trade teams have been involved in
    assessing the ability of U.S. based industries to meet the demands for
    noodle production for Asian markets. Anticipated completion date is
    1998. However, in keeping with the Administration's policy of awarding
    research grants competitively, no further Federal funding is requested
    for this grant. Research could be continued at the state's discretion
    using formula funds.
        The agency reviews progress each year when a new proposal is
    submitted. We believe satisfactory progress is being achieved.
               multi-cropping strategies for aquaculture, hawaii
        In fiscal year 1993, the university redirected this research
    program to address the opportunities of alternative aquaculture
    production systems, including the ancient Hawaiian fish ponds on the
    island of Molokai. The university has developed a community based
    research identification process and has developed specific research
    projects to be included in this program. Current research includes work
    in the area of edible seaweed cultivation and the culture of the
    Pacific threadfin, a species indigenous to Hawaii. Previous research
    under this program led to the development of coproduction of shrimp and
    oysters in aquacultural systems. The technology developed from this
    program has been commercialized. The principal researchers indicate
    that the primary need for this research is to assist the native
    Hawaiians in improving the profitability and sustainability of the
    ancient Hawaiian fish ponds and other appropriate aquaculture systems
    as part of a total community development program. In view of
    significant needs for research in high priority national interest
    topics such as improved pest management systems, funds are not proposed
    to continue this Special Research Grant. At the discretion of the
    state, Hatch Act or other funding could be used to support this
    research.
        The original goal of this program was to develop technology for the
    coproduction of shrimp and oysters in aquacultural production systems.
    Research led to the development of oyster production systems that have
    been field tested under commercial conditions. The current research
    effort is aimed at developing sustainable commercial aquaculture
    production systems on the island of Molokai. Hatchery techniques have
    been developed for the culture of the Pacific threadfin. Techniques for
    the culture of two edible aquatic plants have been refined.
    Multidimensional field testing and evaluation of existing and restored
    ancient Hawaiian fish ponds is currently underway.
        This research was initiated in fiscal year 1987 and $152,000 per
    year was appropriated in fiscal years 1987 through 1989. The fiscal
    year 1990-1993 appropriations were $150,000 per year; $141,000 in
    fiscal year 1994; and $127,000 in fiscal years 1995-1997, each year. A
    total of $1,578,000 has been appropriated. The university reports a
    total of $137,286 of non-federal funding for this program in fiscal
    years 1991-1994, $318,468 in fiscal year 1995. The primary source of
    non-federal funding was from state sources.
        Research is being conducted through the University of Hawaii on the
    island of Molakai. The completion date for the original project was
    1993. The original objectives were met. The specific research outlined
    in the current proposal will be completed in fiscal year 1998. Keeping
    with the Administration's policy of awarding research grants
    competitively, no further Federal funding for this grant is requested.
    Research could be continued at the State's discretion using formula or
    other funds.
        The agency evaluates the progress of this project on an annual
    basis. The university is required to provide an accomplishment report
    when the new grant proposal is submitted to CSREES for funding. In
    addition, in 1996 the CSREES program manager conducted a site visit to
    Molokai to meet with the principal investigator and industry
    cooperators. The 1996 review indicated that progress has been made in
    the implementation of the program despite the challenges of developing
    a community based program in such a unique social and cultural
    environment.
                 national biological impact assessment program
        The National Biological Impact Assessment Program was established
    to facilitate and assess the safe application of new technologies for
    the genetic modification of animals, plants and micro-organisms to
    benefit agriculture and the environment. This program was established
    in fiscal year 1989. During the last decade there has been an explosion
    of new information produced by rapid advances in biotechnology and its
    beneficial application to agriculture and the environment. The research
    proposed for this program fulfills an important national need to
    provide scientists easy access to relevant information that will
    facilitate the preparation of scientific proposals that comply with the
    oversight and regulatory requirements for testing potential
    biotechnology products and foster the safe application of biotechnology
    to benefit agriculture and the environment. This program supports the
    agricultural and environmental biotechnology community by providing
    useful information resources to scientists, administrators, regulators,
    teachers and the interested public.
        The original goal of the National Biological Impact Assessment
    Program was to provide easy access to reliable information on public
    health and environmental safety of agricultural biotechnology research.
    Its objectives were to increase the availability, timeliness and
    utility of relevant information to the biotechnology research
    community; facilitate the compliance of biotechnology research with
    oversight and regulatory requirements for testing biotechnology
    products; and provide informational resources to the scientific
    community that would foster the safe application of biotechnology to
    agriculture and the environment. This same goal continues today. Each
    year much new information is added and integrated into the computerized
    database. The system has evolved to adapt new computer technologies and
    is now available via internet and the World Wide Web. This computer-
    based information system now includes texts of Federal biotechnology
    regulations, proposed rules and policy statements; databases of biotech
    companies, and research centers, institutional biosafety committees and
    state regulatory contacts; resource lists of publications, directories,
    bibliographies and meetings; monthly newsletters developed and
    distributed by this program; relevant Federal Register announcements;
    and links to other electronic information resources. In addition, this
    program provides biosafety training through workshops for academic and
    corporate scientists, biosafety officers and state regulators. A Field
    Test Notebook has been developed as a reference text for these
    workshops.
        Grants have been awarded from funds appropriated as follows: fiscal
    year 1989, $125,000; fiscal year 1990, $123,000; fiscal years 1991-
    1993, $300,000 per year; fiscal year 1994, $282,000; and fiscal years
    1995-1997, $254,000 per year. A total of $2,192,000 has been
    appropriated.
        The co-principal investigator of this grant is Head of the
    Department of Biochemistry and Anaerobic Microbiology at Virginia
    Polytechnic Institute and State University. The university contributes
    its time to administer this grant which amounts to approximately $5,000
    each year.
        This grant award is with Virginia Polytechnic Institute and State
    University. Former and current partners in the program include The
    Pennsylvania State University, Louisiana State University, North
    Carolina Biotechnology Center, University of Arizona, University of
    Missouri, Michigan State University, Purdue University, and the
    National Agricultural Library. There remains a continuing need to
    address the safety of field testing of genetically modified organisms
    to benefit agriculture and the environment. This continues to be a
    rapidly expanding field. Increasing amounts of new information needs to
    be properly integrated into the computerized information system each
    year. This program has been very successful in providing essential,
    updated information on the conduct of safe field experiments. Thus, the
    program remains a high priority and needs to be continued.
        The National Biological Impact Assessment Program was extensively
    reviewed by an external panel of scientists in October 1994. The review
    report was highly complimentary regarding the Information Systems for
    Biotechnology funded by this special grant and recommended continuation
    of this program. The fiscal year 1997 proposal was peer reviewed and
    highly recommended for funding. Peer reviewers consistently conclude
    that the Information Systems for Biotechnology supported by this grant
    contains current, highly relevant, and useful information for the
    biotechnology research community. Scientists rely on this database as a
    source of current and accurate information in a rapidly changing field
    of science.
               nematode resistance genetic engineering new mexico
        This research is designed to investigate naturally occurring
    compounds from diverse sources that may confer pesticidal resistance if
    introduced into agronomic plants. The main target pests are plant
    parasitic nematodes. The work is using molecular biological techniques
    to incorporate genes into agronomic plant which will shortens the time
    frame to produce transgenic plants. Progress includes the a Diphtheria
    A toxin has been engineered behind a root-knot promoter. The promoter
    triggers the toxin to kill the nurse cell, which is necessary for
    nematode development. Two proteinase inhibitor genes have been
    constructed and have been inserted into crop plants. The expression
    rate however is low at this time. Other genes that promote toxins have
    been constructed and inserted into experimental and crops plants. The
    bioassay with targeted pest appear very promising. The principal
    researcher believes that the successful development of these techniques
    and subsequence transfer of nematode resistant genes into agromic
    plants will provide an environmentally-sound system for all plants
    susceptible to plant parasitic nematodes. Because there are significant
    needs for research in high priority national interest topics such as
    improved pest management systems, funds are not proposed to continue
    this Special Research Grant. At the discretion of the state, Hatch Act
    or other funding could be used to support this research. The original
    goal of this research was to provide an alternative approach for the
    control of plant parasitic nematodes through the use of molecular
    biological technologies to transfer pesticide resistant to plants. A
    nematode-stimulated promoter element was engineered for insertion in
    front of a bacteria toxin. A unique technique utilizing insect
    intestinal membrane vesicles were used as tools for detection of
    specific protein binding domains. The synthetic gene, CRY3A Bt has been
    successful in field trials on potato and eggplants.
        The work supported by this grant began in fiscal year 1991 and the
    appropriations for fiscal years 1991-1993 was $150,000 per year;
    $141,000 was appropriated in 1994: $127,000 in fiscal years 1995-1997,
    each year. A total of $972,000 has been appropriated thus far.
        The non-federal funds and sources provided for this grant were as
    follows: $65,000 state appropriations in 1991; $62,000 in state
    appropriations in 1992; $75,000 in state appropriations in 1994; and
    $75,000 in 1995. For 1996, the University and the Plant Genetic
    Engineering Laboratory are providing matching contributions in faculty
    and staff salaries, facilities, equipment maintenance and replacement,
    and administrative support. In 1997, there are no matching non-federal
    funds.
        Research is being conducted at the New Mexico State University, and
    at collaborating universities in the region. The estimated completion
    date for this project is estimated to be in 2001. Keeping with the
    Administration's policy of awarding research grants competitively, no
    further Federal funding for this grant is requested.
        The last evaluation of this project was a merit review conducted
    December 19, 1996. In summary, the overall goal of this project is to
    use molecular biological techniques to develop pesticide capability in
    plants of agronomic importance. The research accomplishments
    demonstrated the feasibility of insertion of toxin genes into plants
    for expression against nematodes. The use of the synthetic CRY3A Bt
    gene has been successful in potato and eggplant in field trails.
                nonfood agricultural products program, nebraska
        This work focuses on the identification of specific market niches
    that can be filled by products produced from agricultural materials,
    developing the needed technology to produce the product, and working
    with the private sector to transfer the technology into commercial
    practice. Major areas of application include starch-based polymers, use
    of tallow as diesel fuel, improvements in ethanol production, use of
    vegetable oil as drip oil for irrigation wells, production of levulinic
    acid, the extraction of wax from grain sorghum and production of
    microcrystalline cellulose from crop biomass. The principal researcher
    believes our ability to produce agricultural commodities exceeds our
    needs for food and feed. These commodities are environmentally-friendly
    feedstocks which can be used in the production of many biochemicals and
    biomaterials that have traditionally been produced from petroleum. The
    production of the commodities and the value-added processing of these
    commodities is regional in scope. In view of significant needs for
    research in high priority national interest topics such as improved
    pest management systems, funds are not proposed to continue this
    Special Research Grant. At the discretion of the state, Hatch Act or
    other funding could be used to support this research.
        The objectives of the Center are to identify niche markets for
    industrial utilization of agricultural products, improve and develop
    conversion processes as needed for specific product isolation and
    utilization, provide technical, marketing and business assistance to
    industries, and coordinate agricultural industrial materials research
    at the University of Nebraska, Lincoln. Accomplishments include
    developing a formula that combines starch from corn and wheat, plastic
    resin from polystyrene and polymethylmethacrylate and compatibilizing
    agents to make loose fill packaging materials. Collaborations with the
    private sector to optimize the technology and to initiate a startup
    company are ongoing. Crude degummed and dried soybean oil has been
    proven to be an effective drip oil for irrigation wells. Archer
    Petroleum in Omaha is developing a marketing plan for regional
    distribution through 2500 distributors. Crude beef tallow has been
    converted to methyl esters and studied as diesel fuel. Fuel tests and
    extensive engine studies have shown it to be compatible with petroleum
    diesel and diesel engines. Starch has been converted to levulinic acid
    using acid hydrolysis and an extruder. As an antifreeze, levulinic acid
    has a freezing point of -18  deg.C, which is not as low as conventional
    antifreeze but is environmentally friendly. Other industrial uses of
    levulinic acid need to be explored. Protein films have been made and
    evaluated for potential use as coatings and in laminated packaging
    materials. These films may have a unique application for use as
    sprayed-in-place agricultural mulches. Seeds or plants could be easily
    planted by puncturing the film on the soil surface. Preliminary studies
    show significant potential for such film applications in controlling
    soil erosion.
        The funding levels for this project are $109,000 in 1990; $110,000
    per year in fiscal years 1991-1993; $103,000 in fiscal year 1994;
    $93,000 in fiscal year 1995; and $64,000 in fiscal years 1996 and 1997.
    A total of $763,000 has been appropriated.
        The non-Federal funding for this project is: in fiscal year 1992,
    $315,000, fiscal year 1993, $330,000, fiscal year 1994, $330,000,
    fiscal year 1995, $309,000, and fiscal year 1996, $251,000 and fiscal
    year 1997 $250,000. These funds were from Nebraska Corn, Soybean,
    Wheat, Sorghum and Beef Boards, World Wildlife Fund, Nebraska Bankers
    Association, United Soybean Board and National Corn Growers
    Association.
        This work is being conducted at the Industrial Agricultural
    Products Center, University of Nebraska, East Campus, Lincoln,
    Nebraska. The objectives of the original projects have been completed.
    Specific objectives have been identified in each renewal request.
    Keeping with the Administration's policy of awarding research grants
    competitively, no further Federal funding for this grant is requested.
    Research could be continued at the State's discretion using formula or
    other funds.
        This project is evaluated annually based on an annual progress
    report. The lead staff scientist has reviewed the project and
    determined that the research is conducted in accord with the mission of
    this agency.
                     north central biotechnical initiative
        The North Central Biotechnical Initiative administered by Purdue
    University conducts a regional competitive research grants program for
    biotechnology research to enhance the economic value and commercial use
    of plant-based agricultural products of the North Central Region. The
    Initiative has funded biomolecular studies with commercial potential in
    corn, soybean, rice, barley, and alfalfa, as well as studies on
    significant plant pests such as corn borer, corn rootworm, and fungal
    pathogens. The principal researcher believes that the proposal links
    public and private research in plant biotechnology for enhanced
    commercialization of agricultural research that will contribute to
    regional and national priorities. In view of significant needs for
    research in high priority national interest topics such as improved
    pest management systems, funds are not proposed to continue this
    Special Research Grant. At the discretion of the State, Hatch Act or
    other funding could be used to support this research. The principal
    researcher believes this research to be of national, regional or local
    need. The original goal of this project is to enhance the economic
    value and commercial use of plant-based agricultural products of the
    North Central Region. In 1996, the project awarded 13 grants for
    biomolecular studies with commercial potential in corn, soybean, rice,
    barley, alfalfa, and plant pests.
        The work supported by this grant began in fiscal year 1995 and the
    appropriation for fiscal years 1995-1996 was $2,000,000 per year and
    for fiscal year 1997, $1,940,000, for a cumulative appropriation of
    $5,940,000. At this time Purdue University has not allocated any direct
    non-federal funds for grants management. Purdue University staff are
    providing management and oversight support for the program. Non-federal
    support may accrue to individual research projects funded under the
    grant.
        The funds are administered at Purdue University and the research is
    currently carried out at Purdue University, Iowa State University,
    Michigan State University, North Dakota State University, Ohio State
    University, University of Minnesota, University of Missouri, and
    University of Wisconsin. The researchers anticipate that work may be
    completed in fiscal year 1999. Completion of initially awarded grants
    will be in the summer of 1998 for two-year awards and later for
    programs extending beyond two years. Keeping with the Administration's
    policy of awarding research grants competitively, no further Federal
    funding for this grant is requested. Research could be continued at the
    State's discretion using formula or other funds.
        The North Central Biotechnical Initiative was evaluated by an
    agency peer review panel on January 7, 1997. The panel expressed
    concerns about the project, primarily because of the brevity of the
    proposal and the absence for a proposal from the grant application. The
    agency requested additional information from the principal researcher,
    and the grant has been forwarded for final processing. The North
    Central Biotechnical Initiative was also featured in a biotechnology
    special grant seminar hosted by the agency on December 16, 1996, at
    which the principal investigator presented progress and highlights to
    an audience of agency scientists, administrators, and awards management
    staff.
                  oil resources from desert plants, new mexico
        The Plant Genetic Engineering Laboratory has been exploring the
    potential for the production of high value industrial oils from
    agricultural products. The effort has been focused on transferring the
    unique oil producing capability of jojoba into oilseed rape and
    soybean. With the development of technology to both isolate the enzyme
    components of oil biosynthesis and successfully transform the target
    plants, significant advances have been made with jojoba. In addition,
    oil enzymes have been studied in soybean, castor, oilseed rape, and
    meadowfoam. The principal researcher believes desert plant sources of
    valuable oils for industrial applications are typically low yielding
    and limited in climatic areas for farm production. Genetic engineering
    offers an opportunity to move genetic capability to high yielding major
    crops. Many of the oils and their derivative acids, waxes, and others
    can directly substitute for imports of similar polymer materials,
    especially petroleum. In view of significant needs for research in high
    priority national interest topics such as improved pest management
    systems, funds are not proposed to continue this Special Research
    Grant. At the discretion of the State, Hatch Act or other funding could
    be used to support this research. The goal of the research is to
    transfer the unique oil producing capability of jojoba and other native
    shrubs into higher yielding crops such as oilseed rape and soybean.
    This is a form of metabolic engineering and it requires the transfer of
    coordinated groups of genes and enzymes into the host plant to catalyze
    the necessary biochemical reactions. Progress has included
    characterization and isolation of several lipid biosynthetic enzymes
    along with associated genes, binding proteins, and molecular enhancers.
        This research began in fiscal year 1989 with a $100,000 grant under
    the Supplemental and Alternative Crops program. Grants have been
    awarded under the Special Research Grants program as follows: fiscal
    year 1990, $148,000; fiscal years 1991-1993, $200,000 per year; fiscal
    year 1994, $188,000; fiscal years 1995-1996, $169,000 each year; and
    fiscal year 1997, $175,000. A total of $1,549,000 has been
    appropriated.
        Non-federal funds are not provided for operational portions of this
    research. However, New Mexico State University and the Plant Genetic
    Engineering Laboratory provide $90,000 for in-kind support per year
    including faculty salaries, graduate student stipends, facilities,
    equipment maintenance, and administrative support services.
        The research is being conducted by the Plant Genetics Engineering
    Laboratory at New Mexico State University, Las Cruces, New Mexico. An
    estimate of the total time in Federal funds required to complete all
    phases of the project is 3-4 years. Keeping with the Administration's
    policy of awarding research grants competitively, no further Federal
    funding for this grant is requested. Research could be continued at the
    State's discretion using formula or other funds.
        The Oil Resources from Desert Plants, New Mexico project was
    evaluated for scientific merit by an agency peer review panel on
    January 7, 1997. The panel recommended approval of the project pending
    receipt of supplemental information on administrative aspects of the
    project.
                     organic waste utilization, new mexico
        Composted dairy waste is utilized as a pretreatment to land
    application. Composting dairy waste before land application may
    alleviate many of the potential problems associated with dairy waste
    use in agronomic production systems. Composting may also add value to
    the dairy waste as a potential landscape or potting media substrate.
    High temperatures maintained in the composting process may be
    sufficient for killing enteric pathogens and weed seeds in dairy waste.
    Noxious odors and water content may be reduced via composting.
    Composted dairy waste may be easier to apply, produce better seed beds,
    and not increase soil salinity as much as uncomposted dairy waste. The
    principal researcher believes the research will address the utilization
    of dairy waste combined with other high-carbon waste from agriculture
    and industry, including potash and paper waste, for composting. This
    approach to waste management will have high impact for states where
    dairy and agriculture are important industry sectors. This is
    especially true for New Mexico and the southwest United States, where
    the dairy business is growing rapidly. This research will also provide
    an additional pollution prevention toot for the industrial sectors
    dealing with potash and paper waste. In view of significant needs for
    research in high priority national interests such as pest management
    systems, funds are not proposed to continue this Special Research
    Grant. At the discretion of the state, Hatch Act or other funding could
    be used to support this research.
        The original goal of the research is to determine the feasibility
    of simultaneously composting of dairy waste from agriculture and
    industry. The research will determine effects of utilizing composted
    waste, as opposed to raw waste, as a soil amendment on plant growth,
    irrigation requirements, and nutrient and heavy metal uptake. Phase 1,
    to determine the feasibility of simultaneous composting dairy waste
    with available high carbon wastes from agriculture and industry, has
    been completed. Phase 11, to determine the appropriate ratios of waste
    to carbon substrate for successful composting, is 50 percent completed.
        The work supported by this grant begins in fiscal year 1996 and the
    appropriation for fiscal year 1996 was $150,000, and for fiscal year
    1997 is $100,000. A total of $350,000 has been appropriated. The non-
    federal funds for the duration of this grant from the state
    appropriation is $50,000. There is another $30,000 in-kind support from
    the industrial partners. Additionally, a sum of $15,000 from the New
    Mexico State Highway Department is also being leveraged by this
    project.
        This work will be carried out in New Mexico under direction of the
    Waste-Management Education & Research Consortium in collaboration with
    The Composting Council and industrial partners, such as Envio (Ohio),
    Plains Electric and McKinley Paper (New Mexico). Completion date will
    be January 1999. Objectives are being met as the project continues.
    Keeping with the Administration's policy of awarding research grants
    competitively, no further Federal funding for this grant is requested.
    Research could be continued at the State's discretion using formula or
    other funds.
        This project has been evaluated based on the annual progress report
    and research findings presented at the annual Composting Council
    Conference. The lead staff scientist has reviewed the project and
    determined that this research is conducted in accordance with the
    mission of this agency.
                       pasture and forage research, utah
        CSREES has requested the university to submit a grant proposal in
    accordance with the Senate directive that has been received, and is
    being reviewed by the agency. The proposed research under this Special
    Research Grant will address issues related to forage production and
    utilization in Utah. In view of significant needs for research in high
    priority national interest topics such as improved pest management
    systems, funds are not proposed to continue this Special Research
    Grant. At the discretion of the state, Hatch Act or other funding could
    be used to support this research. The original goal of this project is
    to develop a comprehensive guide for the management of irrigated
    pastures to assist livestock producers, reduce cost, and increase net
    returns.
        The work supported by this grant begins in fiscal year 1997 and the
    appropriation for fiscal year 1997 is $200,000.
        Research will be conducted at the Utah Agricultural Experiment
    Station. The principal investigators anticipate the completion date for
    these objectives to be in 2002. Keeping with the Administration's
    policy of awarding research grants competitively, no further Federal
    funding for this grant is requested.
        The proposal for the initial year's funding is currently under
    agency review.
                    peach tree short life in south carolina
        Progress continued in 1996 with focus on the continued evaluation
    of longevity and productivity of Guardian rootstocks on peach tree
    short life sites in the southeast and replant sites throughout North
    American. More fundamental work has involved the biochemical
    characterization of the egg-kill factor produced by a bacteria on
    nematode eggs. Other basic studies involved the cloning of genes
    associated with production and expression of toxins from the bacteria.
    The problem of the disease on peach, nectarine, and plum trees in the
    southeastern United States effects is very great. More than 70 percent
    of peach acreage in the southeast is effected. Due to the loss of
    chemical nematicides, this disease has increased to nearly three times
    the levels experienced when nematicides were in use. In South Carolina,
    an average of 100,000 trees died in the years between 1980 and 1986.
    Continued studies on improvement of rootstock and the use the cultivar
    Guardian BY520-9 has potential to benefit the entire peach industry
    including California, New Jersey and Michigan where bacterial canker is
    a problem. Because there are significant needs for research in high
    priority national interest topics such as improved pest management
    systems, funds are not proposed to continue this Special Research
    Grant. At the discretion of the state, Hatch Act or other funding could
    be used to support this research.
        The goal of this research was the continued evaluation of
    productivity of peach Guardian BY520-9 rootstocks on peach short life
    and investigations into novel management for ring nematodes by
    bacteria. Recent accomplishments include increased Guardian seed
    production that reached 600,000 commercial seeds. The rootstock is
    being tested in a 22 states and provinces and continues to perform
    well. Bulk seed lots of Guardian was shown to be resistant to root-knot
    nematodes. Fingerprinting using RAPD successfully separated root-knot
    nematode resistant rootstocks from susceptible ones. The unique
    insertion site in four Tn5 egg-kill factor minus mutants were
    identified. The bacteria, Pseudomonas aureofaciens BG33R was shown not
    to produce chitinase but other enzymes.
        Grants have been awarded from funds appropriated as follows: fiscal
    year 1981, $100,000; fiscal years 1982-1985, $192,000 per year; fiscal
    years 1986-1988, $183,000 per year; fiscal year 1989, $192,000; fiscal
    year 1990, $190,000; fiscal years 1991-1993, $192,000 per year; fiscal
    year 1994, $180,000, and fiscal years 1995-1997, $162,000 each year. A
    total of $3,041,000 has been appropriated.
        The non-federal funds and sources for this grant were as follows:
    $149,281 state appropriations in 1991; $153,276 state appropriations in
    1992; $149,918 state appropriations in 1993; $211,090 state
    appropriation in 1994; $193,976 in state appropriation in 1995,
    $169,806 in state appropriation in 1996.
        This research is being conducted at South Carolina Agricultural
    Experiment Station. The researchers anticipated that the work may be
    completed in fiscal year 1998. Adequate progress has been made to
    assure that the objectives will be met before the completion date.
    Keeping with the Administration's policy of awarding research grants
    competitively, no further Federal funding for this grant is requested.
        The last agency evaluation was a merit review completed January 5,
    1997. In summary, the evaluation of peach rootstocks with resistance to
    peach tree short life is of continued importance in managing this
    disease. The use of biological control strategies in suppression of
    plant parasitic nematodes are a complementary areas of research in that
    it can enhance disease management by protecting the peach rootstocks.
    Progress was made in all the objectives in 1996. Some accomplishments
    were the increased production and release of commercial Guardian seed
    and continued evaluation of the seed in 22 states and provinces. A
    molecular technique that separates resistant from susceptible peach
    rootstocks appeared successful in preliminary studies. Other
    accomplishments were on the identification of the Tn5 egg kill factor.
                   pest control alternatives, south carolina
        This grant supports research and technology transfer to provide
    growers with alternatives for managing pests and to implement the use
    of new alternatives reducing the sole reliance on chemical pesticides.
    The investigators contributing to the research and technology transfer
    at South Carolina believe that need for the development of alternatives
    for managing pests on vegetables is a regional and national problem.
    Research contributions are projected by South Carolina to impact
    vegetable production in the Southern region and consumers of vegetable
    production from the Southern region. In view of significant needs for
    research in high priority national interest topics such as improved
    pest management systems, funds are not proposed to continue this
    Special Research Grant. At the discretion of the State, Hatch Act or
    other formula funding could be used to support this research. In
    addition, future efforts will be made to collaborate with Integrated
    Pest Management (IPM) regional and state team representatives in
    finding solutions to the specified problem area.
        The goal of this program is to investigate alternative methods of
    managing insects, plant diseases, and nematodes in vegetable crops as
    complements to or as substitutes for conventional chemical sprays.
    Principal accomplishments appear to rest in a four-year comparison of
    study plots of organically grown and conventionally grown vegetables.
    Residual nutrient levels in subplots treated with organic sources of
    fertilizer were greater than in subplots which received inorganic
    source of fertilizer. After four years of summer cropping followed by
    winter cover crop treatments, no herbicides nor pesticides have been
    applied to the study area. Weekly scouting has determined that harmful
    insect thresholds have not been reached. Naturally occurring beneficial
    insects were sufficient for pest control. The role of indigenous
    predators, parasites, and pathogens in controlling insect pests are
    being evaluated. Technology transfer to conventional and IPM systems
    has resulted in modified thresholds for caterpillar pests in collards
    and tomatoes which incorporate the impact of beneficials in the system
    and a sampling plan for tomato fruitworm which considers numbers of
    parasitized eggs used to schedule insecticide sprays. Numbers of
    insecticide sprays were reduced by 75-100 percent and the weight of
    marketable fruits was the same in plots receiving weekly sprays.
        This work supported by this grant began in fiscal year 1992 and the
    appropriation for fiscal years 1992 and 1993 was $125,000 per year. In
    fiscal year 1994 the appropriation was $118,000 and in fiscal years
    1995 through 1997, $106,000 per year. A total of $686,000 has been
    appropriated. South Carolina has provided $124,860 per year from State
    appropriations.
        This research and technology transfer program is being conducted at
    the South Carolina Agricultural Experiment Station, Clemson University
    at Clemson, Florence, and Charleston, South Carolina. The original
    objectives of the project were for five years. Funding last year
    completed the five-year duration, and researchers indicated that the
    work would be completed by the end of the last fiscal year. Research on
    objective A, develop and evaluate microbial pest control agents for
    control of plant pathogens and insect pests of vegetables, is defuse
    and non-conclusive. Work in this area could be submitted to competitive
    peer review programs where the investigators would need to clearly
    focus specific activities and receive the benefit of the comments of
    peer scientists. Research on objective B, determine the efficacy of
    innovative cultural practices for vegetable production systems in South
    Carolina, and objective C, assess the role of indigenous predators,
    parasites, and pathogens in controlling insect pests, determine
    environmental and biological factors that influence the abundance and
    distribution of these indigenous beneficials, and consider the presence
    of natural enemies, as well as pests, in management decisions, is the
    area where the most progress appears evident. The base of information
    and orientation of the research in this area is adequate and of quality
    that the investigators could compete well in competitive grant programs
    such as sustainable agriculture or regional IPM grant programs, and
    would benefit from the peer review process. Progress in this area is an
    ongoing process as explanations are sought for the results being
    obtained. Research on objective D, evaluate and develop germplasm,
    breeding lines and cultivars for resistance to major pathogens of
    commercially important vegetables, and objective E, transfer new
    technology to user groups, has not demonstrated any progress that would
    not be anticipated from ongoing conventional sources of funds. Keeping
    with the Administration's policy of awarding research grants
    competitively, no further Federal funding for this grant is requested.
        We evaluate this project annually when we process the grant. Last
    year we wrote to the South Carolina station indicating that they should
    consider initiating a comprehensive review with CSREES participation.
    CSREES plans to initiate this review before we process the 1997 grant.
                              pesticide clearance
    Pest Management for Minor Crops
        The Pest Management for Minor Crops (IR-4) Program, formerly the
    Pesticide Clearance Program, is a joint effort between the State
    Agricultural Experiment Stations, CSREES, and the Agricultural Research
    Service. IR-4 provides the national leadership, coordination and focal
    point for obtaining tolerance and safety data for pesticides and
    biological control agents for specialty crops such as horticultural
    crops. The agricultural chemical industries have not economically-
    justified the time and expense to conduct the necessary research for
    pesticides with small market potential. With the Federal registration
    resulting from this research, a large number of small acreage crops
    such as vegetables, fruits, nuts, spices and other specialized crops
    have been provided with needed crop protection against pests. Protocols
    are written after careful review and inputs from representatives of
    grower groups, industry and researchers. The researchers then carry out
    field trials on priority needs to determine their effectiveness, safety
    and usefulness and then analyze the field grown commodities, where
    appropriate, to identify and quantify any residues that may persist.
    All of this is done according to the Environmental Protection Agency's
    (EPA) Good Laboratory Practices guidelines which calls for rigorous
    field testing and chemistry analysis. The research program then
    assimilates the data from all the grower groups and chemical industry,
    and petitions are written for tolerances and Federal registration or
    reregistration. The 1996 grants terminate between March 1996 and March
    1998. The basic mission of IR-4 is to aid producers of minor food crops
    and ornamentals in obtaining needed crop protection products. IR-4 is
    the principal public effort supporting the registration of pesticides
    and biological pest control agents for the $31 billion minor crop
    industry. This is a national research effort which identifies needs by
    a network of users and state university and Federal researchers. This
    research is highly significant to national, regional or local needs.
        The goal is to obtain minor use and specialty use pesticide
    registrations and assist in the maintenance of current registrations,
    and to assist with the development and registration of biopesticides
    and safer pesticide products useful in IPM systems for minor corps.
    This research effort has been responsible for data in support of 2,074
    food use clearances, which include 1,127 since 1984, 3,602 ornamental
    registrations, and research on 26 biopesticides resulting in 18 minor
    use registrations. The Pesticide Clearance program continues to have a
    high productivity which, according to EPA, results in 40 percent of all
    EPA pesticide registrations.
        Grants have been awarded from appropriated funds as follows:
    Program redirection in fiscal year 1975, $250,000; fiscal year 1979,
    $500,000; fiscal years 1977-1980, $1,000,000 per year; fiscal year
    1981, $1,250,000; fiscal years 1982-1985, $1,400,000 per year; fiscal
    year; 1986-1989, $1,369,000 per year; fiscal year 1990, $1,975,000;
    fiscal year 1991, $3,000,000; fiscal years 1992-1993, $3,500,000 per
    year; fiscal year 1994, $6,345,000; and fiscal year 1995 through 1997,
    $5,711,000. A total of $52,529,000 has been appropriated.
        The non-federal funds and sources provided for this grant were as
    follows: $891,856 state appropriations and $65,402 industry in 1991;
    $1,002,834 state appropriations and $104,292 industry in 1992;
    $1,086,876 state appropriations and $310,133 industry in 1993; $550,160
    state appropriations, $408,600 industry, and $924,169 miscellaneous in
    1994; $775,432 state appropriations, $266,714 industry, and $751,375
    miscellaneous in 1995; and an estimated $800,000 state appropriations,
    $250,000 industry, and $800,000 miscellaneous in 1996.
        Field work is performed at the State and Territorial Experiment
    Stations. Laboratory analysis is conducted primarily at the California,
    New York, Florida and Michigan Agricultural Experiment Stations with
    assistance by the Oregon, Hawaii, North Dakota, Arkansas, North
    Carolina, Washington, Virginia, Mississippi, Idaho, Pennsylvania and
    New Jersey Agricultural Experiment Stations. Protocol development, data
    assimilation, writing petitions, and registration processing are
    coordinated through the New Jersey Agricultural Experiment Station. ARS
    is conducting minor use pesticide studies at locations in California,
    Georgia, Illinois, Maryland, Ohio, Oregon, South Carolina, Texas, and
    Washington. ARS laboratories in Georgia, Maryland and Washington are
    cooperating with analyses.
        Selected categories of the Special Research Grants program address
    important national and regional research initiatives. The pesticide
    clearance program, also referred to as pest management for minor crops,
    involves research on biological systems that by their nature are ever
    changing and presenting new challenges to agriculture. The IR-4
    workload is anticipated to be long term because of the sensitivities
    about food safety and the environment, plus the reregistration of older
    pesticides mandated by the 1988 amendments to the Federal Insecticide,
    Fungicide, and Rodenticide Act--FIFRA. IR-4 developed a strategy in
    1989 to defend needed minor use pesticides that were subject to
    reregistration but would not be supported by industry for economic
    reasons. In addition, the Food Quality Protection Act calls for more
    extensive residue data requirements which would take into account an
    additional safety factor for assessing pesticides on foods consumed by
    infants and children. IR-4 will fulfill these commitments by December
    1997, the conclusion of reregistration process mandated by the FIFRA
    amendments. IR-4's updated strategic plan focuses on the registration
    of biopesticides and safer pest control technology for minor crops.
    This program thrust will be carried out along with the traditional
    minor crop pesticide clearance programs
        Each year the program is peer reviewed and reviewed by CSREES'
    senior scientific staff. A summary of those reviews indicate excellent
    progress in achieving the objectives. In addition to the yearly
    evaluations, the program received an on-site external review sponsored
    by CSREES in December 1990, and a GAO review, the results of which were
    published in June 1992. The GAO report notes that IR-4 has an effective
    research agenda to include pesticides that are most likely to be
    approved by EPA, using the existing land-grant university
    infrastructure. The mentioned legislative requirements and regulatory
    standards add to IR-4's already significant workload.
                      pesticide impact assessment program
        Research funded by the National Agricultural Pesticide Impact
    Assessment Program NAPIAP--discovers, gathers, publishes, and
    distributes information relating to the use and effectiveness of pest
    management alternatives essential to the maintenance of U.S.
    agricultural crops and livestock production. These data involve
    evaluating the biologic and economic impact and consequences of
    restricting the use of key pesticides either through voluntary
    cancellations or regulatory action. NAPIAP data augments National
    Agricultural Statistic Service--NASS--data by conducting commodity
    based assessments on minor-use or small acreage crops. To insure that
    there is no duplication of effort, NAPIAP coordinates information
    collection with NASS and concentrates its pest management inquiries on
    commodities not surveyed by NASS. This program provides the
    Environmental Protection Agency (EPA) and the USDA with information on
    the use and effectiveness of pest management alternatives essential to
    the maintenance of U.S. agricultural crops and livestock production.
    EPA uses this information in making environmentally sound regulatory
    decisions which have minimal risk to human health and the economic
    balance of U.S. agriculture. USDA uses these data to identify commodity
    sites where there are critical pest threats to production because no or
    few pest management alternatives exist. This national research and
    information delivery effort involves USDA coordinated cooperative
    interactions with scientists in all State Agricultural Experiment
    Stations and Cooperative Extension Services. The USDA and EPA receive
    state generated agricultural information needed for sound regulatory
    decision-making and the state partner receives federal funds,
    participatory input into the regulatory process, and direct access to
    timely regulatory information.
        The National Agricultural Pesticide Impact Assessment Program--
    NAPIAP--has been an on-going research effort whose original goal in
    1977 was to gather data to provide comprehensive assessments
    documenting what would be the impact on agriculture if certain
    pesticides would no longer be available. A federally coordinated
    network of state scientist contacts was developed in the intervening
    years as broader and more environmentally enlightened goals evolved
    within this program. Today the NAPIAP's goals are defined in its
    strategic plan as: first, in collaboration with USDA, EPA, and Land-
    Grant partners, to focus activities on collecting and delivering high
    quality, science based pest management information for use in the
    regulatory process; and second, maintain and enhance a strong
    partnership between the USDA and the Land Grant System in order to
    continue the positive interactive flow of vital pest management
    information between the USDA, the regulatory community, and production
    agriculture.
        Grants have been awarded from funds appropriated as follows: Fiscal
    years 1977-1981, $1,810,000 per year; fiscal years 1982-1985,
    $2,069,000 per year; fiscal years 1986-1988, $1,968,000 per year;
    fiscal year 1989, $2,218,000; fiscal year 1990, $2,437,000; fiscal
    years 1991-1993, $2,968,000 per year; fiscal year 1994, $1,474,000; and
    fiscal years 1995-1997, $1,327,000 per year. A total of $42,244,000 has
    been appropriated.
        The majority of the cost of the state scientist and the NAPIAP
    program is born by the state partner. The exact contribution of each
    state is not known, nor has this information been requested to be
    reported to the federal partner during the duration of this program.
    The federal program funds provided to the states by the Cooperative
    State Research, Education, and Extension Service have been used by
    state partners to partially defray their costs of staffing a Pesticide
    Impact Assessment Program State Liaison Representative on their Land
    Grant campus. The remainder of the salary costs, facility costs,
    clerical support expenditures, supplies and program costs of the
    program's State Liaison Representative have been born by each state and
    there costs are considered the state funding provided to support this
    program. State estimates of their contributions to this program have
    ranged from 3 to 6 times the federal dollars that have been provided to
    support their cooperative efforts.
        This work is underway at State Agricultural Experiment Stations in
    53 states and Territories. Competitively awarded research funds which
    fill both national and regional informational needs are coordinated
    through a lead state in each of the four regions of the United States:
    California--West; Ohio--North Central; Northeast--Pennsylvania; and
    Florida--South. The National Agricultural Pesticide Impact Assessment
    Program--NAPIAP--has been an ongoing research effort whose original
    goal in 1977 was to gather data to provide comprehensive assessments
    documenting what would be the impact on agriculture if certain
    pesticides would no longer be available. A federally coordinated
    network of state scientist contacts was developed in the intervening
    years as the information needs of the regulatory agency increased. This
    is a multi-agency on-going program strongly supported by dollars and
    personnel within CSREES, ARS, ERS, and the Forest Service which is
    attempting to address the ever increasing data needs for information by
    EPA in recent years. As the impacts of the Food Quality Protection Act
    become more widely realized and IPM implementation requires
    measurements to comply with the Government Performance and Results Act,
    there will be an even greater need for pest management information
    traditionally gathered, developed, and processed by the NAPIAP.
        A comprehensive evaluation and review of the national component of
    the National Agricultural Pesticide Impact Assessment Program--NAPIAP--
    was conducted in February 1995. The review panel's report was published
    in June 1995. The review team was composed of 10 scientists from EPA,
    Industry, and the Land Grant System. The recurring theme that emerged
    from the 1995 review was a directive to focus the NAPIAP program on
    data collection on the benefits of pest management alternatives. To
    address this directive, CSREES brought together the programmatic and
    budgetary components of CSRS and CES into a single coordinated NAPIAP
    effort. This reorganized program is now supported by parallel funding
    of Public Law 89-106 and Smith-Lever 3(d) dollars. In addition to
    NAPIAP program allocation funds, there is a regionally-based
    competitive grants program designed to: first, quantify the usage of
    different pest management alternatives; second, quantify yield and
    quality data related to pest management alternatives; and third,
    measure other benefit parameters related to agricultural pest
    management. The data gathered by NAPIAP will also be used to aid the
    Pest Management Alternative program efforts. There is strong potential
    for further collaboration between these two programs.
                       phytophthora root rot, new mexico
        Work has continued to focus in general on development of strategies
    for sustainable vegetable production in irrigated lands. Work has
    continued on the search for Phytophthora root rot resistance in
    chilies, identification of molecular markers for rot tolerance genes,
    investigation on irrigation modification as a means to manage root rot,
    and soil bed temperature control as a means to control disease. Because
    the Phytophthora disease threatens chili production in west Texas, New
    Mexico, and Eastern Arizona, this problem is of state-and regional-
    scale significance. In view of significant needs for research in high
    priority national interest topics such as the integrated pest
    management systems initiative, funds are not proposed to continue this
    Special Research Grant. At the discretion of the state, Hatch Act or
    other funding could be used to support this research. The original goal
    was to improve chile production through genetically superior cultivars,
    combined with new improved cultural practices. Researchers have
    developed a highly effective disease screen that selects resistant
    seedlings, found that genes for resistance to root rot do not provide
    protection against Phytophthora foliar blight, that a wild species of
    Capsicum is immune to the fungus, and that molecular markers are useful
    to introgress genes for tolerance. They also found that alternate row
    irrigation and drip irrigation significantly reduce Phytophthora root
    rot. Control of soil temperature with soil mulches can greatly impede
    the progression of root rot in the irrigated fields.
        The work supported by this grant began in fiscal year 1991 with an
    appropriation of $125,000 for fiscal year 1991. The fiscal years 1992-
    1993 appropriation was $150,000 per year; $141,000 in fiscal year 1994;
    and $127,000 in fiscal years 1995-1997, each year. A total of $947,000
    has been appropriated. The non-federal funds supporting this project
    amount to $255,319, from state appropriations and the California Pepper
    Commission.
        Research is being conducted at New Mexico State University. The
    anticipated completion date for the original objectives was 1995. Those
    objectives have not been met. Related programs deal with research and
    development efforts designed to prevent or manage diseases impacting
    vegetable production in irrigated areas, and cooperators estimate that
    the objective of these programs should be met by 2002. Keeping with the
    Administration's policy of awarding research grants competitively, no
    further Federal funding for this grant is requested.
        The last agency evaluation was made in December, 1996. In summary,
    the evaluation stated that the overall goal of this project is control
    of various soil-borne diseases of irrigated vegetable crops in New
    Mexico, with applicability to other southwest U.S. production areas.
    Specifically, the current effort focuses on Phytophthora root rot of
    chilies.
                       postharvest rice straw, california
        The postharvest rice straw special grant is new in 1997 and has two
    main objectives: (1) characterize current capabilities, costs and
    constraints in harvesting and handling rice straw as a renewable
    material for commercial products and (2) investigate alternative
    harvest and handling systems and evaluate their specialized equipment
    and system designs. California legislation mandates reduction in the
    amount of open rice straw burning, the principal method of rice straw
    disposal. Efficient harvest and handling may make rice straw a suitable
    raw material for user businesses while meeting straw burning
    regulations and improving air quality. In view of significant needs for
    research in high priority national interest topics such as improved
    pest management systems, funds are not proposed to continue this
    Special Research Grant. At the discretion of the state, Hatch Act or
    other funding could be used to support this research. The principal
    researcher believes this research to be of regional and local need.
    This research was initiated in 1997. The goal is to demonstrate
    efficient and economic rice straw harvest and handling, thereby
    establishing rice straw as a feedstock for value-added manufacturing
    and other uses.
        The work supported by this grant begins in fiscal year 1997 and the
    appropriation for fiscal year 1997 is $100,000. The University of
    California-Davis cites cooperation by the California Rice Industry
    Association and the California Rice Research Board. Cost-sharing
    support from non-federal funds is not included. Cost-sharing may become
    available from industry later in the project as prototype harvest and
    handling equipment and systems for rice straw are developed and tested.
        Research will be conducted at the Department of Biological and
    Agricultural Engineering, University of California-Davis, California.
    It is anticipated by the University of California-Davis that the
    postharvest rice straw project will be completed in 2002, after a five
    year-period to meet objectives. Keeping with the Administration's
    policy of awarding research grants competitively, no further Federal
    funding for this grant is requested.
        Since 1997 is the first year for the postharvest rice straw
    project, no evaluation has been conducted.
                            potato cultivars, alaska
        This research will focus on the development of potato cultivars
    that might be useful as disease resistant seed stock for the contiguous
    U.S. This research will focus on the development of potato cultivars
    that might be useful as disease resistant seed stock for the contiguous
    U.S. However, in view of significant needs for research in high
    priority national interest topics such as improved pest management
    systems, funds are not proposed to continue this Special Research
    Grant. At the discretion of the state, Hatch Act or other funding could
    be used to support this research. This research will focus on the
    development of potato cultivars that might be useful as disease
    resistant seed stock for the contiguous U.S. Funding for this project
    was initiated in fiscal year 1997, so no accomplishments have been made
    under the grant to date.
        The work supported by this grant begins in fiscal year 1997.
    Funding is appropriated in fiscal year 1997 for $120,000. No
    information on non-federal funds have been reported to CSREES yet.
        The research will be conducted in the state of Alaska. It is
    anticipated that the completion date for the original objectives will
    be within a 5-year period. Keeping with the Administration's policy of
    awarding research grants competitively, no further Federal funding for
    this grant is requested.
        Because this is a new project in fiscal year 1997, the agency has
    not had an opportunity to evaluate the project, but will follow its
    procedures of reviewing the University's proposal and the resulting
    progress reports.
                                potato research
        Scientists at several of the State Agricultural Experiment Stations
    in the Northeast, Northwest, and North Central States, are breeding new
    potato varieties, high yielding, disease and insect resistant potato
    cultivars, adapted to the growing conditions in their particular areas,
    both for the fresh market and processing. Research is being conducted
    in such areas as protoplast regeneration, somoclonal variation,
    storage, propagation, germplasm preservation, and cultural practices.
    The principal researcher believes this research effort addresses needs
    of the potato producers and processor. Research areas being studied
    include storage and postharvest handling of potatoes and their effect
    on potato quality. Potato producer and processor needs are breeding and
    genetics, culture factors and pest control on potato production. In
    view of significant needs for research in high priority national
    interest topics such as improved pest management systems, funds are not
    proposed to continue this Special Research Grant. At the discretion of
    the state, Hatch Act or other funding could be used to support this
    research. Efforts will be made to collaborate with IPM regional and
    state team representatives in finding solutions to specific pest
    concerns. The original goal was to improve potato production through
    genetics and cultural practices as well as improve storage for quality
    potatoes for processing and fresh market. This research has resulted in
    a number of new high yielding, good quality, disease and insect
    resistant, russet type cultivars, which are now being used in the
    processing industry and in the fresh market. Research by the Pacific
    Northwest States of Washington, Oregon and Idaho has resulted in the
    release of a number of cultivars, including Gemchip, Calwhite, Century
    Russet, Ranger Russet, Frontier Russet and Chipeta. In addition, North
    Dakota developed Norkatah as a result of this program.
        Grants have been awarded from funds appropriated as follows: fiscal
    year 1983, $200,000; fiscal year 1984, $400,000; fiscal year 1985,
    $600,000; fiscal years 1986-1987, $761,000 per year; fiscal year 1988,
    $997,000; fiscal year 1989, $1,177,000; fiscal year 1990, $1,310,000;
    fiscal year 1991, $1,371,000; fiscal years 1992 and 1993, $1,435,000
    per year; fiscal year 1994, $1,349,000; and fiscal years 1995 through
    1997, $1,214,000. A total of $15,438,000 has been appropriated.
        The non-federal funds and sources provided for this grant were as
    follows: $401,424 state appropriations, $4,897 product sales, $249,830
    industry, and $30,092 miscellaneous in 1991; $567,626 state
    appropriations, $6,182 product sales, $334,478 industry, and $44,323
    miscellaneous in 1992; $556,291 state appropriations, $9,341 product
    sales, $409,541 industry and $44,859 miscellaneous in 1993; $696,079
    state appropriations, $21,467 product sales, $321,214 industry, and
    $226,363 miscellaneous in 1994; $935,702 state appropriations, $35,376
    product sales, $494,891 industry, and $230,080 miscellaneous in 1995;
    and an estimated $900,000 state appropriations, $10,000 product sales,
    $400,000 industry, and $200,000 miscellaneous in 1996.
        The research work is being carried out at the Cornell, Idaho,
    Maine, Maryland, Michigan, North Dakota, Oregon, Pennsylvania, and
    Washington State Agricultural Experiment Stations. The project was
    initiated to accomplish significant results in about five years.
    Because the research is based on genetic varietal development, progress
    in developing new potato varieties takes from 5 to 10 years. Keeping
    with Administration's policy of awarding research grants competitively,
    no further Federal funding for this grant is requested. Research could
    be continued at the State's discretion using formula funds.
        Each year the grant is peer reviewed and reviewed by CSREES's
    senior scientific staff. A summary of that review indicated progress in
    achieving the objectives. In addition, the agency has at least one
    formal meeting with representatives from the potato industry to review
    research needs.
                         preharvest food safety, kansas
        The project is to examine the incidence of shedding of E. coli
    0157:H7 in feces of beef cattle and the impact of various management
    procedures such as calving, weaning, routine cattle handling for
    vaccination, etc. on the frequency and amount of shedding of these
    bacteria. The study will focus on the differences between small and
    large cow-calf operations in Kansas. The presence of E. coli in cattle
    destined for slaughter and entry of meat products into the human food
    chain has given impetus to the need for understanding the ecology of
    the organism and the impact of management strategies, including herd
    size, on the prevalence of the organism and likelihood of contamination
    of meat supplies. In view of significant needs for research in high
    priority national interest topics such as improved pest management
    systems, funds are not proposed to continue this Special Research
    Grant. At the discretion of the state, Hatch Act or other funding could
    be used to support this research.
        The original goal of this research was to determine the relative
    incidence of shedding of E. coli 01 57: H7 from beef cattle in small
    and large cow-calf operations and the impact of various management
    events in the production cycle on this bacterial shedding. The
    principal researcher expects this information will assist in reducing
    the prevalence of this organism in beef cattle and, thus, reduce the
    incidence of food-borne illness in humans due to this bacterium. To
    date, the research team has established new highly effective and rapid
    detection systems for identifying the E. coli organism in feces of
    cattle. The cooperating herds have been identified and initial
    collections have been made. Collaborative arrangements have also been
    established with scientists at the University of Nebraska-Lincoln for
    doing more intensive work with animals that are identified as
    ``shedders''. At this time they have met all of their goals on time and
    expect to continue to do so.
        The work supported by this grant began in fiscal year 1996. The
    appropriation for fiscal years 1996 and 1997 was $212,000. A total of
    $424,000 has been appropriated. During fiscal year 1996 non-federal
    funds provided to this project were $150,000 in state appropriations
    and $91,450 in contributed indirect costs. It is anticipated that a
    similar contribution will be made by Kansas State University in fiscal
    year 1997.
        This research is being conducted at Kansas State University,
    University of Nebraska-Lincoln and at ranches in Kansas, Nebraska and
    Colorado. The anticipated completion date was October 1, 1998, for the
    original objectives. At this time, the research team has completed all
    objectives that were planned for Year 1 of the grant and are working on
    the objectives for Year 2. It is anticipated that the other original
    objectives will be completed on schedule and the project should
    terminate in late 1998. Keeping with the Administration's policy of
    awarding research grants competitively, no further Federal funding for
    this grant is requested.
        The agency evaluates the progress of this project on an annual
    basis. The principal researcher has provided regular progress reports
    which have confirmed that the objectives are being accomplished in a
    timely manner.
                 preservation and processing research, oklahoma
        Research has focused on the effects of preharvest and postharvest
    factors on the market quality of fresh and minimally processed
    horticultural products, including factors affecting marigold petal
    pigment content, minimal processing procedures for extending the shelf
    life and reducing the oil content of pecans, and harvest quality
    evaluations for watermelons, pecans and peaches. Researchers are
    developing harvester prototypes for multiple harvest of marigold
    flowers and drying and threshing systems for marigold petal drying and
    separation. Work is ongoing to develop a fruit orienting mechanism to
    be incorporated into an on-line grading system and to develop
    integrated harvesting/postharvest handling systems for fresh market and
    processing market horticultural products. Research is also ongoing to
    develop methods to determine textural properties of pecans, determine
    optimum operating parameters for supercritical carbon dioxide and other
    alternative partial oil extraction, and develop and optimize modified
    atmosphere packaging techniques for pecan shelf life extension. Fiscal
    year 1997 funds will support research from July 1, 1997 through June
    30, 1999. The principal researcher believes that technological
    improvements in fruit, nut and vegetable handling systems are
    critically needed to supply domestic markets and to support continued
    participation in international commerce and thus serves the national
    need. Regionally, processing systems under development for commercial
    adaptation provide crucial solutions required for market expansion of
    pecans, affecting product market potential and value throughout the
    southern U.S. Locally, improvements in postharvest handling and
    processing are necessary to support growth of the industry and ensure
    competitive involvement in national and international commerce of
    horticultural commodities uniquely suited for production in Oklahoma.
    In view of significant needs for research in high priority national
    interest topics such as improved pest management systems, funds are not
    proposed to continue this Special Research Grant. At the discretion of
    the State, Hatch Act or other formula funding could be used to support
    this research.
        The goal of the research has been to define the major limitations
    for maintaining quality of harvested fruits, vegetables and tree nuts
    and prescribe appropriate harvesting, handling and processing protocols
    to extend shelf life and marketability of harvested horticultural
    commodities, thus maintaining profitability of production systems and
    assuring an economic market niche for Oklahoma producers and food
    processors. A systems approach to develop complementary cropping,
    harvesting, handling and processing operations has resulted in
    development of improved handling systems for cucurbit and tree fruit
    crops. Matching funding has supported development of nondestructive
    processing systems for partial oil reduction of tree nuts, to extend
    shelf life and lower the calorie content for the raw or processed
    product, resulting in development of a business plan for a commercial
    facility. Technologies and procedures previously developed for cucurbit
    and tree fruit systems are now being applied to support development of
    profitable okra, pepper, sage, basil, tree nut, sweetcorn, and marigold
    cropping, handling and light processing systems, with a targeted
    completion date of 1999. Research from this project provided the basis
    for commercial high relative humidity storage of peaches. Grants have
    been awarded from funds appropriated as follows: fiscal year 1985,
    $100,000; fiscal year 1986, $142,000; fiscal year 1987, $242,000;
    fiscal years 1988 and 1989, $267,000 per year; fiscal year 1990,
    $264,000; fiscal year 1991, $265,000; fiscal year 1992, $282,000;
    fiscal year 1993, $267,000; fiscal year 1994, $251,000; and fiscal
    years 1995-1997, $226,000 each year. A total of $3,025,000 has been
    appropriated.
        Support from the State of Oklahoma, through the Oklahoma
    Agricultural Experiment Station and through the Oklahoma Centers for
    Advancement of Science and Technology, have been provided as follows:
    fiscal year 1991, $126,900; fiscal year 1992, $209,783; fiscal year
    1993, $219,243; fiscal year 1994, $308,421; fiscal year 1995, $229,489;
    and fiscal year 1996, $366,570, for a total of $1,460,405 in state
    funds. An additional $16,100,000 has been committed by the State of
    Oklahoma for development of an Agricultural Products and Food
    Processing Center to support, among other programs, the horticulture
    processing initiatives, and to begin operation in the spring of 1997.
    The Oklahoma State University Division of Agriculture Sciences and
    Natural Resources has appropriated approximately $2 million dollars to
    staff the facility.
        This work is being conducted at the Oklahoma State Agricultural
    Experiment Station, in conjunction with ongoing production research at
    the Wes Watkins Agricultural Research and Extension Center and the
    South Central Agricultural Research Laboratories. The principal
    investigator anticipated that the fiscal year 1996 grant would support
    work through June 1998. It is expected that ongoing research will be
    completed in 2001. Keeping with the Administration's policy of awarding
    research grants competitively, no further Federal funding for this
    grant is requested. Research could be continued at the State's
    discretion using formula or other funds.
        An agency science specialist conducts a merit review of the
    proposal submitted in support of the appropriation on an annual basis.
    A review of the proposal was conducted on December 20, 1996. Though
    research progress was satisfactory, development and commercial adoption
    of new practices and equipment has been less certain. The project was
    evaluated as part of a comprehensive CSREES program site review in the
    fall of 1995, with a recommendation by the review team to continue the
    value-added product development.
                 red river corridor, minnesota and north dakota
        The purpose is to conduct a program of research to assess emerging
    international trade opportunities for the Red River trade region and
    develop the means to be able to compete for such opportunities in order
    to stimulate economic development. Projects were initiated to assess
    the Corridor's transportation infrastructure, research and development
    capability, competitive position, export opportunities in Europe and
    Latin America, and trade strategies. Emphasis is placed on technology
    and information transfer to inform users and potential users. The
    University of Minnesota has submitted a grant proposal for fiscal year
    1997 to CSREES, and the grant has been awarded. The researchers believe
    there is a regional need to find new and alternative markets to replace
    traditional markets that have little or no growth potential and to
    develop the capabilities to compete successfully for these markets.
    International trade is expected to support continued economic growth in
    this primarily rural, agriculturally dependent region. In view of
    significant needs for research in high priority national interest
    topics, such as improved pest management systems, funds are not
    proposed to continue this Special Research Grant. At the discretion of
    the State, Hatch Act or other funding could be used to support this
    research.
        The goal is to identify and assess export market opportunities and
    develop strategies and programs to improve the region's competitiveness
    in international trade. The program has completed studies on
    transportation services and costs, the region's trade position on
    specialty crops and metal fabrication, agro-industrial research and
    development capabilities, and export opportunities through
    collaboration with Canada. Studies in progress include trade strategies
    of selected European regions and their implications for regional trade
    strategies, trade opportunities with Mexico, bilateral technology
    transfer among businesses in the region, assessment and implications of
    Latin American transportation systems on trade, opportunities and
    linkages between rural Mexico and the Red River region, and
    relationships between social structure and rural development, This
    grant will be used to fund projects to expand the use by rural
    businesses of state-of-the-art telecommunications technologies to
    expand markets and up-grade worker skills.
        The work supported by this grant began in fiscal year 1992. The
    appropriation for fiscal years 1992-1993 was $200,000 per year,
    $188,000 in fiscal year 1994, and $169,000 in fiscal years 1995-1997. A
    total of $1,095,000 has been appropriated.
        The non-federal funds and sources provided for this grant are as
    follows: $4,300 State appropriations and $2,269 miscellaneous for a
    total of $6,569 in fiscal year 1992; $16,000 State appropriations,
    $4,138 industry, and $16,688 miscellaneous for a total of $36,826 in
    fiscal year 1993; and $1,600 State appropriations, $1,637 industry, and
    $29,501 miscellaneous for a total $32,738 in fiscal year 1994. The
    preliminary allocation of non-federal matching funding for fiscal year
    1995 is $2,000 State appropriations, $7,500 industry, and $6,500
    miscellaneous for a total of $16,000. Therefore, a total of $91,133
    non-federal funds has been provided through fiscal year 1995. Data for
    fiscal year 1996 are not available at this time.
        The research program is carried out by the University of Minnesota,
    Crookston, in collaboration with North Dakota State University. The
    researchers indicate that this phase of the program may be completed in
    fiscal year 1998. Keeping with the Administration's policy of awarding
    research grants competitively, no further Federal funding is requested
    for this grant.
        A merit review was conducted of this project in 1996 which
    indicated that it has contributed to the strengthening of
    communications to rural America regarding international trade
    opportunities. A site visit is scheduled for 1997 to assess the
    project.
                      regional barley gene mapping project
        The objectives of this project are to: construct a publicly
    available medium resolution barley genome map; use the map to identify
    and locate loci, especially quantitative trait loci controlling
    economically important traits such as yield, maturity, adaptation,
    resistance to biotic and abiotic stresses, malting quality, and feed
    value; provide the framework for efficient molecular marker-assisted
    selection strategies in barley varietal development; identify
    chromosome regions for further, higher resolution mapping with the
    objective of characterizing and utilizing genes of interest; and
    establish a cooperative mapping project ranging from molecular genetics
    to breeding that will be an organizational model for cereals and other
    crop plants. The fiscal year 1995 grant proposal has been received and
    is being processed. The principal researcher believes barley breeders
    nationwide need information about the location of agriculturally
    important genes controlling resistance to biotic and abiotic stresses,
    yield, and quality factors in order to rapidly develop new, improved
    cultivars and respond to disease and pest threats. This project
    provides that information along with appropriate molecular markers to
    track these traits through the breeding and selection process. In view
    of significant needs for research in high priority national interest
    topics such as improved pest management systems, funds are not proposed
    to continue this Special Research Grant. At the discretion of the
    state, Hatch Act or other funding could be used to support this
    research.
        The original goal of this project has been to develop a restriction
    fragment length polymorphism map for barley and associated important
    genetic traits as a map to provide closely linked molecular markers for
    barley breeders. The project successfully mapped 300 molecular markers.
    Portions of the map are described as very dense and contain key
    location points for enhanced utility. The project is now using the map
    to locate quantitative traits loci of economic importance. These
    include genetic determinations for yield, maturity, rust resistance,
    plant height, seed dormancy, and components of malting quality.
    Technical papers have been published to report research results to the
    scientific community.
        Grants have been awarded from funds appropriated as follows: fiscal
    year 1990, $153,000; fiscal year 1991, $262,000; fiscal years 1992-
    1993, $412,000 per year; fiscal year 1994, $387,000; and fiscal years
    1995-1997, $348,000 each year. A total of $2,670,000 has been
    appropriated. The nonfederal funds and sources provided for this grant
    were as follows: $203,760 from industry in 1991; $212,750 from industry
    in 1992; $115,000 from industry in 1993; and $89,000 from industry in
    1994; and $35,000 from the State of Washington and $108,000 in other
    nonfederal funding, for a total of $143,000 in 1995. An estimated total
    of $163,000 of non-federal funds supported this project.
        Research is being conducted in the following state agricultural
    experiment stations; Oregon, Colorado, Washington, Montana, Idaho,
    North Dakota, Minnesota, New York Virginia and California. The original
    objective of the ``Regional Barley Gene Mapping Project'' was to
    produce a genetic map of agronomically important traits of the barley
    genome. The anticipated time to complete this task was estimated at 10
    years with completion in 1999. Many important genes have been mapped,
    some of which are being used to improve barley cultivars. Keeping with
    the Administration's policy of awarding research grants competitively,
    no further Federal funding for this grant is requested.
        This project is made up of many competitively awarded subprojects
    that are reviewed annually by a peer panel and selected for relevance
    to the original objective and scientific merit of the proposed
    research. This project has been judged as an exceptionally productive
    project which serves as a model for multiinstitutional,
    multidisciplinary competitively awarded research projects.
                   regionalized implications of farm programs
        The purpose of this research is to estimate the impacts of farm,
    trade, and fiscal policies and programs and assess their alternatives
    on the economic viability of typical crop and livestock production
    operations located in different regions of the United States. The
    principal researcher believes there is a need for research that
    provides an assessment and evaluation of the potential impacts of
    Federal farm, trade, and fiscal policies on the economic viability and
    competitiveness of farmers located in different regions of the United
    States. Policy impacts vary regionally because of differences in farm
    productivity, input costs, climate, farm enterprises and size. The
    research results are widely used by farmers and public policymakers
    concerned about minimizing policy and program inequities between
    regions and farm sizes. In view of significant needs for research in
    high priority national interest topics such as improved pest management
    systems, funds are not proposed to continue this Special Research
    Grant. At the discretion of the State, Hatch Act or other funding could
    be used to support this research.
        The original, as well as current, goal was and continues to be to
    provide the farm community, extension, and public officials information
    about farm, trade, and fiscal policy implications by developing
    regionalized models that reflect farming characteristics for major
    production regions of the United States. The researchers have developed
    a farm level policy analysis system encompassing major U.S. farm
    production regions. This system interfaces with existing agricultural
    sector models used for farm, macroeconomic, and trade policy analysis.
    The universities have expanded the number and types of representative
    farms to 80. Typical farm models also are being developed for Mexico
    and Canada under a collaborative agreement for use in analyzing impacts
    of the North American Free Trade Agreement. Some 25 policy studies were
    completed this past year at the request of policymakers and farm groups
    including analyses of the impacts of various farm policy proposals on
    representative crop farms in the U.S., elimination of the rice program,
    conservation reserve program impacts on farms in the Great Plains, and
    revised baseline projections for representative farms. The
    representative farms were used extensively for analysis of farm level
    impacts of the alternative farm program proposals considered for the
    1996 Farm Bill as well as implementation alternatives after passage of
    the Bill.
        The work supported by this grant began in fiscal year 1990 and the
    appropriation for fiscal year 1990 was $346,000. The fiscal years 1991-
    1993 appropriations were $348,000 per year; $327,000 in fiscal year
    1994; and $294,000 in each of the fiscal years 1995 through 1997. A
    total of $2,599,000 has been appropriated.
        The non-federal funds and sources provided for this grant were as
    follows: $288,843 State appropriations and $46,773 industry for a total
    of $335,616 in fiscal year 1991; $45,661 State appropriations in fiscal
    year 1992; $33,979 State appropriations in fiscal year 1993; $40,967
    State appropriations in fiscal year 1994; $161,876 State appropriations
    in fiscal year 1995; $187,717 State appropriations for fiscal year
    1996; and $137,100 for fiscal year 1997.
        Research is being conducted by the Texas A&M University and
    University of Missouri at Columbia. The researchers believe this
    program is of a continuing nature for the purpose of assessing the
    impacts of existing policies and issues and proposed policy and program
    changes at the individual firm level for feed grain, wheat, cotton,
    rice, oilseed and livestock producers. In keeping with the
    Administration's policy of awarding research grants competitively, no
    further Federal funding is requested for this grant. No formal
    evaluation of this project has been carried out.
                                 rice modeling
        The purpose of this research project is to develop a rice industry
    model with domestic and international components to aid U.S. farmers,
    millers, and policymakers in making production, investment, marketing
    and public policy decisions. Research is needed to assist both the U.S.
    rice industry and national policymakers in assessing the impact of
    existing and proposed changes in public policies for rice. This
    research enables improved analysis of both international and domestic
    policy changes on rice production, stocks, prices of substitute crops
    and consumption. However, in view of significant needs for research in
    high priority national interest topics such as improved pest management
    systems, funds are not proposed to continue this Special Research
    Grant. At the discretion of the State, Hatch Act or other funding could
    be used to support this research. The original goal of this research
    was to develop international, national and regional models to analyze
    the impact of foreign and domestic policy changes, and forecast changes
    in production, stocks, prices of substitute crops and consumption.
        The work supported by this grant began in fiscal year 1996. The
    appropriation for fiscal years 1996 and 1997 was $395,000 for a total
    of $790,000. For the 1996 fiscal year, state appropriations are
    estimated to be $178,000; and for 1997, approximately $150,000.
        The research is being carried out at the University of Arkansas-
    Fayetteville and the University of Missouri-Columbia. The researchers
    anticipate that the domestic portion of the rice model will be complete
    by September 30, 1997. The international modeling research is a little
    over half completed and the researchers estimate another 5 years is
    required. In keeping with the Administration's policy of awarding
    research grants competitively, no further Federal funding is requested
    for this grant.
        We have conducted no formal evaluation of this project. However,
    each annual proposal is carefully reviewed for adherence to stated
    objectives and annual progress is discussed with the principal
    investigators.
                           rural development centers
        The overall objectives of the research agenda of the five rural
    development centers are to: Improve economic competitiveness and
    diversification in rural areas; support management and strategic
    planning for economic development; create community capacity through
    leadership; assist in family and community adjustments to stress and
    change; and promote constructive use of the environment. The function
    of the Centers is to increase the productivity of regional faculty both
    in doing research on rural issues and in using that research to do
    effective outreach with rural communities. The number of research
    faculty who are addressing broader rural issues is declining in many
    places. The multi-disciplinary, multistate, work supported by the
    Centers becomes even more crucial in a period of reduced research
    emphasis. Critical needs are being met by Center support including
    public lands policy, changing rural migration patterns, fiscal
    alternatives for local governments, and forest stewardship education.
    Specific needs for regional research are reviewed annually by the
    Centers. The focus of proposals varies from year-to-year depending on
    the shifting priorities.
        The Rural Development Center mission is to strengthen rural
    families, communities, and businesses by facilitating collaborative
    socio-economic research and extension through higher education
    institutions in the various regions. These program objectives are also
    consistent with one of the 5 major goals discussed in the fiscal year
    1999 Performance Plan for the REE Mission Area. Research programs are
    undertaken after evaluating broader regional and national priorities.
    Following are some accomplishments of selected research activities
    conducted under the auspices of various centers. A group of economists
    from Oregon, Washington, and Nevada used recent developments in
    regional economic modeling to look at the effects on rural and urban
    economies of reduced timber harvests in Oregon and of limited grazing
    on public lands in northern Nevada. Rural-Urban Interdependence and
    Natural Resource Policy, a publication recently released by the Western
    Rural Development Center, reports these studies in detail. This report
    reflects core-periphery input-output modeling that has grown out of an
    earlier research project supported by the Center. Northeast Center
    staff have been working with faculty of the University of Minnesota
    Extension Service and West Virginia University Extension Service to
    alter and condense a business retention and expansion notebook.
    Retaining and expanding existing businesses in communities is an
    effective alternative approach to industrial recruitment. The resulting
    publication will appeal to and be appropriate for use by community
    leaders/volunteers interested in helping businesses maintain or expand
    their services in their community. The community development approach
    to solving business problems is what makes these materials so
    appealing. The authors are in their final stages of editing, and the
    materials should be available for purchase by the spring of 1997.
        Grants have been awarded from funds appropriated as follows: fiscal
    year 1971, $75,000; fiscal year 1972, $225,000; fiscal year 1973,
    $317,000; fiscal years 1974-1981, $300,000 per year; fiscal years 1982-
    1985, $311,000 per year; fiscal years 1986-1987, $363,000 per year;
    fiscal year 1988, $475,000; fiscal year 1989, $500,000; fiscal year
    1990, $494,000; fiscal years 1991-1993, $500,000 per year; fiscal year
    1994, $470,000; and fiscal years 1995-1997, $423,000 per year. A total
    of $9,695,000 has been appropriated.
        Non-federal funds available to the four Regional Centers for Rural
    Development were: fiscal year 1991, $1,117,000; fiscal year 1992,
    $790,000; fiscal year 1993, $900,000; fiscal year 1994, $776,591; and
    fiscal year 1995, $710,050; for a total of $4,293,641 across the five
    years for which there are complete data.
        The regional rural development centers include the following:
    Northeast Regional Center for Rural Development, Pennsylvania State
    University; North Central Regional Center for Rural Development at Iowa
    State University; Southern Rural Development Center at Mississippi
    State University; and Western Rural Development Center at Oregon State
    University. There is also a rural development project at North Dakota
    State University which receives funding from the annual Rural
    Development Centers appropriation. Most of the research sponsored by
    the four regional centers is actually performed by resident faculty at
    landgrant universities in the respective region through subcontracts
    from that center's grant. The regional rural development centers were
    established to provide an on-going ``value added'' component to link
    research and extension and by doing so to increase rural development
    under the special conditions in each region. The work of the Centers is
    being carried out in all 50 states and in some territories. The Centers
    compile a report of annual accomplishments and share those with the
    states in the region. The list of needs is constantly evolving and is
    being addressed through projects that are matched to the constantly
    shifting local agenda. The current phase of the program will be
    completed in 1997.
        The Centers enlist the help of advisory committees that help
    establish operating rules and provide professional, technical counsel
    and peer evaluation of Center projects. Advisory committee members are
    qualified to fulfill these roles because they are directly involved in
    the scholarship of rural development and are knowledgeable on changing
    issues in rural areas. Specific site evaluations have been undertaken
    as follows:

            Western Rural Development Center--November 1994
            North Central Center--July 1992
            Northeast Center--May 1993
            Southern Center--August 1995
                            rural policies institute
        The Rural Policy Research Institute (RUPRI) is a consortium of
    three universities designed to create a comprehensive approach to rural
    policy analysis. The Institute conducts research and facilitates public
    dialogue to increase public understanding of the rural impacts of
    national, regional, state, and local policies on rural areas of the
    United States. There is a need to be able to estimate the impacts of
    changing programs and policies on rural people and places. Objective
    public policy analysis can provide timely and accurate estimates of the
    impacts of proposed policy changes to allow more reasoned policy
    discussions and decisions. In view of significant needs for research in
    high priority national interest topics such as improved pest management
    systems, funds are not proposed to continue this Special Research
    Grant. At the discretion of the State, Hatch Act or other funding
    sources could be used to support this research. The original goal of
    the Rural Policy Research Institute was to create a new model to
    provide timely, accurate, and unbiased estimates of the impacts of
    policies and new policy initiatives on rural people and places. The
    Institute has completed a number of successful policy research projects
    and developed three analytic models central to its mission. These
    Projects focus on the rural implications of health care, education,
    housing, rural development, tax and telecommunications policy
    proposals. In addition, the Institute uses expert panels to provide
    policy decision support to a number of policy making groups at national
    and State levels.
        The work supported by these grants began in fiscal year 1991 and
    the appropriation for fiscal year 1991 was $375,000. The fiscal year
    1992 appropriation was $525,000; for fiscal year 1993, $692,000; for
    fiscal year 1994, $494,000; and fiscal years 1995 to 1997, $644,000
    each year. A total of $4,018,000 has been appropriated.
        Aggregated non-federal funds to support the Rural Policy Research
    Institute across the three universities involved include unrecovered
    indirect costs, salary support from university and other non-federal
    sources, and various other grants, contracts, and reimbursable
    agreements. They amounted to $316,458 for fiscal year 1991; $417,456 in
    fiscal year 1992; $605,302 in fiscal year 1993; $537,834 in fiscal year
    1994; $584,516 in fiscal year 1995; $576,782 in fiscal year 1996; and
    $186,859 in 1997. Total non-federal funding to date is $3,225,207.
        The Institute's member universities are: the University of
    Missouri-Columbia; the University of Nebraska-Lincoln; and Iowa State
    University, Ames. Current funding will sustain activity through January
    1998. In keeping with the Administration's policy of awarding research
    grants competitively, no further Federal funding is requested for this
    grant.
        We have conducted no formal evaluation, however, annual project
    proposals are carefully reviewed, as are policy analyses produced by
    RUPRI.
           seafood harvesting, processing, and marketing, mississippi
        Research related to seafood safety, quality and by-product
    utilization has been supported by this grant. Compounds that are
    generally recognized as safe and naturally occurring viruses have been
    tested for their potential to control pathogenic Vibrio vulnificus that
    is associated with gastroenteritis and fatal septicemia following
    consumption of raw oysters. The researchers have also evaluated a new
    impedance technology to objectively and rapidly determine the freshness
    of seafoods. Researchers are also testing steam pasteurization to
    reduce catfish microflora and extend shelf life. The principal
    researcher believes that needs reflected in the project include
    providing consumers with affordable alternative seafood products.
    Alternative sources of seafood protein are needed because of a drastic
    decline in natural harvests due to overexploitation. Other needs
    addressed in this project include reducing pollution during seafood and
    aquaculture food processing by converting byproducts into value-added
    food ingredients or materials. A regional interest for the Gulf coast
    is the potential devastation of the oyster industry if harvests are
    severely restricted during warm months. The present project seeks to
    provide alternative processing strategies to control foodborne disease
    agents in oysters. Locally, catfish processors are a major employer of
    the severely economically depressed Delta region of Mississippi. By
    further enhancing the value of catfish products, this project seeks to
    improve the livelihood of individuals both on the Gulf coast and in the
    aquaculture region of the state. In view of significant needs for
    research in high priority national interest topics such as improved
    pest management systems and food safety, funds are not proposed to
    continue this Special Research Grant. At the discretion of the State,
    Hatch Act or other funding could be used to support this research.
        The original goals of the research were to improve the quality and
    safety of catfish and improve the utilization of catfish byproducts and
    underutilized marine species. Due to successes of the original project,
    subsequent efforts are focusing on additional uses of seafood and
    aquaculture foods by improving processing strategies and providing
    alternative products from waste materials. The project has thus
    expanded to include crab, shrimp, oysters, freshwater prawns, hybrid
    striped bass, and crawfish.
        The work supported by this grant began in fiscal year 1990 when
    $368,000 was appropriated for this project. The appropriations for
    fiscal years 1991-1993 were $361,000 per year; fiscal year 1994,
    $339,000; and fiscal years 1995-1997, $305,000 each year. A total of
    $2,705,000 has been appropriated.
        The State of Mississippi contributed $1,949 to this project in
    fiscal year 1991; $41,286 in fiscal year 1992; $67,072 in fiscal year
    1993; $91,215 in fiscal year 1994; $147,911 in fiscal year 1995; and
    $61,848 in fiscal year 1996. Product sales contributed $7,044 in 1991,
    $13,481 in 1992, $13,704 in 1993, and $5,901 in 1994. Industry grants
    contributed $14 in 1992 and $31,796 in 1993. Other non-federal funds
    contributed $80 in fiscal year 1991, $838 in 1992, and $17,823 in 1993.
    The total non-federal funds contributed to this project from 1991
    through 1996 was $501,962.
        Research is being conducted by scientists in the Departments of
    Food Science and Technology and Agricultural Economics of the
    Mississippi Agricultural and Forestry Experiment Station at Mississippi
    State University and at the Coastal Research and Extension Center,
    Seafood Processing Laboratory, in Pascagoula, Mississippi. The
    principal investigators anticipate that research on the original
    objectives will be completed in 1999. Keeping with the Administration's
    policy of awarding research grants competitively, no further Federal
    funding for this grant is requested. Research could be continued at the
    State's discretion using formula or other funds.
        An agency science specialist conducts a merit review of the
    proposal submitted in support of the appropriation on an annual basis.
    Since the agency has not yet received the proposal in support of the
    fiscal year 1997 proposal, the last review of the proposal was
    conducted on March 18, 1996. At that time, the agency science
    specialist believed that the projects addressed needs and interests of
    the regional seafood and aquaculture industries.
                              small fruit research
        Research carried out using funding for this Special Research Grant
    has been to enhance the production and quality of small fruits in the
    Pacific Northwest which includes Idaho, Oregon, and Washington.
    Research has been focused on cold hardiness, breeding and genetics, and
    pest management. The principal researchers believe Washington, Oregon,
    and Idaho are important states for growing, processing, and marketing
    small fruits such as strawberries, blackberries, raspberries, grapes
    and cranberries. Research is needed to help solve the myriad of
    problems in order to remain competitive and expand markets. In view of
    significant needs for research in high priority national interest
    topics such as improved pest management systems, funds are not proposed
    to continue this Special Research Grant. At the discretion of the
    state, Hatch Act or other funding sources could be used to support this
    research.
        The original goal of this project was to improve the production and
    quality of small fruits in the Pacific Northwest through research on
    cold hardiness, breeding and genetics, and pest control. Research
    progress to date for Oregon is the evaluation of new strawberry
    germplasm from Chile and North America for resistance to fruit rot,
    aphids, spider mites, and weevils; virus indexing of small fruit
    germplasm; better color stability of processed strawberries; increasing
    cranberry production through better weed control; and improving wine
    quality. Work is continuing in Washington on fruit physiology; cold
    hardiness of strawberries, grapes, and red raspberries; pest management
    of cranberries; and breeding of pest resistant strawberries. Idaho work
    continues on postharvest research for better marketability and adapting
    small fruit crops to high elevation growing conditions. Oregon and
    Washington are jointly carrying out marketing studies to identify new
    market niches for berry crops and wines.
        The work supported by this grant began in fiscal year 1991 and the
    appropriation for year 1991 was $125,000, The fiscal years 1992 and
    1993 appropriation was $187,000 per year, fiscal year 1994 was
    $235,000, and fiscal years 1995-1997 are $212,000 each year. A total of
    $1,370,000 has been appropriated.
        The non-federal funds and sources provided for this grant were as
    follows: 1991, $1,562,078 state appropriations, $40,933 product sales,
    $62,993 industry, $357,266 other nonfederal; 1992, $1,465,969 state
    appropriations, $90,453 product sales, $119,164 industry, $287,976
    other nonfederal; 1993, $1,539,255 state appropriations, $91,954
    product sales, $161,141 industry, $416,712 other nonfederal; 1994,
    $368,375 state appropriations, $45,430 industry and $90,822 other
    nonfederal; and $1,185,249 for fiscal year 1995.
        The research is being conducted at Oregon State University,
    Washington State University and the University of Idaho. Oregon State
    University is the lead university. The original objectives of the
    project are still valid today. The main goal was to have a competitive
    industry to satisfy the needs of those using blueberries. However, the
    researchers anticipate that most of the objectives will be met within
    five or six years. Keeping with the Administration's policy of awarding
    research grants competitively, no further Federal funding for this
    grant is requested. Research could be continued at the State's
    discretion using formula funds.
        These projects are evaluated on a yearly basis through a peer
    review mechanism set up by the University of Maine and by staff from
    the Cooperative State Research, Education, and Extension Service. Peer
    review ensures that good scientific practices and rationales are used
    while university and national staff reviews ensures that objectives are
    addressed and budgets are within the policies and regulations.
          southwest consortium for plant genetics and water resources
        New Mexico State University, Los Alamos National Laboratory, Texas
    Tech University, the University of Arizona and the University of
    California at Riverside entered into a cooperative interdisciplinary
    research agreement constituted as the Southwest Consortium on Plant
    Genetics and Water Resources to facilitate research relevant to arid
    and semi-arid land adaptation. The overall goal of the Consortium is to
    bring together multidisciplinary scientific teams to develop innovative
    advances in plant biotechnology and related areas to bear on
    agriculture and water use in arid and semi-arid regions. The Southwest
    Consortium for Plant Genetics and Water Resources is addressing the
    need for an integrated program that identifies specific problems of
    southwest agriculture, coordinates water and biotechnology research
    aimed at solving these problems, and facilitates the transfer of this
    information for commercialization. The specific research objectives of
    the Consortium include the development of crops with resistance to:
    drought and temperature extremes, adverse soil conditions, and pests
    and parasites. The Consortium is also identifying technologies for
    improved water and nutrient delivery. In view of significant needs for
    research in high priority national interest topics such as improved
    pest management systems, funding is not proposed to continue this
    Special Research Grant. At the discretion of the State, Hatch Act or
    other funding sources could be used to support this research. This
    research has national, regional and local applications.
        The original goals of this Consortium remain to facilitate research
    to provide solutions for arid and semi-arid crop adaptation. Five
    participating institutions have developed research plans consistent
    with the Consortium's goals. Subgrants are awarded competitively
    following peer review to support research that would solve problems
    unique to southwest agriculture. Specific attention is given to
    interdisciplinary agricultural research. The Consortium has discovered
    a gene that makes plants more resistant to water stress. They have
    identified a genetic marker for salt tolerance and have compared a
    genetic system of wild plant species to domestic crops for differences
    in drought response. One research team has cloned a gene from alfalfa
    that controls an important biosynthetic pathway, another is working out
    the complex metabolism of salt tolerance in resistant plant types, and
    other teams have identified genes involved in pest resistance,
    herbicide tolerance and nutritional enhancement of arid-land forage.
        Grants have been awarded from funds appropriated as follows: fiscal
    year 1986, $285,000; fiscal years 1987-1989, $385,000 per year; fiscal
    year 1990, $380,000; fiscal years 1991-1993, $400,000 per year; fiscal
    year 1994, $376,000; and fiscal years 1995-1997, $338,000 each year. A
    total of $4,410,000 has been appropriated.
        The Consortium's host institution, New Mexico State University,
    reports matching nonfederal funds of $80,000 in state appropriations in
    1992; $100,000 in 1993; $100,000 in 1994; $100,000 in 1995; and
    $100,000 estimated in state appropriations for 1996. These funds exist
    in the form of researchers' salaries, facilities, equipment maintenance
    and administrative support.
        Research is being conducted by a consortium of institutions
    comprised of New Mexico State University, Los Alamos National
    Laboratory, Texas Tech University, University of Arizona, and
    University of California at Riverside. New Mexico State University is
    the lead institution. The project was initiated in 1986 and
    accomplished significant results in the first five years. Currently
    additional and related objectives have evolved and anticipated
    completion date for these is 2001. Many of the objectives of this
    research have been met. Keeping with the Administration's policy of
    awarding research grants competitively, no further Federal funding is
    requested. Research could be continued at the State's discretion using
    formula funds.
        Each year the grant is peer reviewed and reviewed by CSREES's
    senior scientific staff. A summary of that review indicated excellent
    progress in achieving the objectives.
                        soybean cyst nematode, missouri
        The research being funded by this grant is crucial to the
    development of effective management strategies to understanding host-
    parasite relations of the pathosystem and each of its components. Two
    new nematode resistant soybean lines have been or will be released in
    1996. The need for breeding soybean lines to develop resistant
    varieties with a broad spectrum of resistance continues. More
    fundamental research involves the utilization of new molecular
    technologies to identify genes responsible for resistance. Other
    aspects of the works relate to field management strategies for these
    nematodes including cultural and biological applications. The soybean
    cyst nematode, Heterodera glycines is the most serious pest of soybean
    in the United States. The problems continue to increase in the Midwest
    where 12 states have yield reductions in soybean because of this
    nematode. Due to the nematodes' ability to adapt to resistant varieties
    over time, new varieties are continually needed. Because there are
    significant needs for research in high priority national interest
    topics such as improved pest management systems, funds are not proposed
    to continue this Special Research Grant. At the discretion of the
    state, Hatch Act or other funding could be used to support this
    research.
        The original goal of this research was managing the soybean cyst
    nematode, Heterodera glycines through the development of new resistant
    soybean varieties and the use of biological and cultural management
    strategies. To date, a new soybean variety that has resistance to
    Heterodera glycines race 3 and moderator resistance to race 14 has been
    developed and will be released shortly. This variety also has
    resistance to Phytophthora sojae. Further, approximately 1,000 lines
    resulting from resistant soybean lines were selected for progeny row
    planting and 150 lines advanced to 1996 yield tests. Delsoy 5500, a
    soybean variety in maturity group V, was released in 1996 to five state
    experiment stations. A single dominant gene was determined to be a
    condition of resistance by two PI lines of soybean for Heterodera
    glycines, race 3 while there was a two gene difference between two PI
    line for race 5. The cultural studies involving no-till and disk-till
    varied in different locations while the effects of six cropping
    sequences indicated that Heterodera glycines can develop in the winter
    on certain host crops.
        This is a renewal of grant that started in 1991. Grants have been
    awarded from funds as follows: fiscal year 1980-1981, $250,000 per
    year; fiscal year 1982, $240,000; fiscal years 19831985, $300,000 per
    year; fiscal years 1986-1989, $285,000 per year; fiscal year 1990,
    $281,000; fiscal year 1991, $333,000; fiscal years 1992-1993, $359,000
    per year; fiscal year 1994, $337,000; and fiscal years 1995-1997,
    $303,000 per year. A total of 5,358,000 has been appropriated.
        The non-federal funds and sources provided for this grant were as
    follows: $105,012 state appropriations in 1991; $84,368 state
    appropriations in 1992; $168,017 state appropriations in 1993; $118,725
    state appropriations in 1994; $33,498 state appropriations in 1995; and
    $33,723 state appropriation in 1997.
        This research is being conducted at the Missouri Agriculture
    Experiment Station and the University of Missouri. The anticipated
    completion date for the major objectives was 1996. Many of the
    objectives are being met but genetic interaction of the soybean cyst
    nematode/soybean is extremely complex. The anticipated completion date
    of the continuing research is 1998. Keeping with the Administration's
    policy of awarding research grants competitively, no further Federal
    funding for this grant is requested.
        The last evaluation of this project was a merit review in December,
    1996. In summary, continued development of new management strategies
    for the soybean cyst nematode is extremely important.
               spatial technologies for agriculture, mississippi
        CSREES has requested the university to submit a grant proposal that
    has been received, and is being reviewed. This project will evaluate
    the Components of Advance Spatial Technology for Agriculture (ASTA),
    also known as precision farming, to improve the level of Crop
    Management and thereby improve farm income while avoiding adverse
    environmental impacts. Integration of ASTA Components included
    computers, Global Positioning, Geographic Information System and Yield
    Monitor will permit combining yield maps with agronomic data and
    variable rate technology for application of seed fertilizer and
    pesticides, as well as other management practices to specific sites as
    precisely the right amounts for optimum production with minimum inputs.
    The proposed research under this Special Research Grant will focus on
    evaluation of site-specific technology evaluation and utilization for
    the major agronomic crops in Mississippi. In addition, the technology
    evaluation information would apply to many other crops where precision
    farming systems are used. In view of significant needs for research in
    high priority national interest topics such as improved pest management
    systems, funds are not proposed to continue this Special Research
    Grant. At the discretion of the state, Hatch Act or other funding could
    be used to support this research. The original goal of this project is
    to develop production management strategies utilizing site-specific
    technologies to enhance crop production efficiencies and environmental
    quality.
        The work supported by this grant begins in fiscal year 1997, and
    the appropriation for fiscal year 1997 is $350,000.
        Research will be conducted at the Mississippi Agricultural
    Experiment Station. The principal investigators anticipate the
    completion date for these objectives to be in 2002. Keeping with the
    Administration's policy of awarding research grants competitively, no
    further Federal funding for this grant is requested. The proposal for
    the initial year's funding is currently under agency review.
                 steep iii--water quality in pacific northwest
        The STEEP III study was established in 1996 as the third phase of
    the tri-state STEEP Program entitled ``Solutions to Environmental and
    Economic Problems,'' to meet the needs of farmers and ranchers in the
    Pacific Northwest in solving severe problems with soil erosion and
    water quality, while maintaining economically and environmentally
    sustainable agricultural production. The principal researcher believes
    the Pacific Northwest wheat region is subject to severe wind and water
    erosion, which has taken a heavy toll of the topsoil in a little more
    than 100 years of farming. Due to the hilly terrain, water erosion has
    reduced potential soil productivity in the high rainfall areas of the
    region by about 50 percent. Wind erosion has reduced productivity on
    the sandy soils in the lower rainfall areas. Also, off-site
    environmental costs of water erosion are large. Although many of these
    are difficult to measure, they include damage from sediment to
    recreational areas, roadways, and other areas which costs taxpayers
    millions of dollars annually. Wind erosion, which occurs mostly in the
    spring and fall, also can be costly and environmentally damaging, and
    causes increasing concerns for human health and safety from blowing
    dusts. Water quality degradation is of increasing concern in the
    agricultural areas of this region, since sediment is a major pollutant
    of surface water runoff which may contain varying amounts of chemicals.
    The complex hydrology of the region's landscape has made it difficult
    to identify the sources of these chemicals in surface and ground
    waters. In view of significant needs for research in high priority
    national interest topics such as improved pest management systems,
    funds are not proposed to continue this Special Research Grant. At the
    discretion of the state, Hatch Act or other funding could be used to
    support this research.
        The primary goals are: to obtain and integrate new technical/
    scientific information on soils, crop plants, pests, energy, and farm
    profitability into sustainable management systems; to develop tools for
    assessing the impacts of farming practices on soil erosion and water
    quality; and to disseminate conservation technology to the farm. The
    original STEEP and STEEP II projects for erosion control, and the
    successor STEEP III program for erosion and water quality control, have
    provided growers a steady flow of information and technologies that
    have helped them meet economic, environmental, and resource
    conservation goals. Through the adoption of these technologies, the
    researchers believe wheat growers have been able to reduce soil
    erosion, improve water quality, and maintain or increase farm
    profitability. This has been accomplished through a tri-state, multi-
    disciplinary approach of basic and applied research and through
    technology transfer and on-farm testing to assist growers with applying
    these research findings on their farms. The on-farm testing program has
    been especially successful because growers are involved directly in the
    research and education effort. For example, the on-farm testing program
    has evaluated conservation options that growers can use to meet Farm
    Bill conservation compliance requirements. STEEP programs have helped
    position farmers with new conservation technologies well in advance of
    deadlines to meet current and anticipated policy requirements. This
    preparation protects farmers against potential penalties and loss of
    government program benefits.
        The work supported by this grant began in fiscal year 1991, and the
    appropriations for fiscal years 1991-1993 were $980,000 per year; in
    fiscal year 1994, $921,000; in fiscal year 1995, $829,000; and in
    fiscal years 1996 and 1997, $500,000 per year. A total of $5,690,000
    has been appropriated.
        The non-federal funds and sources provided for this grant were as
    follows: $938,812 state appropriations, $63,954 product sales, $156,656
    industry, and $16,994 miscellaneous in 1991; $1,025,534 state
    appropriations, $75,795 product sales, $124,919 industry, and $88,696
    miscellaneous in 1992; $962,921 state appropriations, $62,776 product
    sales, $177,109 industry and $11,028 miscellaneous in 1993; $1,069,396
    state appropriations, $46,582 product sales, $161,628 industry, and
    $22,697 miscellaneous in 1994; and $1,013,562 state appropriations,
    $31,314 industry, and $107,151 miscellaneous in 1995. In 1996,
    Washington received $231,724 in state appropriations; Oregon passed
    Measure 5 which reduced revenues and imposed funding restrictions so
    they were unable to provide any non-Federal cost-sharing or matching
    funds; and Idaho contributed $81,525 state support, and $86,242 in
    estimated non-Federal grant support, for a total non-Federal
    contribution of $167,767.
        The work under STEEP III will be done at laboratories and field
    research sites at the University of Idaho, Oregon State University, and
    Washington State University. Cooperative on-farm testing will be
    conducted in cooperation with growers on their fields in Idaho, Oregon
    and Washington. The STEEP II project was completed in 1995. The results
    are compiled and are available as of January 1997 in a final, 5-year
    report. The STEEP III project started in 1996 and will continue through
    the year 2000 as a 5-year project. Keeping with the Administration's
    policy of awarding research grants competitively, no further Federal
    funding for this grant is requested. Research could be continued at the
    State's discretion using formula funds.
        The Cooperative State Research, Education, and Extension Service
    program manager annually reviews progress reports and proposes new
    research on the STEEP Program, and attends the annual meetings to
    assess progress. However, the program is evaluated each year by three
    committees: grower, technical, and administrative. Annual progress is
    reported at an annual meeting and compiled into written reports. These
    reports and the meeting are reviewed annually. Grower and industry
    input is solicited at the annual meeting on research objectives and
    accomplishments.
                       sustainable agriculture, michigan
        This project is intended to develop agricultural production systems
    that are highly productive and profitable as well as being
    environmentally sustainable. More specifically, this project will
    examine how to achieve a high nutrient flow from soil to crops and
    animals, and back to soil, with low loss to ground and surface waters.
    The principal researcher believes there is a need to better understand
    the biological processes occurring in Michigan's high-nutrient-flow
    crop and animal systems. With high water tables, networks of lakes and
    slow-moving streams, and concern about environmental standards, field
    contamination by agricultural production materials is a high priority.
    In view of significant needs for research in high priority national
    interest topics such as improved pest management systems, funds are not
    proposed to continue this Special Research Grant. In addition, funding
    for these projects could potentially be available through a competitive
    grant under the Sustainable Agriculture Research and Education program.
    The specific goals of this research are to develop an agroecological
    framework for decision-making, develop crop and cover crop rotations,
    develop water table management strategies, and develop rotational
    grazing systems. Accomplishments to date include an extension
    publication on agroecology, development of on-farm compost
    demonstration sites, collection of research data and computer software
    models on water table management, and completion of initial research
    trials on rotational grazing at three sites in Michigan.
        The work supported by this grant began in fiscal year 1994 with an
    appropriation of $494,000; $445,000 were appropriated in fiscal years
    1995 through 1997, bringing total appropriations to $1,829,000.
    Matching funds were provided at the state level for $511,900 in fiscal
    year 1994, $372,319 in fiscal year 1995, and $359,679 in fiscal year
    1996.
        This work is being carried out in Michigan at several locations by
    Michigan State University. Locations include the Kellogg Biological
    Station and the Upper Peninsula Experiment Station. This project is
    currently scheduled to go through March 31, 2000. Keeping with the
    Administration's policy of awarding research grants competitively, no
    further Federal funding for this grant is requested.
        Findings from this project have demonstrated that rotational
    grazing reduces production costs, and increases net profits, compared
    to traditional cow management. This project has also shown that
    composting is an effective way of stabilizing livestock waste,
    controlling odor, and improving nutrient composition for later land
    application. The computer modeling done with this project has shown
    reduced contamination of ground water through alternative management
    practices employed in the project.
          sustainable agriculture and natural resources, pennsylvania
        This project studies the cycling of nutrients from animal
    agricultural production systems through soil and water into crops and
    back to food for animals or directly to humans in the case of vegetable
    production. Environmental degradation is a major concern of
    agricultural production near urban areas, especially with regard to
    pest management and pesticide use, nutrient loading of soils and water
    associated with chemical fertilizers and animal and poultry manures.
    However, in view of significant needs for research in high priority
    national interest topics such as improved pest management, funds are
    not proposed to continue this Special Research Grant. At the discretion
    of the State, Hatch Act or other funds could be used to support this
    research. In addition, funding from the Sustainable Agriculture
    Research and Education (SARE) competitive grants program could be
    available for this type of research. The original goal of this research
    was to understand the cycling of nutrients from animal agricultural
    production systems through soil and water into crops and back to food
    for animals or directly to humans in the case of vegetable production.
    Conventional science in the late 1980's and early 1990's held that if
    only all animal wastes were composted, the nutrient management problems
    would disappear. However, the results of this research to date show
    that this is a more complex problem. If farmers are to manage their
    farm lands properly, indicators of soil quality and health must be
    developed that can be used by agricultural producers and consultants.
    Efforts under this project have been devoted to this goal.
        The work supported under this grant began in fiscal year 1993. The
    appropriation for fiscal year 1993 was $100,000, and $94,000 was
    appropriated in each of the fiscal years 1994 through 1997 for a total
    of $476,000. A total of $195,901 in matching support from university,
    state and private industry sources was provided in fiscal year 1996.
        Research is be conducted by the Pennsylvania State University with
    cooperators throughout the state. The anticipated completion date for
    the overall original project objectives in 1998. It is anticipated that
    the original objectives will be met at the end of 1998. Keeping with
    the Administration's policy of awarding research grants competitively,
    no further Federal funding for this grant is requested.
        There has not been a formal evaluation of this project, but
    progress reports have been submitted to the agency and reviewed by our
    scientific staff.
                   sustainable agriculture systems, nebraska
        This project is aimed at integration of field crops, animal
    production, agroforestry, livestock waste management, and diversified
    enterprises to meet production, economic, and environmental quality
    goals. Farmers and ranchers in Nebraska and throughout the Midwest face
    increasing difficulties in maintaining profitable operations that are
    sustainable under increased production costs and more stringent
    environmental regulations. They continue to seek alternative production
    systems, integration of crop and animal enterprises, value-added
    products, including those from woody perennials, and new marketing
    approaches to secure more of the food dollar. Work on crop residue
    utilization is highly important to assess the loss of erosion
    mitigation when grazing occurs as well as the benefits of winter forage
    to production of lean beef. Erosion is still a major problem with
    monoculture cropping, and work with contour strips, residue management,
    and animal grazing is essential to provide good recommendations to
    farmers for how to manage fragile lands. However, in keeping with the
    Administration's policy of awarding research grants competitively, no
    further Federal funding for this Special Research grant is requested.
    At the discretion of the State, Hatch Act or other funding could be
    used to support this research. In addition, funding for these projects
    could potentially be available through a competitive grant under the
    Sustainable Agriculture Research and Education program. This project
    has involved several components, with a number of results to date. In
    improving erosion control through grazing, calves were fed cornstalks
    from October through March, and fed some supplements. The calves had
    lower costs of production, and reduced need for grain feed. The
    researcher's work on integrative cropping and agroforestry has shown
    that diversifying rotations centered around soybeans has provided
    increased economic returns. In the objective dealing with compost
    utilization, compost has provided increased sources of nitrogen and
    improved soil quality. Reports from this project have been disseminated
    through extension and through a sustainable agriculture newsletter.
        This project began in fiscal year 1992, with an appropriation of
    $70,000; subsequent appropriations are as follows: $70,000 in fiscal
    year 1993; $66,000 in fiscal year 1994; and $59,000 in fiscal years
    1995 through 1997. Total appropriations to date are $383,000. Matching
    funds provided for this research include state funds in the amount of
    $25,313 for fiscal year 1992, $26,384 for fiscal year 1993, $27,306 for
    fiscal year 1994, and $36,091 in fiscal year 1995.
        Research is being conducted by the University of Nebraska at
    several locations in Nebraska, with the major part of the project at
    the Agricultural Research and Development Center near Mead, Nebraska.
    The current project proposes work through March 31, 1998. It is
    expected that current objectives of the project will be met by this
    time period. Keeping with the Administration's policy of awarding
    research grants competitively, no further Federal funding for this
    grant is requested. Findings from this project have shown that young
    cattle can be fed with lower costs if cornstalks are used as part of
    their ration. This system also allowed for a cropping pattern that
    reduced erosion. The corn, soybean, and agroforestry system showed the
    highest net income of the systems tested.
             sustainable pest management for dryland wheat, montana
        This research will address pest issues of the dryland wheat areas
    of eastern Montana. The proposed research is specifically designed to
    address pest issues of the dryland wheat area of eastern Montana. In
    view of significant needs for research in high priority national
    interest topics such as improved pest management systems, funds are not
    proposed to continue this Special Research Grant. At the discretion of
    the state, Hatch Act or other funding could be used to support this
    research. The original goal of this research was to provide pest
    management information to dryland wheat producers of eastern Montana
    where crop loss can approach $100 million per year.
        The work supported by this grant begins in fiscal year 1997 and the
    appropriation for fiscal year 1997 was $200,000.
        Research will be conducted at Montana State University Experiment
    Station. The project is proposed for a duration of 3 years and
    therefore should be completed after fiscal year 1999. Keeping with the
    Administration's policy of awarding research grants competitively, no
    further Federal funding for this grant is requested.
        The expected completion date of the project is fiscal year 1999.
    Assessment of the precision of biological control organisms and
    estimates of profitability, marketability, and risk will be used to
    assess progress.
                     swine waste management, north carolina
        CSREES has received the grant proposal from North Carolina State
    University and is being processed at this time. The objectives of this
    project are: (1) to develop a prototype system for treatment of animal
    waste which will be used to study and optimize a new and innovative
    swine waste management treatment process; (2) to provide funds for
    additional technical staff to perform the work under this project; (3)
    to purchase additional analytical equipment; and (4) to provide funding
    for operation of the prototype facility. The prototype facility will
    consist of a set of eight tanks which will be connected by piping or
    hoses to enable researchers to test a variety of different strategies
    for treatment of animal waste, including anaerobic or aerobic
    digestion, removal of nutrients such as nitrogen and phosphorus, and
    alterations in the sequence of these various operations. The principal
    researcher has stated that North Carolina now ranks second in the
    United States in both pork and poultry production. The problem of waste
    management has become critical because adequate land for application of
    waste in not available in some areas, water quality problems have been
    noted in both surface and ground waters, nutrients from several lagoon
    failures have created serious pollution problems in rivers and coastal
    areas, and communities have become less tolerant of odor problems. In
    view of significant needs for research in high priority national
    interest topics such as improved pest management systems, funds are not
    proposed to continue this Special Research Grant. At the discretion of
    the state, Hatch Act or other funding could be used to support this
    research. The original goal of this research was to enhance the design,
    development, and implementation of alternative swine waste management
    strategies and treatment systems. The project is awaiting the initial
    award of funds so no progress can be reported at this time.
        The work supported by this grant begins in fiscal year 1997 and the
    appropriation for fiscal, year 1997 is $215,000. The exact amount of
    non-federal funds to be contributed to this project in fiscal year 1997
    is not known. However, faculty time from three individuals will be
    contributed to this project so it is anticipated that the non-federal
    contribution will be substantial.
        This research will be conducted at North Carolina State University
    in Raleigh, North Carolina. The anticipated completion date is October
    1, 1997. The project is just getting started so there is no interim
    progress to report at this time. Keeping with the Administration's
    policy of awarding research grants competitively, no further Federal
    funding for this grant is requested.
        An evaluation of this project has not undertaken since fiscal year
    1997 was the first year funds were appropriated for this grant.
             tillage, silviculture and waste management, louisiana
        This research has five components: Rice and Cotton Tillage, Dairy
    and Poultry Waste Management, and Bald Cypress Silviculture. More
    specifically, the Rice scientists are looking for ways to improve stand
    establishment; the Cotton scientists are focusing on the use of tillage
    system to combat harmful insect populations; the Waste Management
    Scientists are quantifying the environmental and economic effectiveness
    of approved dairy and poultry waste disposal systems; and the
    Silviculturists are conducting a problem analysis of Louisiana's Bald
    Cypress forest. Since the crops, forest, and waste issues extend beyond
    the borders of Louisiana, this research may have application outside
    the state. However, in view of the significant research needs on
    national high priority issues, funding for this project is not
    proposed. At the State's discretion, Hatch Act or other funding could
    be used to support this effort.
        The original goals were to: improve conservation tillage in rice
    and cotton production, to determine the effectiveness of no-discharge
    dairy waste treatment facilities, to determine permissible poultry
    litter land-treatment rates, and to evaluate wetland forest
    regeneration problems. All components of the project have established
    research studies and are monitoring progress. Each year the principal
    investigator initiates a review of the sub-projects and, in this
    fashion, is encouraging good dialogue and cooperation among the sub-
    project investigators and their respective departments. For instance,
    Louisiana State University's Poultry and Forestry Scientists are
    working closely to establish application rates and procedures for
    applying poultry waste to forest plantations.
        The work began in fiscal year 1994. The appropriation for fiscal
    year 1994 was $235,000, fiscal year 1995 to 1996, $212,000 each year.
    This totals $659,000. State funding in support of these areas of
    research exceeds $750,000 annually.
        Investigations are being conducted on the main campus at Louisiana
    State University as well as the Experiment Stations at Calhoun and
    Washington Parish. The original work was scheduled for completion in
    1999. Early term objectives have been met even though they suffered the
    loss of a promising graduate student. Keeping with the Administration's
    policy of awarding research grants competitively, no further Federal
    funding for this grant is requested.
        The last field evaluation was completed on December 12, 1995. The
    evaluation summary complimented the scientist on the interdisciplinary
    components associated with this project, along with their investigative
    procedures, report writing, and external networking.
                       tropical and subtropical research
        The Tropical and Subtropical Research (T-STAR) Program is operating
    in coordination with the Caribbean Basin Administrative Group and the
    Pacific Basin Administrative Group. State Agricultural Experiment
    Stations that are members of the Caribbean group are Florida, Puerto
    Rico, and the Virgin Islands; members of the Pacific group are Hawaii
    and Guam. Nonmember institutional interests are represented by the
    Executive Director of the Southern Region Agri-cultural Experiment
    Station Directors, who is a member of the Caribbean group, and the
    Executive Director of the Western Region Agricultural Experiment
    Station Directors, who is a member of the Pacific group. The
    Agricultural Research Service also has representation on the two
    groups, as does the CSREES scientist who manages the T-STAR grant
    program. Funds for the program are divided equally between the two
    Basin Administrative Groups. The research objective of the program
    developed by the principal researchers is to improve the agricultural
    productivity of many of the subtropical and tropical parts of the
    United States. Special research grants have been awarded for research
    on controlling insect, disease and weed pests of crops; increasing the
    production and quality of tropical fruits, vegetables and agronomic
    crops; promoting increased beef production through development of
    superior pastures; detection of heartwater disease of cattle and the
    influence of heat stress on dairy cattle reproduction; better use of
    land and water resources; developing computer models for efficient crop
    production systems and animal feeding systems; developing computer
    models for land-use decisions; using biotechnology methodologies for
    improving plant resistance to viral and bacterial diseases; using
    biotechnology to develop non-chemical, or biological, strategies for
    controlling insect pests; and potential for growing new speciality
    crops. Fiscal year 1997 proposals have been requested.
        The principal researchers believe there is a need for the T-STAR
    program to provide research-generated knowledge that enables informed
    choices in the responsible use of natural resources, facilitates the
    health and well being of American citizens through improved food safety
    and nutrition, provides frontline protection for the rest of the
    nation's farms and ranches from serious plant and animal diseases and
    pests, and enhances the ability of U.S. farmers to produce crops
    efficiently and economically and/or to introduce new crops and
    agricultural products with export potential to gain market share
    abroad. On a regional basis, the T-STAR program addresses the unique
    challenges of practicing tropical agriculture, that is presence of
    pests year-round, heat stress, post-harvest processing to meet
    regulatory requirements for export, etc. The local need of Americans
    living in tropical regions of the nation for T-STAR knowledge-based
    products to design and implement sustainable agricultural development
    within fragile tropical agroecosystems--particularly on tropical
    islands--and to develop new crops and niche markets. In view of
    significant needs for research in high priority national interest
    topics such as improved pest management systems, funds are not proposed
    to continue this Special Research Grant program. At the discretion of
    the States, Hatch Act or other funding could be used to support this
    research.
        The original goal of this research was to increase the production
    and quality of tropical crops; control pests and diseases of plants and
    animals; promote increased beef production and conserve land and water
    resources. In fiscal year 1996, grants were supported for research on
    control strategies for Melon thrips; the biochemical nature of
    resistance to rust in nutsedge; development of bioherbicides for
    nutsedges; development of tomato cultivars with resistance to the
    spotted wilt virus; development of pheromones for monitoring and
    controlling the citrus root weevil; reducing the effects of heat stress
    in dairy cattle; development of a decision support system for vegetable
    production; finding cucurbits with resistance to silverleaf, developing
    a computer program for optimal supplementation strategies for beef and
    diary cattle on tropical pastures; characterizing new strains of citrus
    tristeza virus in the Caribbean basin; determining the economic
    threshold for the citrus leaf miner on limes; using viral replicase
    genes to engineer rapid detection methods for geminiviruses; developing
    makers of bacterial spot resistance genes in tomato; breeding snap and
    kidney beans for resistance to golden mosaic virus and for heat
    tolerance; searching for resistance to papaya bunchy top disease;
    developing weed controls for yam production; and bioengineering
    ringspot virus resistance in papaya.
        The operation of the tropical and subtropical research program was
    transferred from ARS to CSREES, with CSREES funding being first
    provided in fiscal year 1983. Funds in the amount of $2,980,000 per
    year were appropriated in fiscal year 1983 and 1984. In fiscal year
    1985, $3,250,000 was appropriated. In fiscal years 1986, 1987, and
    1988, $3,091,000 was appropriated each year. $3,341,000 was
    appropriated in fiscal year 1989. The fiscal year 1990 appropriation
    was $3,299,000. The fiscal years 1991-1993 appropriations are
    $3,320,000 per year; $3,121,000 in fiscal year 1994; $2,809,000 in
    fiscal years 1995-1996; and $2,724,000 in fiscal year 1997. A total of
    $46,546,000 has been appropriated.
        For fiscal year 1996, more than $1 million of nonfederal funds were
    provided to the T-STAR program from state appropriations. These state
    funds were in the form of faculty salary time commitments and indirect
    costs covered by the institutions.
        This research is being conducted in Florida, Puerto Rico, Virgin
    Islands, Hawaii, and Guam. Work is also being done in other Pacific and
    Caribbean countries through agreements between institutions but not
    using federal funds. Research on tropical crop and animal agriculture
    to increase productivity, net profits, decrease harmful environmental
    impacts, conserve water, and natural resources. The need to continue
    with this project has been expressed by producers in the area,
    importers in the U.S. mainland and the institutions involved. Keeping
    with the Administration's policy of awarding research grants
    competitively, no further Federal funding for this grant is requested.
        The projects that are funded by the T-STAR Special Research Grant
    have been peer reviewed by panels of scientists in the U.S. to assure
    that good science is undertaken. Also as part of the grant renewal
    process, progress reports are reviewed by the two Administrative Groups
    and by the grant manager at the national level. Workshops in which
    research results and their application for agricultural production are
    developed every two years. Research papers are published in the
    appropriate regional, national, and international forums available. The
    development in 1995 of the Strategic Plan for T-STAR provided a
    mechanism to define priorities, examine program direction, and
    recommend operational changes. One of the principal points considered
    was to bring the Caribbean and Pacific Basin components closer and
    better coordinated. T-STAR and the coordination which it implies was an
    outcome that will make this program better.
                              urban pests, georgia
        This research is focused on urban pests with specific emphasis on
    termites and ants. The principal researcher believes subterranean
    termites and ants are significant economic pests in the southeastern
    United States. Damage and control costs for termites in Georgia were
    estimated at $44.5 million in 1993. It is estimated that Professional
    Pest Control Operators apply over 23 million pounds of active
    ingredient in and around homes each year. Chemicals currently
    registered for controlling these pests are less efficacious than
    desired and applied at an intensity that exceeds most agricultural
    settings. In view of significant needs for research in high priority
    national interest topics such as improved pest management systems,
    funds are not proposed to continue this Special Research Grant. At the
    discretion of the State, Hatch Act or other formula funding could be
    used to support this research.
        The goal of the termite research is to better understand the
    foraging activities of subterranean termites and their responses to
    selected environmental cues in order to tailor monitoring and
    predictive strategies with efficacious conventional and alternative
    methods of control. Specific accomplishments in the subterranean
    termites research in 1996 are as follows:
        A third year of data on termite foraging behavior was collected and
    completed in 1996. Three years of data indicates Subterranean termite
    colonies in Georgia are 500,000 termites per colony and are
    characteristically smaller than those in Florida and Canada, but are
    within the same size range of those in Mississippi. It is believed that
    colonies of subterranean termites are nonindigeneous to Florida and
    Canada and are not subject to the same competitive interactions as
    those colonies that are native to Georgia and Mississippi. However,
    structures attacked by subterranean termites in Georgia are often
    attacked by more than one distinct colony. Three manuscripts have been
    published and one is in press in this area of research. Studies with
    termite baits in 1995 have demonstrated the seasonality of termite
    feeding activity and behavior impacts the timing of application and the
    timeframe for expected results from termite baiting. Research in 1996
    demonstrate that the active ingredient used in termite baits must
    display a lack of dosemortality effects for at least two weeks to
    insure consistent, significant, and long-term suppression of termite
    activity. Three manuscripts have been published. Mitochondrial DNA
    preliminary work indicates that human transport of termite-infested
    materials is the primary mode of termite dispersion and could result in
    a higher frequency of hybrid formation within the gentis
    Reticulitermes. One manuscript has been accepted for publication.
        The research supported by this grant began in fiscal year 1991, and
    the appropriation for fiscal years 1991-1993 was $76,000 per year. In
    fiscal year 1994 the appropriation was $71,000 and in fiscal years
    1995-1997 the appropriation was $64,000 each year. A total of $491,000
    has been appropriated. The non-federal funds and sources provided for
    this grant by fiscal year were as follows: 1991--none, 1992--$26,000,
    1993--$18,000, 1994--$59,530 and 1995--$59,539.
        This research and technology transfer is being conducted at the
    Georgia Agricultural Experiment Station in Griffin, Georgia. The grants
    have been processed on a year to year basis pending the availability of
    funds, however, the original objectives were essentially a five- to
    eight-year plan of work. CSREES entomologists judge that excellent
    progress has been made on foraging behavior and the identification and
    development of termite baits. The publication of the research results
    has also been excellent. Keeping with the Administration's policy of
    awarding research grants competitively, no further Federal funding for
    this grant is requested.
        This project has been evaluated on an annual basis by CSREES, and
    the progress has been excellent. Last year we documented the progress
    on foraging behavior, genetic isolation of termite colonies, new
    chemistry soil termiticides, the killing potential and repellency of
    several strains of the fungus Metarhizium anisopliae, termite baits and
    feeding activity and behavior that impacts the time frame for expected
    results from termite baiting. A peripheral objective on Argentine ants
    was completed last year with the development of commercial baiting
    stations used on the outside periphery of buildings. This method was
    proven effective in preventing infestations in apartment complexes and
    reducing ant complaints by residents.
                        viticulture consortium, ny & ca
        The University of California and Cornell University in New York
    received funding in the spring of 1996 for research on varietal
    responses of grapes, modeling of water requirements, management of
    diseases including phyloxera and other cultural aspects of grape
    production. The fiscal year 1996 funds will be used by the lead
    institutions to fund projects in the various grape producing states
    within their region. The research being carried out is designed to help
    the viticulture and wine industries remain competitive in the United
    States and in the global market. Both these industries have a positive
    effect on the United States balance of payments. In view of the fact
    that there are significant needs for research in other high priority
    national interest topics, such as improved pest management systems,
    funds are not proposed to continue this Special Research Grant. At the
    discretion of the State, Hatch Act or other funding could be used to
    support this research. The original goal of this research is to
    maintain or enhance the competitiveness of the U.S. viticulture
    industry in the global market.
        Grants have been awarded from funds appropriated as follows: fiscal
    year 1996, $500,000; fiscal year 1997, $500,000. The non-federal funds
    used in conjunction with this grant have not been accounted for because
    these projects are in their first year and have not yet been evaluated.
    However, monitoring of non-federal funds used to further the projects
    will be carried out.
        Research is being conducted in various states which include
    California, Washington, New York, and Pennsylvania. A recent review of
    the project revealed the research priorities set by the guidance group
    were not all addressed nor will they be in the near future. Keeping
    with the Administration's policy of awarding research grants
    competitively, no further Federal funding for this grant is requested.
                           water conservation, kansas
        This research program is designed to develop and disseminate
    technical and economic information on the efficient use of water for
    irrigated crop production in western Kansas. The following objectives
    comprise this program for the fifth year of the project:
        1. develop regression models to estimate the longevity of
    subsurface drip irrigation systems using calculations of annual system
    performance deterioration based on 11 years of operating pressures and
    flow rates;
        2. develop efficient advanced irrigation management procedures for
    subsurface drip irrigation systems for corn;
        3. identify and evaluate the technically and economically feasible
    modifications to irrigation systems for irrigation of corn, wheat and
    grain sorghum as affected by well capacity, institutional water
    restrictions, and the new federal farm program and;
        4. increase the availability of irrigation research information and
    best management practice recommendations to Kansas irrigators through a
    series of extension bulletins and updates based on research-based
    information.
        An advanced study was conducted to evaluate the water use
    efficiency of high frequency deficit subsurface drip irrigation for
    corn production. The 1994-1996 results indicate that corn yields can be
    maintained at a level nearly equal to fully irrigated crop production
    at significantly lower water inputs when daily deficit irrigation is
    used. An advanced substudy was initiated in 1996 to develop water/land
    allocation strategies for corn using subsurface drip irrigation. This
    substudy was initiated as a result of the changes in the federal farm
    program which allow greater planning flexibility. These changes removed
    the need of irrigators to protect base acreages, so economic efficiency
    will be a strong determinant in water/land allocation strategies. This
    substudy along with economic and system longevity analyses will be
    continued in 1997.
        Water is a precious resource to farmers in the Great Plains. Corn
    is a principle crop for feeding livestock. To produce corn in the Great
    Plains, additional water applied as irrigation enhances production. The
    most common irrigation methods are furrow irrigation or center pivot
    irrigation. The need to conserve water has turned attention to drip
    irrigation as an efficient alter-natives. In view of significant needs
    for research in other high priority national interest topics such as
    improved pest management systems, funds are not proposed to continue
    this Special Research Grant. At the discretion of the state, Hatch Act
    or other funding could be used to support this research.
        The research goal is to determine the feasibility of subsurface
    drip irrigation and other alternative irrigation systems in western
    Kansas to sustain irrigated corn production to support the beef feedlot
    industry. The project also supports an educational effort through
    collection and dissemination of information on efficient irrigation
    methods. The project has a significant and active technology transfer
    and extension program. In 1996 alone, one paper was given at an
    international conference, three refereed journal articles were
    submitted, two extension publications were published, and ten other
    miscellaneous presentations and publications were made. The computer
    program Irrigation Economics Evaluation System is complete and will be
    distributed by the Kansas State University Cooperative Extension
    Service in 1997.
        The work supported by this grant began in fiscal year 1993 with an
    appropriation of $94,000; $88,000 in fiscal year 1994; and $79,000 in
    fiscal years 1995-1997 each year. The total funds appropriated are
    $419,000.
        The non-federal funds and sources provided for this grant were as
    follows: $781,232 state appropriations, $55,205 product sales, $60,907
    industry and miscellaneous in 1991; $863,408 state appropriations,
    $37,543 product sales, $35,484 industry and miscellaneous in 199'2;
    $833,324 state appropriations, $54,964 product sales, $144,225 industry
    and miscellaneous in 1993. Amounts for other fiscal years are not
    available.
        The research is being conducted at Kansas State University. The
    field portion of the research is being conducted on Research Centers at
    Colby and Garden City, Kansas. Additional work is being carried out on
    campus at the Departments of Agronomy and Agricultural Economics in
    Manhattan, Kansas. The original anticipated completion date for the
    project was May 31, 1998, following the funding in fiscal year 1997.
    The original objectives of the project appear to be on track for
    completion by that date. Keeping with the Administration's policy of
    awarding research grants competitively, no further Federal funding for
    this grant is requested.
        The project has been peer reviewed. The reviewers felt the project
    concept to be valid and the timetable for accomplishments to be on
    target. The research as outlined in the proposal is within the mission
    of the Agricultural Experiment Station and is a high priority to Kansas
    agriculture.
                           water management, alabama
        The program components of the Water Management, Alabama project
    include: renovation as a water quality enhancement practice for
    pastures fertilized with poultry waste, the efficacy of a new biocidal
    polymer water filter against Cryptosporidium oocysts and Giardia cysts,
    improving effluent quality of the in-pond raceway fish culture system
    through removal and infiltration of fish wastes, relationships between
    landscape characteristics and nonpoint pollution inputs to coastal
    estuaries, and resource management for enhancement of environmental
    quality as conservation reserve program contracts expire in the Alabama
    Black Belt.
        The principal researchers believe that perennial pastureland is the
    most common disposal area for waste collected from confined animal
    operations in the humid Southeast. This is especially true in broiler
    chicken production areas such as Alabama, where litter is generated,
    since this material can be used as both fertilizer and feed in
    associated cattle operations. Most broiler production in this region is
    highly concentrated where topography and soil fertility limit row crop
    production. Although application of high rates of poultry wastes to
    perennial pastures in these areas has the potential to cause
    environmental pollution, operators have few alternatives to land
    application. This research provides solutions and/or potential
    recommendations for utilization of broiler litter in the best manner to
    protect water from both nitrogen and phosphorous application. With the
    considerable acreage that is coming off the Conservation Reserve
    Program, this research will give guidance to landowners and government
    agencies in the best use for the land. Published guideline handbooks
    have been distributed and the researchers believe they are providing
    much assistance to landowners, county agents, Natural Resources
    Conservation Service personnel, and others in applying best management
    practices.
        The potential for Geographic Information Systems to be major tools
    for determining the best use for land so as to protect the environment
    will be enhanced because of this study. Entire watersheds can be
    protected as landowners, land use planners and government entities make
    decisions for the future. The data provided by this study are
    particularly important in light of proposed revisions to the Coastal
    Zone Management Act. Given concerns regarding land use activity in the
    coastal zones, these data may provide indications of which combinations
    of land use and land forms may be problematic in terms of water
    quality. In view of significant needs for research in high priority
    national interest topics, such as improved pest management systems,
    funds are not proposed to continue this Special Research Grant. At the
    discretion of the state, Hatch Act or other funding could be used to
    support this research.
        This is a new grant, however, water quality work has been ongoing
    in Alabama in recent years. This previous research will be used to
    strengthen and backdrop work for this grant. Previous research has
    shown the relationships between cattle foot traffic, forage canopy,
    ground cover, root biomass, and nutrient uptake for grazed versus hayed
    tall fescue following two renovation tillage treatments. As a followup
    to this research, 25 Conservation Reserve Programs were surveyed. This
    included 300 sampling points, each covering 300 acres. Instrumentation
    was installed on several of the properties for measurement of soil
    erodability. Non-point source pollution in streams is being examined
    using the Geographic Information System and Remote Sensing analysis
    tools to assess the relationships between land use complex and water
    quality. Lands within each sub-watershed were classified according to
    their use, and the location of forested land use relative to the stream
    channel was noted. A linkage model was developed which relates land
    use/land cover with non-point source pollution.
        The work supported by this grant begins in fiscal year 1997 and the
    appropriation for fiscal year 1997 is $170,000. The non-federal funds
    and sources provided for this grant for fiscal year 1996 are as
    follows: $894,344 state appropriations; and $572,342 miscellaneous. It
    is anticipated that the University will more than match federal funds
    for this grant with state appropriations and miscellaneous non-federal
    funds in fiscal year 1997.
        This work is being conducted at the Auburn University Main Campus,
    and at the Upper Coastal Plain Substation at Winfield, Alabama, the
    Tennessee Valley Substation at Belle Mina, Alabama, the Black Belt
    Substation at Marion Junction, Alabama, the Sand Mountain Substation at
    Crossville, Alabama, and on private forest land near Greenville,
    Alabama. It is anticipated that the completion date of the project will
    be August 31, 1998, even though selected objectives will be met sooner.
    Work is proceeding on all objectives and some of them have already been
    met, Some objectives will be completed at the end of summer 1997 and
    others will continue through August 31, 1998. Keeping with the
    Administration's policy of awarding research grants competitively, no
    further Federal funding for this grant is requested.
        The Program Manager from the Cooperative State Research, Education,
    and Extension Service reviewed and evaluated the proposed research
    prior to the award of the grant, and reviewed and evaluated the annual
    progress reports from the Principal Investigator, following internal
    review by the University. Annual progress reports are due to be
    submitted by the individual research investigators to the University on
    March 1, 1997, after which a University evaluation will be made on each
    segment with the project leaders and department heads during March and
    April 1997, prior to submission to the Cooperative State Research,
    Education and Extension Service for review and approval.
                                 water quality
        The Cooperative State Research, Education, and Extension Service
    (CSREES) continues support of this national, competitively-awarded
    grants program as part of USDA's Water Quality Initiative. The program
    supports research to investigate the impacts of non-point source
    pollution from agriculture on water quality and to develop improved,
    sustainable agricultural practices and systems that protect the
    environment and are economically profitable. Also, this program
    supports research on five Management Systems Evaluation Area (MSEA)
    projects as part of the Midwest Initiative on Water Quality to develop
    new farming systems that protect water quality, with research located
    at 10 sites throughout the Corn Belt. This program is conducted jointly
    with the State Agricultural Experiment Stations, USDA's Agricultural
    Research Service and Natural Resources Conservation Service, the U.S.
    Environmental Protection Agency, the U.S. Geological Survey, extension
    specialists, and other Federal, State, and local agencies. The water
    quality grants have supported more than 300 research projects across
    the country. In fiscal years 1996 and 1997, funds were awarded to the
    five MSEA projects in the Midwest to continue the water quality systems
    research started in 1990. In 1996, new projects were initiated as
    Agricultural Systems for Environmental Quality. The new projects focus
    on watershed-scale agriculture production systems that reduce pollution
    of soil and water while maintaining productivity and profitability.
    Concerns have been raised by the public about the possible risks to the
    environment and soil and water quality resulting from the use of
    agricultural chemicals. Better methods detection of minor amounts of
    chemicals in water have made the public, farmers, and policy-makers
    more concerned about the use and management of these agricultural
    chemicals and wastes, while meeting the challenge of maintaining the
    efficiency and productivity of agricultural production systems. Water
    quality continues to be of high priority at local, regional, and
    national levels. Results from the research are providing technologies
    to reduce pollutants, guidelines for site-specific farming, and
    improved farming systems.
        The original goals of the program were to determine the extent to
    which agriculture has impacted ground water quality, and to develop
    new, improved, cost effective agricultural systems that enhance ground
    water quality. During the past three years, focus and allocation on
    resources have increased for surface water quality. Major progress has
    already been made on these goals. examples of some of the results of
    recently completed research include the following:
        1. Nitrogen continues to be of concern as a pollutant in our
    Nation's waters. The rapid expansion of the Hypoxic zone in the Gulf of
    Mexico in 1993 has focused additional attention on nitrates coming from
    several sources, including agriculture. Nitrogen testing research and
    implementation of the Pre-sidedress Nitrogen Test in the Northeast and
    Midwest is helping producers match the supply and demand for nitrogen,
    thus reducing excess application.
        2. Crop rotations can significantly reduce nitrate pollution. In
    the Pacific Northwest, nitrate lost from the root zone of irrigated
    potatoes can be effectively recaptured by following with a grain or
    forage crop.
        3. The Management System Evaluation Area modeling group has
    adapted, improved, and verified the usefulness of the Root Zone Water
    Quality Model as a tool for extending MSEA results beyond the research
    sites. The model predicts the movement of water and agricultural
    chemicals.
        The work under the Water Quality Program began in fiscal year 1990
    with an appropriation of $6,615,000. The subsequent appropriations were
    as follows: $8,000,000 in fiscal year 1991; $9,000,000 in fiscal year
    1992; $8,950,000 in fiscal year 1993; $4,230,000 in fiscal year 1994;
    and $2,757,000 in fiscal years 1995 through 1997. A total of
    $45,066,000 has been appropriated for the Special Research Grants Water
    Quality Program. The non-federal funds in support of the Water Quality
    Program, provided by state appropriations, industry, product sales, and
    other local sources, have averaged approximately $1,000,000 annually
    since the program began in 1990.
        Funds provided under the Water Quality Program have been awarded to
    institutions in virtually every state, so work is being carried out in
    all parts of the country. The MSEA projects of the Midwest Initiative
    on Water Quality are headquartered in Iowa, Minnesota, Missouri,
    Nebraska, and Ohio, with satellite locations in North Dakota, South
    Dakota, and Wisconsin. Three new projects located in Indiana, North
    Carolina, and Ohio were initiated in fiscal year 1995. The original
    goals of the USDA Water Quality Research Plan were to: (1) assess the
    seriousness and extent of agriculture's impact on ground water quality,
    and (2) develop new and improved agricultural systems that are cost
    effective and enhance ground water quality. The original project was
    developed for five years with the expectation that it would be reviewed
    and possibly extended beyond the five year period if warranted. The
    1995 review of the program identified a need for increased attention to
    surface water quality problems. The research funded under the Special
    Research Grants Program has produced significant progress in
    understanding the impacts of agricultural practices on surface and
    ground water pollution, and in developing improved agricultural systems
    that are economically and environmentally sustainable. Implementation
    of some of these improved agricultural systems is already underway in a
    number of states. The focus over the next five years will be on
    developing and implementing agricultural systems that utilize the
    results of research funded under this program. The March 1995 Water
    Quality Users Conference brought together research findings and new
    technologies that have been developed.
        An external review team evaluated the Management System Evaluation
    Areas and associated component projects. All MSEA projects have an
    impressive record of successfully implemented interdisciplinary teams
    to study water quality problems. Credibility and confidence in
    experimental data has been assured by implementation of quality
    assessment/quality control procedures, and a diversified delivery
    system/educational outreach effort will be a necessary key component of
    MSEA success.
                           weed control, north dakota
        The project is designed to reduce the environmental pollution
    caused by the extensive usage of herbicides for weed control and
    provide growers with environmentally safe weed control systems. The
    present project addresses three areas; one being crop production
    practices, second, weed biology and herbicide resistance, and third,
    efficient herbicide usage. In crop production practices, systems
    experiments have been established at three locations that include crop
    rotation, tillage, seeding method and timing; these variables are
    incorporated into sustainable, reduced tillage and conventional
    systems. Results being monitored include the effect of weed control
    intensity on long-term weed infestations and economic returns. The
    emphasis in weed biology research is with kochia, wild oat, and green
    foxtail that are herbicide resistant. In efficient herbicide usage,
    several factors are being studied such as application methods to
    improve weed retention of herbicides and weed-detecting sprayers to
    treat only areas where weeds are present. The research addresses new
    methods to control weeds using systems control with multi-year, multi-
    crop rotations, reduced pesticide applications, that better simulate a
    typical on-farm sequence than short-term grants. Some variables
    included in the research are reduced pesticide applications and
    techniques to enhance herbicide efficacy. In view of significant needs
    for research in high priority national interest topics such as improved
    pest management systems, funds are not proposed to continue this
    Special Research Grant. At the discretion of the state, Hatch Act or
    other funding could be used to support this research.
        The original goal was to develop new, efficient weed control
    methods. To accomplish this, long-term field experiments have been
    initiated to obtain basic crop-weed biology and production system
    information. The first three years of the rotation experiments have
    been completed in 1993 through 1995. Changes in weed populations were
    beginning to occur in 1995 and the environmental conditions were
    atypically wet during these three years; these observations support the
    need to complete at least two cycles of the rotation for a total of at
    least eight years to obtain reliable scientific information. The
    improved efficiency of weed control method has developed adjuvants to
    overcome the antagonism of salts, which naturally occur in water and
    reduce the efficacy of some herbicides. Another approach is adjuvants
    to reduce the herbicide rate required and/or to improve their
    performance consistency. Kochia genetic lines have been developed that
    are homozygous for resistance to various studies to determine
    inheritance and possible spread of herbicide resistance. Fields are
    being monitored for the development of kochia resistance to dicamba. A
    better understanding of how herbicide-resistant weeds occur in a
    population should be useful to developing methods to prevent herbicide
    resistance from becoming an unmanageable problem.
        The work supported by this grant began in fiscal year 1992 and the
    appropriation for fiscal years 1992 and 1993 was $500,000 per year;
    $470,000 in fiscal year 1994; and $423,000 in fiscal years 1995 through
    1997. A total of $2,739,000 has been appropriated.
        The non-federal funds and sources provided for this grant were as
    follows: no matching in 1991; $27,030 state appropriations in 1992,
    $48,472 state appropriations in 1993, $41,969 state appropriations in
    1994, $71,847 state appropriations in 1995, and an estimated $70,000
    state appropriation in 1996.
        Research is being conducted at North Dakota State University. The
    original anticipated completion date was a minimum of 5 years, with an
    additional 5 years currently being projected. The original objectives
    have been satisfactorily met, but the research with biological traits
    of herbicide-resistant weeds require more time, depending upon whether
    the traits prove to be simply inherited or involve multiple genes with
    a complex inheritance. The anticipated completion date of the
    additional and related objectives is 2001. Keeping with the
    Administration's policy of awarding research grants competitively, no
    further Federal funding for this grant is requested.
        Each year the grant is peer reviewed and reviewed by CSREES's
    senior scientific staff. A summary of that review indicated excellent
    progress in the achieving the objectives.
                             wheat genetics, kansas
        This project provides partial support for the Wheat Genetics
    Resource Center at the University of Kansas, which focuses on
    collection, evaluation, maintenance and distribution of exotic wheat
    related germplasm needed to develop new wheat cultivar resistant to
    disease, insects, and environmental stress. The principal researcher
    believes most cultivated varieties of wheat are derived from common
    sources. They lack the rich genetic diversity needed to develop
    resistance to diseases, insects and environmental stress. The
    replacement of genetically rich primitive cultivar and land races by
    modern, more uniform cultivars all over the world is causing erosion of
    wheat germplasm resources. New pests or those that have overcome
    varietal resistance pose a constant threat to the nations wheat
    production. Genetic resistance often resides in wild relatives of
    wheat. The researchers believe this program, which was established in
    Kansas, is providing service to wheat breeders nationwide. In view of
    significant needs for research in high priority national interest
    topics such as improved pest management systems, funds are not proposed
    to continue this Special Research Grant. At the discretion of the
    state, Hatch Act or other finding could be used to support this
    research. The original goal of this research was to enhance the genetic
    diversity available to wheat breeders nationally and internationally by
    collecting, evaluating, maintaining and distributing germplasm derived
    from wild relatives of wheat. To date 25 germplasm releases have been
    made containing new genes for resistance to such pests as Hessian fly,
    greenbug, leaf rust, soilborne mosaic virus and Russian wheat aphid.
    Germplasm stocks with resistance to leaf rust and powdery mildew are
    under development. Evaluation of germplasm for important resistance
    genes was carried out by Center scientists and cooperating
    institutions. The Center filled 30 requests from U.S. wheat breeders
    for seed from the germplasm collection and 57 requests for seed of
    germplasm releases, as well as large numbers from international
    breeders.
        Work supported by this grant began in fiscal year 1989.
    Appropriations were for fiscal year 1989, $100,000; fiscal year 1990,
    $99,000; fiscal year 1991, $149,000; fiscal years 1992-1993, $159,000
    per year; fiscal year 1994, $196,000; and fiscal years 1995-1997,
    $176,000 each year. A total of $1,390,000 has been appropriated.
        The nonfederal funds provided for this grant were as follows:
    $493,285 state appropriations, $31,414 product sales, and $84,610,
    other non-federal in 1991; $414,822 state appropriations, $14,259
    product sales, and $102,086 other non-federal in 1992; and $533,848
    state appropriations, $32,297 product sales, and $163,937 non-federal
    in 1993, $468,960 in 1994; $563,671, non-federal funding for 1995 and
    $457,840 of non-federal support for 1996.
        This research is being conducted at Kansas State University by the
    Wheat Genetics Resource Center. The collection, evaluation and
    enhancement of Wheat germplasm is continual process. Therefore this
    project does not have a defined completion date. The principal
    researcher anticipates continuing the work for an indefinite period of
    time. In keeping with the Administration's policy of awarding research
    grants competitively, no further Federal funding for this grant is
    requested.
        This Special Grant has not been subjected to a comprehensive
    review. However each annual proposal is peer reviewed at the
    institution and reviewed by CSREES scientists.
                           wood utilization research
        The new wood utilization knowledge and technologies discovered help
    maintain a vigorous, competitive, domestic forest industry. This, in
    turn, helps achieve sustainable forests since improved utilization
    extends timber supplies. The research includes: meeting environmental
    objectives in timber harvesting and forest products manufacture;
    extending the timber resource through research, including management;
    exploiting pesticides developed from forest trees; wood machining;
    introducing small forest products industries to wood technology; and
    developing new products from wood and recycled materials. Research at
    four of the centers improves the utilization of those forest species
    that grow in these regions, i.e. western conifers, southern pines, Lake
    States hardwoods, and northeastern forests. The other two centers
    conduct research in specific subdisciplines, i.e. machining of wood and
    incubator technology transfer. The wood machining work at North
    Carolina State University improves wood machining. Wood industry
    incubator work in Duluth, Minnesota, contributes to rural development
    of local economies. In view of significant needs for research in high
    priority national interest topics such as improved pest management
    systems, funds are not proposed to continue this Special Research
    Grant. At the discretion of the State, Hatch Act or other formula
    funding could be used to support this research.
        The original goal was to generate new knowledge that would benefit
    the forest industry. This goal has been fine-tuned to place additional
    emphasis on environmental stewardship, resource extension, technology
    transfer, and scientist education. Research that extends the resource
    benefits forest ecosystems and increases the competitiveness of the
    forest products industry. In addition, the principal researchers
    believe consumers benefit from the more efficient production. For
    example, quality control procedures have saved $200,000 per year in one
    mill and $300,000 per year in a second through reduced waste. The
    researchers estimate that handheld calculator programs developed by
    this research have resulted in savings of nearly $1,000,000 to
    woodworkers. Research has reduced the cost of cleanup of superfund
    sites by tenfold due to the use of biodeterioration technology. Water
    quality is believed to have been improved due to the introduction of
    bacteria that consume polychlorinated phenols in contaminated water
    sources. Laser cutting of wood holds potential for high savings in raw
    materials. Systems analysis of sawmill operations has allowed managers
    to improve the efficiencies of operation. Improvements in membrane
    pressing of cabinet doors has improved production and product quality.
    The research developed an electric wood defect deterioration system to
    improve automated production systems. These are a few examples of the
    benefits from continuing research in wood utilization. Each of these
    centers has an advisory committee that establishes priorities and peer
    reviews research proposals.
        Grants have been awarded from funds appropriated as follows: fiscal
    year 1985, $3,000,000; fiscal years 1986 through 1989, $2,852,000 per
    year; fiscal year 1990, $2,816,000; fiscal years 1991 and 1992,
    $2,852,000 per year; fiscal year 1993, $4,153,000; fiscal year 1994,
    $4,176,000; fiscal year 1995-1996, $3,758,000 per year; and $3,536,000
    in fiscal year 1997. A total of $42,309,000 has been appropriated.
        Mississippi State University non-federal funds were: State
    appropriations $2,498,800, $2,178,725, $2,353,225, and $2,331,691,
    $2,650,230, and $2,778,535 for 1991, 1992, 1993, 1994, 1995, and 1996,
    respectively. In addition, industrial funds averaged $553,700 for those
    4 years in support of the Mississippi Forest Products Laboratory.
    Oregon State University state appropriations were: $1,337,962,
    $1,394,304, $1,256,750, $1,252,750, 1,417,755, and $1,117,000 for 1991,
    1992, 1993, 1994, 1995, and 1996, respectively. Estimated non-public
    support averages $500,000 per year. Michigan State University non-
    federal contributions for 1994 totaled $910,481. Three new locations
    were added in 1994: University of Minnesota-Duluth non-federal match
    was $590,000, $550,000, and $560,000 for 1994, 1995, and 1996. North
    Carolina State University was $126,000, $165,000, and $135,000 for
    1994, 1995, and 1996. University of Maine was $600,000, $445,723, and
    $459,100 for 1994, 1995, and 1996.
        There are six locations. The initial three--Oregon State
    University, Mississippi State University, and Michigan State
    University--were joined by the University of Minnesota-Duluth, North
    Carolina State University, and the University of Maine in fiscal year
    1994. The original objective was to build and maintain strong regional
    centers of wood utilization research to address the Nation's needs for
    wood products through strengthening university wood products research
    and graduate education. These centers have been established, and wood
    utilization improves each year as a result. Projects begun in 1997 will
    be completed by 2001. Keeping with the Administration's policy of
    awarding research grants competitively, no further Federal funding for
    this grant is requested.
        Progress reports from the six centers are reviewed yearly or more
    frequently. Center directors last met together in June 1996. Centers
    all have advisory committees which meet periodically. The U.S.
    Department of Agriculture conducts informal on-site reviews
    periodically. The Duluth and Oregon sites were visited in 1996. A
    Departmental panel reviewed the original three centers in 1992 and
    1993. At that time, the original objectives were broadened. The centers
    have responded to the review recommendations by increasing their focus
    on meeting environmental objectives by conducting research leading to
    sustained timber production; extending the timber supply through
    improved processing; developing new structural applications for wood;
    and developing wood extractives to substitute for pesticides,
    preservatives, and adhesives.
                                 wool research
        The overall goals for this research are the development of
    objective measures of wool, mohair, cashmere and other animal fibers to
    increase profitability of the sheep and Angora goat industries.
    Specific objectives include: develop and evaluate measurement
    techniques for rapid objective evaluation of wool, mohair, cashmere and
    other animal fibers; increase the use of objective measurements to
    increase fiber production, quality and income to producers, and
    increase consumer acceptance of wool fabrics. The fiscal year 1996
    grants terminate between January 1997 and April 1998. The 1997 grant
    proposals have been received and are being reviewed. Collaboration
    exists among researchers in Texas, Wyoming, and Montana associated with
    this grant and other Federal, university, and industry scientists on a
    wide basis to assure responsiveness to the needs of those involved in
    wool and mohair production, marketing, and processing. In view of
    significant needs for research in areas that are high priority
    nationally, no further funding is proposed for this project. At the
    discretion of the State, Hatch Act of other funding could be used to
    support this effort.
        The overall goal for this research to develop objective measures of
    wool, mohair, cashmere and other animal fibers to increase
    profitability of the sheep and Angora goat industries remains the
    primary emphasis of the research. Computer software programs for the
    automatic image analysis system are being evaluated and improved for
    the purpose of measuring the average diameter and distribution of
    animal fibers. Software is also being modified to permit rapid,
    accurate measurement of other fiber properties such as fiber style
    crimp and character. Near infrared reflectance analysis was compared to
    standard practices for yield measurement of mohair. Progress was again
    made to improve the quantity and quality of fibers produced from sheep
    and goats. Selection and crossbreeding experiments, part of a national
    study, were conducted to evaluate wool characteristics, reproduction,
    and lamb quantity and quality of crosses between Merino and Rambouillet
    breeds. Correlation studies were completed to compare the measurements
    made by the laser scan image analyzer with those made by
    microprojection. Numerous scientific and technical papers were
    published during the past year.
        Grants have been awarded from appropriated funds in the amount of
    $150,000 for fiscal years 1984-1985; $142,000 per year for fiscal years
    1986-1989; $144,000 for fiscal year 1990; $198,000 for fiscal year
    1991; and $250,000 per year for fiscal year 1992-1993; fiscal year
    1994, $235,000; and fiscal years 1995-1997, $212,000 each year. A total
    of $2,581,000 has been appropriated.
        The non-federal funds and sources provided for this grant were as
    follows: $150,913 state appropriations, $11,800 product sales, $5,817
    industry, and $3,556 miscellaneous in 1991; $111,394 state
    appropriations, $25,451 product sales, $41,442 industry, $3,068
    miscellaneous in 1992; and $152,699 state appropriations, $39,443
    product sales, $40,804 industry and $3,556 miscellaneous in 1993;
    $150,094 state appropriations, $35,284 product sale, $36,484 industry
    and $3,556 miscellaneous in 1994; and $67,345 state appropriations,
    $10,000 product sales; $34,325 industry contributions in 1995; and
    $39,033 non-federal support in 1996.
        The research is in progress at the Texas A&M University, Texas
    Agricultural Experiment Station, the University of Wyoming and Montana
    State University. The original objectives to improve the efficiency and
    profitability of wool, mohair and cashmere production and marketing are
    still valid. Specific objectives for individual laboratories and
    experiments are continually revised to reflect the changing priorities
    for the wool and mohair industries and consumers. It is anticipated
    that five years will be required to complete the current research.
    Keeping with the Administration's policy of awarding research grants
    competitively, no further federal funding for this grant is requested.
        The principal investigators from the three institutions meet
    annually to evaluate progress and prioritize research according to
    industry needs. The research for this Special Grant is a component of a
    regional research project which entails coordination by the agency,
    reporting of accomplishments annually, and overall project peer review
    every three years. Last year the regional research project was reviewed
    and approved for renewal. Annually, Special Grant proposals are
    submitted to the agency for review and approval. The design and
    procedures in the most recent proposal were deemed to be adequate to
    supply the data necessary to fulfill the objectives. Excellent
    facilities and equipment are available to provide scientists with
    complete fleece analyses for objective measurements of wool and mohair.
    The investigators are able to conduct unique experiments as a result of
    the very specialized instrumentation available for the project. The
    agency representative periodically visits the research facilities and
    reviews progress, the most recent in May of 1994. It was concluded that
    the research was addressing the priorities of the U.S. wool and mohair
    industry, contributing to the introduction of value-based marketing
    systems, assisting in the establishment of a nucleus for U.S. cashmere
    production, and being effectively coordinated with other research
    laboratories. Research results are annually reported to the industry
    and the agency providing the means for adoption of new practices to
    improve the marketing of wool and mohair.
                agricultural development in the american pacific
        The Agricultural Development in the American Pacific (ADAP) project
    allows the Land Grant research, extension, and instruction programs of
    the five participating institutions-American Samoa Community College,
    College of Micronesia, Northern Marianas College, University of Guam
    and University of Hawaii--to collaborate and cooperate to enhance their
    impact on agriculture and communities. ADAP is a mechanism to address
    common regional client-based issues while maintaining cultural, rural,
    economic and environmental integrity. When American Samoa assumes the
    Chair of ADAP in 1997, it will be the first time in the program's ten-
    year history that ADAP will be lead by an institution other than
    Hawaii. Detailed preparations are underway for a formal review by
    CSREES in July 1997. The five institutions have nearly completed the
    required review document and have formed three categories for future
    priorities: sustainable systems, collaboration/partnerships, and
    communication systems. ADAP Deans/Directors will use this review as
    input to formulating a new strategic plan articulated by and for the
    American Pacific. The principal researcher believes the five
    participating institutions are geographically dispersed yet facing many
    similar issues which can best be served through extensive networking
    and communication. ADAP facilitates communications and seeks to raise
    levels of academic achievement and improve the quality of education. In
    addition to a capacity building degree studies program for bachelors,
    masters and doctoral students, ADAP in 1996 opened a new area in
    faculty/staff development to improve institutional capability and
    credibility. For 1997, each ADAP institution will self-determine their
    best means for electronic communications and an independent assessment
    of overall electronic communication needs will be conducted. In view of
    significant needs for research in high priority national interest
    topics such as improved pest management systems, funds are not proposed
    to continue this grant. At the discretion of the state, Hatch Act or
    other funds could be used to support this research.
        ADAP's original goals are embodied in the 1992 strategic plan,
    namely to develop human resources within the institutions, to more
    effectively manage agricultural programs within and among the
    institutions, and to focus resources available on ADAP mission needs.
    Priority projects for 1997 include: animal health survey, livestock
    waste management, dietary guidelines for Pacific foods, artificial
    insemination demonstration/education, youth-at-risk assessment, and
    market information collaboration with ``state'' Departments of
    Agriculture.
        This work has been underway for seven years with an annual
    appropriation of $650,000 to the former Extension Service. In fiscal
    year 1994, an appropriation of $608,000 was made to CSREES to continue
    the ADAP program. The fiscal year 1995 appropriation was $544,000, and
    fiscal year 1996 and 1997 were $564,000 each year. The appropriation
    total to CSREES is $2,210,000. Non-federal funds are not provided.
    Unspecified in-kind support, such as facilities, equipment and
    administrative support, are provided by each institution and, in some
    specific projects, by non-ADAP collaborating institutions.
        This work is being carried out by American Samoa Community College,
    College of Micronesia, Northern Marianas College, University of Guam,
    and the University of Hawaii. The ADAP program has been gradually
    achieving original program objectives, particularly in the areas of
    improvement in institutional capacity and communications. The 1997
    formal review by CSREES will evaluate achievement of the objectives of
    the 1992 strategic plan. It is anticipated that an additional 5 to 10
    years will be needed to fully achieve collaborative integration of the
    American Pacific land grant programs. In keeping with the
    Administration's policy to award grants competitively, no further
    federal funding for this grant is requested. Research could be
    continued at the state's or territory's discretion using formula or
    other funds.
        The ADAP program was last evaluated by a review team in 1992 which
    prepared a 5 year strategic plan. That strategic plan has guided the
    ADAP mission and activities, including the call for the forthcoming
    formal program review.
                 alternative fuels characterization laboratory
        The principal researchers believe these research and information
    dissemination activities have advanced the utilization of ethanol-based
    and other alternative fuels. They believe they have resolved issues
    affecting the use of ethanol in conventional and reformulated
    gasolines. The research addressed evaporative emissions from fuels,
    performance of vapor control sorbents, the environmental effects of
    ethanol fuels, and developing an ethanol-based fuel for piston engine
    aircraft. Dissemination involved promoting ethanol fuels in the Red
    River Valley. The researchers believe the need is to ensure the
    availability of unbiased scientific data to ensure that renewable fuels
    are represented accurately in the marketplace. The project is
    developing partnerships with public and private sectors in advancing
    cleaner burning fuels technology. Fuels from renewable resources will
    reduce U.S. dependence on overseas petroleum, while providing cash
    crops for farmers. Renewable fuels are essential to energy and economic
    sustainability, benefiting people, communities, and the Nation. In view
    of significant needs for research in high priority, national interest
    topics such as improved pest management systems, funds are not proposed
    to continue this grant. At the discretion of the State, other funding
    could be used to support this research. One goal is to compare
    alternative fuels to conventional fuels, and promote alternative fuels
    through the international Red River Valley Clean Cities Coalition.
    Another goal is to provide consumers with information regarding the
    efficiencies of the broad range of fuels, and provide information on
    conversion of agricultural materials and other biomass materials to
    alternative fuels. The program was instrumental in building North
    Dakota's first public ethanol fueling site and in solving cold-start
    problems.
        The work supported in part by this grant began in fiscal year 1991.
    The appropriations for fiscal years 1991 through 1993 were $250,000 per
    year, $235,000 in fiscal year 1994, $204,000 in fiscal year 1995, and
    $218,000 in fiscal year 1996 and 1997. A total of $1,625,000 has been
    appropriated.
        Over the duration of the grant, about $845,000 in non-federal
    funding has been allocated toward performance of grant objectives. For
    fiscal year 1996, non-federal funding was $105,000. In fiscal year
    1995, it was $50,000. In fiscal year 1994, it was $60,000. In fiscal
    years 1991 to 1993, non-federal funding was $630,000, which included
    $600,000 from the Illinois State Geological Survey to evaluate an
    ethanol-based process for coal desulfurization.
        The University of North Dakota, Grand Forks, is the site of the
    Energy and Environmental Research Center, a major research laboratory
    employing over 250 scientists and technicians. The anticipated
    completion date for the original objectives of the project was April
    30, 1992. This research has been completed, and its results have been
    published. In 1995, the scope and collaborative abilities of this
    program were expanded to include the Red River Valley Clean Cities
    program and collaborative efforts with industry and economic
    development partners. Most of the research and dissemination activities
    now underway could be completed by 2001. Keeping with the
    Administration's policy of awarding research grants competitively, no
    further Federal funding is requested for this project.
        The last agency on-site evaluation was conducted in July 1996 by
    the U.S. Department of Agriculture. The program was given a very
    favorable review based on its ability to forge partnerships with both
    regional and national public and private organizations committed to
    commercial development of alternative fuels, its ability to disseminate
    research results to an international technical audience, and its
    ability to provide up-to-date research and unbiased information in
    response to scientific needs, regulatory demands, and public requests.
                  center for agriculture and rural development
        The research provides current economic information on international
    trade in agriculture and analyses of the implications of trade policy
    alternatives on the agricultural sector of the United States and other
    countries. According to the proposal, trade negotiations and agreements
    are of national concern to policymakers, farmers, and agribusiness
    industries because of the implications for maintaining or opening
    markets and establishing terms of trade and prices. Typical agreements
    are extremely complex, requiring analysis by specialists to determine
    outcomes and to provide objective and accurate information to those
    impacted by such agreements. However, in view of significant needs for
    research in other high priority national interest topics such as
    improved pest management systems, funds are not proposed to continue
    this grant. At the discretion of the State, Hatch Act or other formula
    funding could be used to support this research.
        The original goal was to assess and evaluate various proposals
    affecting agricultural trade to provide analytical support to the
    Office of the U.S. Trade Representative, and to provide information to
    farmers and agribusiness firms on the competitive implications of such
    agreements. An extensive number of theoretical studies and empirical
    and descriptive analyses of policy issues and technical problems
    pertaining to the Uruguay Round of negotiations were used by
    negotiators and the agribusiness community. Studies included the
    development of international trade models and assessments of trade
    options for meat, dairy, feed and cereal grains, oilseeds, and other
    commodities; impacts of the agreement upon selected countries; and
    reforms needed for compliance. Analyses included determination of the
    value and implications of export subsidies, import protection, and
    internal support mechanism and levels. Knowledge developed in this
    phase is now being used to monitor the effects of Uruguay Round
    implementation and the differential impacts for developed, developing
    and transitional economies. This grant supports six projects focusing
    on General Agreement on Tariffs and Trade for Eastern Europe, Baltic
    and the Newly Independent States; development of a model to assess the
    North American Free Trade Agreement and its linkages with the General
    Agreement on Tariffs and Trade; trade implications of U.S. food and
    development aid in developing countries; integration of China into
    world agricultural markets; and special projects as requested for the
    U.S. Trade Representative's office.
        This research program was initiated in fiscal year 1989. Grants
    have been awarded from funds appropriated as follows: fiscal year 1989,
    $750,000; fiscal years 1990 and 1991, $741,000 per year; fiscal years
    1992-1993, $750,000 per year; fiscal year 1994, $705,000; fiscal year
    1995, $612,000; fiscal year 1996, $655,000 and fiscal year 1997,
    $355,000. A total of $6,059,000 has been appropriated.
        The non-federal funds and sources provided for this grant are as
    follows: $111,210 State appropriations and $175,616 miscellaneous for a
    total of $286,826 in fiscal year 1991; $113,779 State appropriations
    and $173,117 miscellaneous for a total of $286,896 in fiscal year 1992;
    $120,138 State appropriations and $164,707 miscellaneous for a total of
    $284,845 in fiscal year 1993; $161,673 State appropriations and $32,000
    miscellaneous for a total of $193,673 in fiscal year 1994; $161,000
    State and $30,000 miscellaneous for a total of $191,000 in fiscal year
    1995; $70,000 State appropriations and $44,000 miscellaneous for a
    total of $114,000 in fiscal year 1996. Fiscal year 1997 preliminary
    information indicates $60,325 in State appropriations and information
    is not yet available on miscellaneous funds.
        The research program is carried out by the Center for Agriculture
    and Rural Development at Iowa State University. The university
    researchers anticipate that the work should be completed in 1998 with
    analyses of the final agreement of the Uruguay Round and related trade
    agreements and dissemination of these results. Work covered by the most
    recent agreement would be completed by the end of 1998. However, in
    keeping with the Administration's policy of awarding research grants
    competitively, no further Federal funding is requested for this grant.
        Evaluation of this project occurred as a part of the 1997 project
    review and approval process. We found that this project was useful in
    estimating impacts of the Uruguay Round provisions on world trade in
    important U.S. agricultural commodities.
                    center for north american studies, texas
        The purpose of this grant is to develop linkages with educational
    and other institutions in Mexico and Canada to share data and faculty,
    conduct research identifying trade opportunities and marketing
    problems, conduct policy analysis, and develop a broad range of
    training programs preparing agricultural/agribusiness firms for
    international marketing opportunities. The program director believes
    that citizens of the United States, Mexico and Canada have some similar
    concerns about the impact of the North American Free Trade Agreement
    (NAFTA), and that new, innovative approaches involving international
    cooperation are needed to assess and evaluate these issues. Research
    and training are needed to provide information to evaluate alternatives
    for expanding U.S. exports and resolving potential social, economic,
    and environmental conflicts. In view of significant needs for research
    in high priority national interest topics such as improved pest
    management systems, funds are not proposed to continue this grant. At
    the discretion of the state, Hatch Act or other funding could be used
    to support this research
        The goal is to promote strong agricultural ties among the three
    North American countries, ensure the continued competitiveness of U.S.
    agriculture, and foster greater cooperation among the three countries
    in resolving critical agricultural issues of common interest. As a
    result of this project, cooperative study, research, policy analysis,
    and training programs have been developed and presented to U.S.
    producers and agribusiness managers, reaching over 2,600 people
    regarding trade opportunities in Mexico, impacts of expanded trade on
    selected agricultural sectors, and the procedures of international
    marketing. The Center recently co-sponsored the Tri-National Research
    Symposium, ``NAFTA and Agriculture: Is the Experiment Working?'' in San
    Antonio with 215 participants, of which 100 were from Mexico. The
    proceedings are available electronically through the Symposium Web page
    on the Internet. Research comparing the competitiveness of major
    agricultural production sectors is focused on Mexico's dairy,
    livestock, meat, feed grain, and fresh vegetable industries.
    Information databases on North American agriculture are being built to
    support the Center programs and are accessible on the Web. The
    electronic database on NAFTA and agriculture currently contains over
    2,400 articles from major U.S., Canadian, and Mexican publications. A
    study of trans-boundary trade and environmental linkages found that
    existing institutions in both countries do not adequately address
    environmental losses or gains.
        Work supported by this grant began in fiscal year 1994 with an
    appropriation of $94,000; $81,000 in fiscal year 1995; and $87,000 in
    fiscal years 1996 and 1997. A total of $349,000 has been appropriated.
    The non-federal funds and sources provided for this grant are as
    follows: $39,000 State appropriations in fiscal year 1994 and $54,000
    in fiscal years 1995. The annual State contributions for fiscal years
    1996 and 1997 exceed $60,000.
        The program is being carried out at Texas A&M University through
    the Texas Agricultural Experiment Station in collaboration with the
    Louisiana State University Agricultural Center, and other universities
    and agencies of the Texas A&M University System. The original proposal
    in 1994 was for a period of 12 months. The current phase of the program
    will be completed in the year 2000. In keeping with the
    Administration's policy of awarding research grants competitively, no
    further Federal funding is requested for this grant.
        CSREES performed a merit review of the project in August 1996 as it
    evaluated the project proposal for 1996 and concluded that progress on
    the four objectives was made and that a satisfactory plan of work had
    been planned for the next funding period. Linkages were made with
    counterparts at Mexican institutions and cooperative research projects
    are being planned. Similar linkages will be made with counterparts in
    Canada.
                       data information system questions
        Cooperative State Research, Education, and Extension Service
    (CSREES) is in the process of funding a cooperative agreement with the
    University of Arkansas to provide national leadership in coordinating
    the efforts of our university partners in helping us determine
    appropriate content for a Research, Education, and Economics
    Information System (REEIS)-wide information system. In addition, the
    University of Arkansas will provide essential services in managing and
    coordinating a national Steering Committee responsible for overseeing
    the overall design, development, testing, and implementation of REEIS.
    Similarly, funds have been allocated to employ a technical services
    manager and a program analyst to oversee contracting with outside
    sources to design and launch REEIS and to comply with the necessary
    clearances and regulations applicable to information technology
    systems. In addition, funds have been allocated to secure a temporary
    director through the Intergovernmental Personnel Act (IPA) to
    coordinate and guide the overall aspects of development, testing, and
    implementing REEIS. Remaining funds are being allocated for contracting
    with a private sector firm to conduct a strategic audit of available
    data and a national needs assessment.
        USDA's Research, Education, and Economics (REE) mission agencies
    and their university partners lack a central, integrated, user-friendly
    electronic information system capable of providing a knowledge base of
    the thousands of programs and projects for which they are responsible
    that focus on food, agriculture, natural resources, and rural
    development. Such an information system is increasingly needed to
    enable the Department and its partners to readily conduct both
    comprehensive baseline and ongoing assessments as well as evaluations
    of research, education, extension, and economics programs and projects.
    In recent years, this need has become more urgent for several reasons.
    First, the United States needs a visionary public funded research and
    development program to produce essential knowledge and innovations for
    meeting growing competition in a global market--which is largely
    attributable to the expanding research and development efforts of
    foreign nations. Second, a comprehensive information system is needed
    to serve as a primary reference source for development of new research
    and education projects on such diverse issues as increasing
    productivity in agriculture and processing, improving the safety and
    quality of food, and enhancing the sustainability of the environment
    and rural communities. Third, Federal/State policy makers and
    administrators are requiring empirical analyses to account for
    historical, current, and future use of public funds and to provide a
    basis for redirecting funds to higher priority problems. Fourth, the
    Government Performance and Results Act (GPRA) has imposed reporting
    demands on program outcomes which current, decentralized information
    systems are not prepared to adequately satisfy.
        The original goal of this initiative was to develop an information
    system that can provide real-time tracking of research, extension and
    education projects and programs; has the capability to communicate
    vertically between field, state and Federal locations; will enable the
    REE agencies and their partners to conduct rapid and comprehensive
    policy assessments and program evaluation analyses; facilitates
    assessment of technologies and practices employed in extension,
    education, economics and research activities at the field and/or
    regional levels; provides clear and transparent public access to
    relevant parts of the information; and provides information management
    tools to enhance the timeliness and accuracy of REE-wide responses to
    inquiries about program objectives and expenditures.
        Congress first appropriated $.4 million for REEIS in fiscal year
    1997 to begin planning its design and development. We are in the
    process of establishing a National Steering Committee to provide advice
    and guidance throughout the development and implementation process. The
    Steering Committee will be chaired by a notable administrator of
    extension and research at a key land-grant university. It will be
    comprised of both users and producers of Research, Education, Economics
    agencies' data, including program officials and program leaders,
    information system managers from other Federal agencies,
    representatives from Federal oversight agencies, program/project
    leaders representing partner institutions, and private sector users of
    REE data. Ultimately, this body will be responsible for recommending
    work specifications and for assessing the quality of work performed by
    an experienced and successful private contractor specializing in
    public-sector information systems.
        Leadership responsibility for REEIS resides within the Cooperative
    State Research, Education, and Extension Service's Science and
    Education Resources Development division. This provides for effective
    integration of the Current Research Information System, the Food and
    Agricultural Education Information System, and appropriate extension
    data bases. CSREES is working closely with all REE agencies and with
    the university system via a cooperative agreement with the University
    of Arkansas. We hope also to use the Intergovernmental Personnel Act to
    secure an IPA from another university to carry out REEIS essential
    management responsibilities. In addition, a process is underway to
    engage a private sector firm specializing in public-sector information
    systems to design, develop, test, and implement REEIS.
        It is anticipated that REEIS can be operational by the year 2000.
    The current appropriation of $400,000 will cover start-up costs such as
    establishment of a National Steering Committee, preparation and
    specifications for contracting with an outside firm, selection of a
    contractor, a needs assessment, identification of functional
    requirements, a draft plan for designing and developing the system
    including recommendations for in-house hardware, operating system, and
    software programs. The $600,000 increase request for fiscal year 1998
    will allow for implementing, testing, and refining a prototype,
    including preparation of an operations manual and a full-scale
    implementation and maintenance plan. The Research, Education, and
    Economics Information System meets a high priority national need for a
    continuing national information system. REEIS is being designed to meet
    the data information needs of all REE agencies and their university and
    private sector cooperators. It will link data systems on research,
    education, extension, and economics. Therefore, annual maintenance
    costs will be ongoing.
        An evaluation of Research, Education, and Economics Information
    System is not appropriate at this early stage of development.
                         geographic information system
        The program is designed to transfer evolving geographic information
    systems technologies to state and local governments. This technology--
    and in particular--the related technologies including Internet access
    for information, data bases, and telecommunication for cooperative
    system development are sufficiently complicated that most of the people
    familiar enough with them to serve as effective transfer agents are
    researchers. The current program is being carried out by a non-profit
    corporation, The National Center for Resource Innovations whose
    directors and participants are the sub-contractors who are carrying out
    the program. These sub-contractors range over a wide spectrum of sizes
    and special areas of site based expertise involving different
    Departments in four academic institutions, one regional development
    authority and one non-profit corporation working on agro-environmental
    problems in the Chesapeake Bay. A new site at the University of New
    Mexico has been added by the Board this year. This unique institutional
    arrangement has helped fill a unique role in linking some of the
    otherwise balkanized efforts of agencies and academic institutions and
    now seven regions of the country.
        The principal researcher believes few national programs have impact
    without translation to the local environment, including either
    regional, state, or local government level. Much progress has been made
    in developing computer based information systems ranging from data on
    transportation systems to the quantity of a resource. Given a
    geographic dimension, these information systems provide an invaluable
    vehicle for sharing information over the various levels of government
    and even facilitate the integration of disparate data. The work of this
    project is needed to transfer this technology to state and local
    governments whose limited training budgets and sometimes isolated
    location make it difficult to use the latest technology. The technology
    developed in this program is useful in improving the management of our
    natural resources. While concentrating on issues related to
    agriculture, the independent, non-profit nature of the National Center
    for Resource Innovations facilitates linkages across disciplinary and
    institutional barriers, make it possible to use work at the state and
    local levels which was initiated at the Federal level. While the early
    phases of GIS concentrated on building information systems related to
    rural physical and natural resources, the current challenge is to
    integrate human economic, social and demographic information to better
    understand the relationship of human communities to the landscape.
    There is a need for this to better understand the technology consumer.
    In addition, there is a need for integrated information about other
    biological systems including insects, plants, and animals as we extend
    our work to include whole farm management within an ecosystem-based
    environment.
        In this context, newer high capacity technologies are also
    beginning to provide other dimensions--those of high level time related
    phenomena, including weather-associated transport of biological
    materials and their relationship to food producing systems. CSREES has
    funded seminal research in integrated pest and animal management in the
    1970's and 1980's. At the other end of the spatial scale, the role of
    the public sector in geographic information system based precision
    farming technologies, data capture, and information synthesis as the
    subject of a current study group. In view of significant needs for
    research in high priority national interest topics such as improved
    pest management systems, funds are not proposed to continue this grant.
    At the discretion of the State, Hatch Act or other funds could be used
    to support this research.
        The original goal of this work was to serve as a pilot project for
    the transfer of geographic information systems technology to local
    governments as related to natural resources. It has carried out this
    function in a useful way. With impetus from this project and similar
    efforts economic and biological data are being presented in maps
    fashion useful to state and local governments and individuals. This
    project has provided the impetus and linkages to facilitate planning
    work done in South Georgia with some assistance given to local tax
    assessment and parcel identification by a Department of Commerce
    sponsored Economic Development Authority. The Chesapeake Bay project
    has linked seven state conservation entities in an effort to develop
    better watershed models and decision support systems. The Arkansas
    portion of the project has focused on training to educate county
    employees with regard to the technology of geographic information
    systems and geographic positioning systems. The University of Wisconsin
    has continued to simultaneously support the high technology end of the
    evolution of new tools and seek new ways to implement change while
    measuring the impact of such implementation. The work in North Dakota
    has continued to focus on geographically referenced real time weather
    information for payments and others. And, in the smallest of the
    efforts under this program, the efforts at Central Washington have
    provided training for a number of State personnel and others from
    various levels and institutions on how to utilize geographic
    information systems. It is anticipated that the fiscal year 1997 grant
    will support work under this program through March 1998. The proposal
    for this work in 1996 has been received and reviewed.
        Grants have been awarded from funds appropriated as follows: fiscal
    year 1990, $494,000; fiscal year 1991, $747,000; fiscal years 1992 and
    1993, $1,000,000 per year; fiscal year 1994, $1,011,000; fiscal year
    1995, $877,000; fiscal year 1996, $939,000; and fiscal year 1997,
    $844,000. A total of $6,912,000 has been appropriated.
        For fiscal year 1990 through fiscal year 1996, to date, the work in
    this program had $4,553,252 in non-federal support. In fiscal year 1990
    non-federal support was $714,940 consisting of equipment, data bases,
    and other miscellaneous contributions from foundations, city, and state
    governments. In fiscal year 1991 non-federal support was $25,000 from
    county government. In fiscal year 1992 non-federal support was $366,016
    from county government, computer companies, and state governments
    consisting of equipment, software, facilities, and miscellaneous
    support. In fiscal year 1993, non-Federal support was $713,900
    consisting of financial and miscellaneous support from foundations,
    county and state governments. In fiscal year 1994, the non-Federal
    support was $713,643. In fiscal year 1995 the non-Federal support was
    $987,000. In fiscal year 1996 it was $567,173. It is anticipated to be
    $456,582 in fiscal year 1997.
        The National Center for Resource Innovation Chesapeake Bay is
    located in Rosslyn, Virginia. This group is working under a memorandum
    of understanding with several states of the Chesapeake Bay watershed
    project. The southeastern center, in Valdosta, Georgia, in affiliation
    with the South Georgia Regional Development Center, has developed a
    comprehensive plan for the City of Adel as a model for other urban
    centers in their ten-county region. The southwestern center, in
    Fayetteville, Arkansas serves local governments through its training
    facilities at the University basing its technical approach on their
    expertise and past experience with the federally developed system known
    as GRASS. They have developed pilot projects for some local
    jurisdictions and state level data bases which they have provided
    online. Central Washington University focuses on training in ARC/INFO
    for state planning and in three local governments and the Yakima Nation
    in the Yakima watershed. The north central center in Grand Forks, North
    Dakota, in affiliation with the University of North Dakota, focuses on
    relating real time weather data to other spatial attributes. In
    addition, this center has sought to implement ideas developed in other
    centers in the distance learning concept. The University of Wisconsin-
    Madison, functioning as the Great Lakes center, continues a long
    history of involvement in the application of this technology at the
    local level with strong focus on soils/land-use and the institutional
    aspects of the integration of a new technology.
        The original objectives are to build new institutional frameworks
    for developing and disseminating geographic and related information to
    local decisionmakers has been largely completed. Each site has
    developed unique approaches to solving the greatest needs in their
    region for applications of these modern technologies and many
    innovative applications of these techniques have been implemented. New
    technologies, including Internet based educational and information
    exchange have created tremendous demand among National Center Resource
    Innovations' customers to expand its program to include these new
    technologies in order to bring their primarily rural users into new
    eras of public education and information management. Last year, the
    National Center Resource Innovation became a valued educator about the
    public roles in and information needs for precision farming. The
    Center's view is that information that can sustain individual farmer's
    decisions can also be extended to the needs of the local public
    agencies. Integrating temporal information, such as weather and
    satellite imagery, is needed by everyone who needs to model future
    effects of their decision upon land processes. The Center is moving
    forward into these new territories to facilitate many of the newest
    initiatives of federal agencies who must work together to build modern
    systems for public policy. As resources continue to be used and
    planning continues to be required, and as technology continues to
    evolve, systems, knowledge and decisions must continue to get better.
    It is reasonable to assume that while the need exists for the latter, a
    definitive completion date for the Center's work may not exist. Keeping
    with the Administration's policy of awarding research grants
    competitively, no further Federal funding for this grant is requested.
        No formal evaluation of this project has been developed by CSREES.
    In addition, each Center site prepared a cost-effectiveness study. Each
    site developed the study using the help of external users. The study
    found that for each federal dollar expended on this program, $7.40 in
    value was realized. The analysis will be repeated for fiscal year 1997.
    However, in keeping with the administration's policy of awarding
    research grants competitively, no further Federal funding for this
    program as currently positioned is requested. Research could be
    continued at the state's discretion using formula and other public and
    private funding sources.
                         gulf coast shrimp aquaculture
        Work under this program has addressed important research necessary
    for the development of a U.S. marine shrimp farming industry. Studies
    have been conducted on growout intensification, prevention and
    detection of diseases, seed production, and the development of high
    health and genetically improved stocks. Performance trials on selected
    stocks in various production systems have been conducted. Seed
    production systems have reached commercial feasibility. Protocols for
    viral detection have been improved and have led to the development of
    specific pathogen free stocks of commercial importance. A number of
    important viral pathogens of marine shrimp have been identified.
    Researchers have responded rapidly to viral infections that have
    severely impacted the U.S. shrimp farming industry. Researchers will
    intensify efforts aimed at preventing new introductions of exotic viral
    pathogens. In fiscal year 1997, emphasis will be placed on the industry
    seed supply, disease control, environmental quality, and production
    systems. The principal researcher indicates that there is potential to
    enhance domestic production of marine shrimp through aquaculture in
    order to reduce the annual trade deficit in marine shrimp, which is
    approximately $2 billion. Research could improve the supply of high
    quality seed, improve shrimp health management, and enhance production
    efficiency in shrimp culture systems. The U.S. has the opportunity to
    become a major exporter of shrimp seed and broodstock, and disease
    control technologies, products and services. Increased efforts are
    needed to prevent the introduction and spread of a number of exotic
    viral pathogens of shrimp. In view of significant needs for research in
    high priority national interest topics such as improved pest management
    systems, funds are not proposed to continue this grant. At the
    discretion of the state, Hatch Act or other funding could be used to
    support this research.
        The original goal was to increase domestic production of marine
    shrimp through aquaculture. Studies have been conducted on growout
    intensification, prevention and detection of diseases, seed production,
    and the development of specific pathogen free stocks. Commercially
    viable shrimp seed production systems have been developed. Diagnostic
    techniques for a number of important viral pathogens have been
    developed. High health genetically improved stocks are being developed
    and evaluated under commercial production conditions. Researchers have
    responded to severe disease outbreaks caused by the introduction of
    exotic viral pathogens into U.S. shrimp farms. In addition, scientists
    are currently developing biosecurity protocols to prevent additional
    introductions of viral disease agents.
        Grants have been awarded from funds appropriated as follows: fiscal
    year 1985, $1,050,000; fiscal year 1986, $1,236,000; fiscal year 1987,
    $2,026,000; fiscal year 1988, $2,236,000; fiscal year 1989, $2,736,000;
    fiscal year 1990, $3,195,000; fiscal year 1991, $3,365,000; fiscal
    years 1992-1993, $3,500,000 per year; fiscal year 1994, $3,290,000;
    fiscal year 1995, $2,852,000; fiscal year 1996, $3,054,000; and fiscal
    year 1997, $3,354,000. A total of $35,394,000 has been appropriated.
        The U.S. Marine Shrimp Farming Consortium estimates that non-
    federal funding for this program approaches 50 percent of the Federal
    funding for fiscal years 1991-1996. The source of non-federal funding
    is primarily from state and miscellaneous sources. In-kind
    contributions from the industry were not included in this estimate, but
    are substantial as the program is dependent upon industry cooperation
    to carry out large scale commercial trials.
        The work is being carried out through grants awarded to the Oceanic
    Institute, Hawaii and the Gulf Coast Research Laboratory in
    Mississippi. In addition, research is conducted through subcontracts at
    the University of Southern Mississippi, Tufts University, the Waddell
    Mariculture Center in South Carolina, the Texas Agricultural Experiment
    Station, and the University of Arizona. The anticipated completion date
    for the original specific research objectives was 1987. The original
    specific objectives have been met, however broader research goals have
    not been met. Researchers anticipate that the specific research
    outlined in the current proposal will be completed in fiscal year 1998.
    Keeping with the Administration's policy of awarding research grants
    competitively, no further funding for this grant is requested.
        The agency evaluates the progress of this program on an annual
    basis. The institutions involved in this program submit a detailed
    accomplishment report each year prior to the submission of the new
    grant proposal. In addition, the agency conducts an in-depth on site
    review of the program every three years. The 1997 review of the program
    indicates that the process during the last twelve months has been well
    documented; close linkage between the research and the U.S. shrimp
    farming industry has greatly enhanced the commercialization of research
    findings; and the proposed research represents a logical progression of
    previous work conducted under the program.
                      mississippi valley state university
        Funds were used to strengthen academic programs, including
    accreditation and reaccreditation. Of the ten programs eligible for
    accreditation, nine have been accredited. Assessment of the criteria
    has begun for the remaining eligible program. Academic programs have
    been broadened to include more agriculture-related courses consistent
    with the needs of students from the Mississippi Delta, students from
    other parts of the State, as well as out-of-state students. Curriculum
    additions have had a positive impact on student enrollment. Courses
    continue to be modified to reflect the needs of graduates as well as
    employers in the Mississippi Delta, with particular emphasis on those
    areas that employers have the greatest need. The funds continue to
    provide enhancements related to other program and administrative
    support areas that positively impact program delivery and
    administration at Mississippi Valley State University. The primary need
    for this project is to satisfy a local need. The need is for
    strengthening university capacity and curriculum development at
    Mississippi Valley State University. Degree programs in Accounting,
    Mass Communications, Music and Public Administration have been added
    since the 1988 plan was developed. The Criminal Justice program has
    been developed into a departmental unit with social work in order to
    provide for improved administration and academic counseling. A master's
    program in Criminal Justice is now offered. The baccalaureate major in
    chemistry and the master's program in Elementary Education have been
    reinstated. In view of significant needs for research in high priority
    national interest topics such as improved pest management systems,
    funds are not proposed to continue this Grant. At the discretion of the
    state, Hatch Act or other funding could be used to support this
    research.
        The original goal was to provide funding to strengthen the academic
    programs of the university. The academic programs have been
    strengthened as evidenced by student recruitment, which has improved to
    show a positive ratio between applications received and students
    admitted. Approximately one half of the applicants are enrolled.
    Increased quality of instruction and programs have benefited students.
    This is reflected in the higher graduation rate, increased student
    enrollment, enriched faculty and improved community relationship.
        This program was initiated in fiscal year 1987. Grants have been
    awarded from funds appropriated as follows: fiscal year 1987, $750,000;
    fiscal years 1988 and 1989, $625,000 per year; fiscal year 1990,
    $617,000; fiscal year 1991, $642,000; fiscal years 1992 and 1993,
    $668,000 per year; fiscal year 1994, $93,000; fiscal year 1995,
    $544,000; fiscal year 1996, $583,000; and fiscal year 1997 $583,000. A
    total of $6,898,000 was appropriated.
        Mississippi Valley State received State and private funding during
    the period of this grant. The State figures provided here are for
    enhancement funds provided in addition to the University's standard
    formula generated funds. The sources and amounts are as listed:

                                                         SOURCE
    ----------------------------------------------------------------------------------------------------------------
                               Fiscal year                                 State          Private          Total
    ----------------------------------------------------------------------------------------------------------------
    1987............................................................  ..............        $168,640        $168,640
    1988............................................................  ..............         186,036         186,036
    1989............................................................         $68,658         190,258         258,916
    1990............................................................         207,879         369,358         577,237
    1991............................................................         333,263         337,700         670,963
    1992............................................................         349,427         470,220         819,647
    1993............................................................          35,750         358,680         394,430
    1994............................................................         590,890         568,970       1,159,860
    1995............................................................         841,654         530,300       1,371,954
    1996............................................................       1,197,917         590,824       1,788,741
    ----------------------------------------------------------------------------------------------------------------

        These funds are intended to strengthen programs at Mississippi
    Valley State University. The program has been carried out on the campus
    at Itta Bena and at off-campus sites in Anguilla and Greenville and the
    Greenwood Center since the Spring Semester of 1996. The objectives of
    the current grant will be completed by September 30, 1997. Keeping with
    the Administration's policy of awarding research grants competitively,
    no further Federal funding for this grant is requested.
        The program has been evaluated on an annual basis by the agency.
    The annual progress report for fiscal year 1996 revealed steady
    progress in the academic programs. For example, the Social Work
    Department had significant positive changes in the quantity and quality
    of the faculty. The Business Department offered a component dealing
    with Agricultural land lease in the business law classes and the other
    classes had topics on input and output analysis, agricultural
    stimulations and initial farm planning.
            national education center for agricultural safety, iowa
        CSREES has requested the college to submit a grant proposal that
    has been received. The proposal is currently being reviewed. The
    Northeast Iowa Community College is requesting funding for a national
    center for agricultural safety education. The center will conduct a
    safety training needs assessment of workers and employees involved in
    production agriculture, plan, implement, and evaluate training on
    safety and health issues derived from the needs assessment, and provide
    hands-on training for farm accident rescue. The National Safety Council
    estimated that 800 agricultural work deaths occurred in 1995. Of these
    deaths 55 percent resulted from unintentional injuries suffered in farm
    tractor overturns. Another 140,000 disabling injuries were recorded in
    1995 in agricultural work incidents. Many of these injuries resulted
    from farm machinery entanglements, working with livestock, and highway
    collisions between farm machinery and vehicles. Emergency medical
    services personnel are often exposed to the same hazards as the victims
    they are attempting to rescue. Emergency medical services personnel
    must be prepared to deal with these hazards under stressful
    environmental conditions. In view of significant needs for research in
    high priority national interest topics such as improved pest management
    systems, funds are not proposed to continue this grant. At the
    discretion of the state, Hatch Act or other funding could be used to
    support this research. The goal of this research is to provide on-site,
    hands-on training of emergency response personnel who may be called on
    to respond to a wide range of agriculture related accidents and
    emergencies. Participants in the short courses offered by the center
    would than be prepared to pass on their knowledge to others when they
    return to their communities. There are no accomplishments to date.
        The work supported by this grant begins in fiscal year 1997 and the
    appropriation for fiscal year 1997 is $300,000. The non-federal funds
    and sources provided for this grant are as follows: $1,000,000 state
    appropriations, and $65,802 miscellaneous in fiscal year 1997.
        Research will be conducted at the Northeast Iowa Community College,
    Peosta, Illinois. The anticipated completion date for the original
    objectives is September 30, 1997. Keeping with the administration's
    policy of awarding research grants competitively, no further Federal
    funding for this grant is requested.
        There has been no evaluation of this project yet as it is be newly
    funded in 1997.
                     pm-10 study, california and washington
        The research on PM-10 is being conducted by scientists at the
    University of California, Davis and Washington State University. The
    California program has focused on developing and refining methods to
    accurately measure and detect the sources of PM-10 emissions from
    various agricultural practices, and to investigate alternative
    practices for reducing potential air pollution on susceptible
    California crops and soils. In addition, the California project is also
    measuring PM-2.5 and even more refined size distributions, as well as
    identifying the constituents in all emissions samples in order to
    better characterize the size distribution and possible sources of the
    emissions. The Washington State University scientists are using refined
    instruments on field sites to measure and predict the effects of wind
    erosion and agricultural practices in the Columbia River Basin region
    on PM-10 emissions, with the assistance of a portable wind tunnel.
    Alternative cropping systems, tillage practices, rotations, and weed
    control practices are being developed and compared for control of PM-10
    emission pollution under Columbia River Basin conditions. The principal
    researcher believes there has been growing national concern over the
    potential health and safety aspects of air pollution from dusts and
    suspended particulate matter, resulting in passage of the 1990 Clean
    Air Act which requires the monitoring and control of such pollution.
    Because of particular problems from PM-10 emission in the arid regions
    of the Western United States, more accurate information is needed on
    the role of agricultural operations in intensively cultivated soils in
    California and the Columbia River Basin, as sources of PM-10 pollution,
    in order to assist growers to develop alternative agricultural
    management practices to control PM-10 emissions. In view of significant
    needs for research in high priority national interest topics such as
    improved pest management systems, funds are not proposed to continue
    this grant. At the discretion of the state, Hatch Act or other funding
    sources could be used to support this research.
        The original goals of this research were to measure the PM-10
    emission rates from significant crop and tillage practices, to
    determine the source of PM-10 emissions on soils in agricultural
    regions of southern California and the Columbia River Basin in the
    Pacific Northwest, and to explore cost-effective alternative
    agricultural practices to control these emissions. The third year of
    field measurements are being completed on PM-10 emissions on production
    practices on almonds, figs, walnuts, wheat, and from dairy far-farms
    and feedlots in California, and on a number of agricultural practices
    in the rainfed and dryland croplands in the Columbia River Basin.
    Susceptible climatic and soil conditions and tillage and cropping
    practices have been identified and are being used to develop prediction
    tools to assist growers to adopt alternative practices to reduce
    potential air pollution by PM-10 particulate emissions. Measurements
    continue to be taken in these areas. In addition, preliminary efforts
    are underway to collect ammonia samples. This is important because the
    peaks in PM-10 emissions in California occur in December and January.
    Plans have also been developed to study the impacts of land preparation
    techniques on emissions.
        The work supported by this grant began in March 1994. The
    appropriation for fiscal year 1994 was $940,000; fiscal year 1995,
    $815,000; and for fiscal years 1996 and 1997, $873,000 per year. A
    total of $3,501,000 has been appropriated. The program is matched by
    State funds in the form of salaries, benefits, and operating costs.
        This work is being directed by participating scientists at the
    University of California, Davis, and at the Washington State
    University. The anticipated completion date of the original objectives
    of this project is 2000. The first four objectives of the project on
    soil particle characterization are nearing completion. The objectives
    on field control will continue. Quarterly reports on the entire project
    to date are available. Keeping with the Administration's policy of
    awarding research grants competitively, no further Federal funding for
    this grant is requested.
        The agency's Program Manager annually reviews the research progress
    reports and proposed new research, and attends the annual meetings of
    the program to assess progress. The program is also evaluated each year
    by technical, administrative, and agency personnel. Progress is
    reported at research review meetings three times a year. Printed
    reports are available from each, meeting. Grower and public advisory
    committees are consulted for input on research progress and objectives.
                          rural partnerships, nebraska
        The Rural Partnership Project is a comprehensive effort to
    transform the way that Federal, State, and local institutions deliver
    education and services to rural constituents. It is designed to address
    the issues of mandates; community strategic planning and project
    implementation, impact of devolution on local governments; profiling of
    rural constituents as to challenges, gaps in services, and
    opportunities; impact modeling; and sustaining development
    organizations. The principal researchers believe delivery and
    evaluation of programming delivered by Federal agencies is undergoing
    significant transitions. Research needs to direct the most effective
    and efficient means of program delivery and impact. This project is
    designed to provide insights and experience in alternative delivery
    formats in conjunction with partners at local, state, regional, and
    federal levels. In view of significant needs for research in high
    priority national interest topics, such as improved pest management
    programs, funds are not proposed to continue this grant. At the
    discretion of the State, Hatch Act or other funding could be used to
    support this research. The original goal of this research was to
    provide guidance in the delivery of information, technical assistance,
    and strategy related to rural economic development. Nebraska has
    transformed many of its education and service delivery formats based on
    this applied research activity. This project received Vice-President
    Gore's ``Hammer Award'' in December 1996.
        The work supported by this grant began in fiscal year 1996 and the
    appropriation for fiscal year 1996 and fiscal year 1997 was $250,000. A
    total of $500,000 has been appropriated. Non-Federal funds were limited
    to staff and researcher support.
        Research is being conducted at the University of Nebraska. This is
    an on-going research activity. The project which was begun in 1996 is
    now demonstrating early impacts of restructured delivery and
    implementation approaches for programs. The existing project is
    scheduled for completion September 30, 1998. However, in keeping with
    the Administration's policy of awarding research grants competitively,
    no further Federal funding is requested for this grant.
        The agency evaluates merit of research proposals as submitted. No
    formal evaluation of this project has been conducted.
                            water quality--illinois
        The Illinois Groundwater Consortium grew out of a fiscal year 1990
    appropriation of $500,000 to Southern Illinois University at Carbondale
    to focus on the short-and long-term effects of agricultural chemical
    contamination on the environment, the ground water, and ultimately,
    human health and welfare. As a result of this appropriation, the
    University joined forces with the Illinois State Geological Survey,
    Illinois State Water Survey, University of Illinois Cooperative
    Extension Service, and the University of Illinois Agricultural
    Experiment Station to create the Illinois Groundwater Consortium. The
    Consortium's primary mission, then and now, is to effectively work
    toward providing a scientifically-valid basis upon which meaningful
    agricultural chemical management and regulatory decisions can be based.
    The Consortium has worked to address the concerns of the agricultural
    and agrichemical industries as well as the valid concerns of the
    agencies charged with protection of environmental quality. Examples of
    topics currently under study include:
        1. Flood-Induced Loading of Agricultural Chemicals to Public Water
    Supply Wells in Selected Reaches of the Illinois River
        2. Development of a Conceptual Framework for Sustainable Ecosystem-
    Based Management of Floodplains Along the Mississippi River
        3. The Impact of Flooding on the Water Quality of an Alluvial
    Aquifer at Henry, Illinois: First-Year Progress
        4. Conservation Compliance and Agricultural Producers in the Corn
    Belt: Implications for Strategic Planning and Policy Implementation
        5. Transport and Fate of Agrichemicals in an Alluvial Aquifer
    During Normal and Flood Conditions: A Preliminary Study
        6. Nitrogen Dynamics of Agricultural Watersheds in Central Illinois
        7. Assessing the Reliability and Stability of Policies to Reduce
    Agricultural Chemicals in Public Water Supplies.
        The principal researcher believes that, as the Consortium enters
    its seventh year, the fiscal year 1997 appropriation is targeted to
    research pertaining to the impacts, recovery, and remediation of the
    Midwestern region after flooding. The 1993 and 1995 flooding of the
    Mississippi, Missouri, and Illinois Rivers, and their tributaries,
    created devastating effects on the farm lands, communities, and natural
    resources of the area. These effects have major implications for
    agricultural practices, water quality, and public policy decisions.
    This natural catastrophe has resulted in a need for further studies
    examining the impact of the flooding on surface/ground water, soils and
    their rehabilitation, biodiversity, and on economic and public policy
    in the region. In addition, there is the need to disseminate results to
    the public to enable the Consortium findings to be beneficial in the
    near term to those needing the information. To facilitate this work,
    the Consortium expanded its participant institutions in 1995 to include
    Southern Illinois University at Edwardsville. Southern Illinois
    University at Edwardsville's strategic location in the heart of the
    flood damage area, as well as its qualified research scientists who
    work in the Consortium's high priority research areas, will strengthen
    the capabilities of the Consortium. The highest priorities of the
    Consortium is the funding of research upon which public policymakers
    working on land use or ground water protection issues in flood plain
    areas can base decisions, and the broad dissemination of this
    information. In view of significant needs for research in high priority
    national interest topics such as pest management systems, funds are not
    proposed to continue this grant. At the discretion of the state, Hatch
    Act or other funding could be used to support this research
        The Illinois Groundwater Consortium was established to coordinate
    and support research on agricultural chemicals in Illinois ground
    waters. The research team has accomplished an improved understanding of
    the fate and movement of agricultural chemicals under Illinois crop
    production conditions. A publication supported by the Consortium
    entitled, ``Buried Treasure: 50 Ways Farmers Can Protect Their
    Groundwater,'' has received widespread acceptance and use for lay
    audiences. The Illinois Groundwater Consortium has accomplished a major
    step toward coordination and exchange of information-nation/research
    results relating to ground waters in Illinois. The Groundwater Bulletin
    reports research results from the Consortium. The Bulletin reports on
    atrazine studies, nitrogen management, farming practices for more
    efficient chemical use, geological impacts and policy options to
    safeguard ground waters. The Consortium investigators took an active
    role in monitoring and investigating herbicide, pesticide and coliform
    impacts during and after the Mississippi River Flood of 1993. The
    research continues today on the long-term impacts of flooding and
    management of the affected areas. The findings from this study will be
    useful in restoring the flooded cropland to full productivity and in
    establishing a base upon which policy management decisions can be made.
    The Consortium annually publishes a proceedings of its annual
    conference. The 1996 Proceedings of the Sixth Annual Conference
    contains 320 pages of research results. The Consortium represents an
    exceptionally productive cooperative effort involving several
    universities and agencies.
        Research grants have been awarded from funds appropriated as
    follows: fiscal year 1990, $494,000; fiscal year 1991, $600,000; and
    fiscal years 1992-1993, $750,000 per year; fiscal year 1994, $666,000;
    fiscal year 1995, $460,000; and fiscal years 1996 and 1997, $492,000
    per year. A total of $4,704,000 has been appropriated.
        The non-federal funds and sources provided for this grant were as
    follows: $255,891 state appropriations in 1991; $447,237 state
    appropriations in 1992; $644,054 state appropriations in 1993; and
    $623,124 state appropriations in 1994. Non-federal and state funds for
    1995 and 1996 have exceeded the federal funds.
        The work is being carried out by the Illinois Groundwater
    Consortium and coordinated by the, Carbondale campus of Southern
    Illinois University. The research is being conducted by staff at the
    University of Illinois, Southern Illinois University, the Illinois
    State Geological Survey and the Illinois Water Survey at locations
    across the State.
        This project was planned as a five-year study of the impacts and
    recovery of flooding in the Midwest. The original proposal and
    subsequent proposals identified both short-term objectives which are
    project goals that could be accomplished within one to two years and
    long-term objectives which are project goals that could be accomplished
    within two to five years. In calendar year 1996, two years of studies
    involving 26 projects were completed, and in calendar year 1997, eight
    new projects will begin. These projects are spread across areas
    identified as high priority, including studies of flood impacts on soil
    productivity and remediation, movement of chemicals in water and soils,
    bacteria and microbial life, plants and aquatic life, and on public
    policy impact. Progress in meeting short-term and long-term objectives
    has been excellent. The most complex task is coordinating research
    projects on flood issues involving multiple issues, such as biological,
    social, economic and political issues, where effective solutions await
    the expansion of research databases. It is anticipated that the
    projects will be completed in the year 2000. Keeping with the
    Administration's policy of awarding research grants competitively, no
    further Federal funding for this grant is requested.
        From its beginning, the projects funded through the Illinois
    Groundwater Consortium involve reviews by at least three faculty/
    researchers drawn from 27 different universities, state and federal
    labs and surveys, USDA research laboratories, and other research
    centers. This review system enables the IGC Advisory Committee to
    select projects with scientific merit from the group of proposals
    submitted for funding consideration. The titles, principal
    investigators names and affiliations, and budgets are submitted to USDA
    for review along with the IGC proposals for funding.
                          water quality--north dakota
        The overall objective of the research is to develop an
    understanding of the occurrence, transport and fate of agricultural
    chemicals found in representative field settings in the Northern Great
    Plains region of the United States. The ultimate goal is to provide a
    scientifically valid basis for management and regulation of these
    chemicals. This past year, the scope of the program was expanded to
    include water management issues in the Red River of the North drainage
    basin. The Red River Water Management Consortium, a partnership between
    public and private sectors, was established to address critical water
    quality and quantity issues in an area where agriculture is the
    predominant industry. A major objective of the Consortium program is to
    utilize results from the initial phases of this research program to
    find economical, practical, and timely technological solutions to water
    supply and water quality problems. By providing cofunding for the
    program, Red River Water Management Consortium members become active
    stakeholders in the research. This partnership ensures the practicality
    of the research performed and provides a model for the wise stewardship
    of water resources in other drainage basins in the United States. The
    principal researcher believes that the nation needs a scientifically
    valid basis upon which meaningful agricultural chemical management and
    regulatory decisions can be made. Chemicals in ground water present
    both a public health problem and an environmental quality problem of
    significant short-term and long-term importance on a local, regional
    and national scale. In addition, the principal researcher has
    established a water management consortium consisting of industry,
    municipalities, and other entities in partnership with state and
    Federal governments as a mechanism for transferring the results of this
    research program to the public. However, in view of the significant
    need for research in high priority national interest topics, such as
    improved pest management systems, funds are not proposed to continue
    this grant. At the discretion of the state, other funding could be used
    to support this research.
        The original goal of the research program was to understand the
    occurrence, transport, and fate of agricultural chemicals in
    representative field settings in the northern Great Plains region so
    that scientifically valid decisions could be made for their management
    and regulation. Work on five of the seven sites originally instrumented
    under this program has been completed. Research at the two remaining
    sites is directed toward answering questions that have arisen during
    the course of this research program, specifically to determine the
    long-term trends in nitrate concentrations in a surficial aquifer under
    irrigated agriculture and to determine the source and trends for
    sulfate in a similar setting. Results from this program have been
    reported in journals, conference proceedings, and through presentations
    at national, state, and local meetings. To date, more than 40
    presentations or publications have been made. In addition, two doctoral
    dissertations and one master's thesis have resulted from this program.
    Examples of important results obtained from this research include the
    following:
        1. An understanding of agricultural chemical occurrence in ground
    water as determined by physical, chemical, and biological processes,
    transport mechanisms, management practices, and climatic factors.
        2. Nitrate contamination of ground water in the northern Great
    Plains region of the United States is of even greater concern than
    pesticide contamination.
        3. Biological denitrification is an extremely important process
    that determines the occurrence and distribution of nitrate and sulfate
    in aquifers in the northern Great Plains region.
        4. Preferential flow mechanisms control the movement of water and
    contaminants in glaciated settings. Widely used flow models that do not
    account for preferential flow can severely underestimate the travel
    time and depth of contaminants.
        5. Transport of pesticides on airborne particulate matter may
    present a major health threat and is an extremely important and poorly
    understood mechanism for the movement of pesticides to ground water
    recharge areas.
        Finally, the researchers have established the Red River Water
    Management Consortium as a mechanism for transferring the results of
    the initial research to vested stakeholders in the region and to the
    general public in order to address water quantity and quality problems
    resulting from agricultural practices and agricultural development.
    Sustainable agricultural development throughout the United States must
    rely on a far better understanding of our water resources and the
    application of new water management technologies to address changes in
    the agricultural industry.
        In 1989, $1.0 million was appropriated under the ground water
    research program. Beginning in 1990, funds have been earmarked under
    the Direct Federal Administration program. Work supported by this grant
    was initiated in fiscal year 1990 with an appropriation of $987,000.
    Subsequent appropriations have been $750,000 in fiscal year 1991,
    $500,000 per year in fiscal years 1992-1993; $470,000 in 1994; $407,000
    in fiscal year 1995; and $436,000 in fiscal years 1996 and 1997. A
    total of $5,486,000 has been appropriated for this water quality
    research program.
        Red River Water Management Consortium members provide cofunding to
    support their participation in the program. Cofunding provided by Red
    River Water Management Consortium members for fiscal year 1996 totaled
    $59,700. Interest in this program is growing, and it is anticipated
    that at least $80,000 in cost-share will be obtained during the 1997
    fiscal year through membership fees. These funds are provided directly
    to the program and do not include in-kind costs incurred by the
    participants. In-kind costs incurred by the participants are estimated
    to be several hundred thousand dollars, although this estimate cannot
    be verified at this time. Field activities to determine the long-term
    trends of nitrate and sulfate and to determine the source of sulfate
    are being conducted in cooperation with the North Dakota State Water
    Commission. Water samples collected at the Elk Valley field site are
    being analyzed at the North Dakota State Water Commission laboratory.
    For this 3-year effort, 1996-1998, they have estimated a cash-
    equivalent funding in the amount of $33,660. In addition, the North
    Dakota State Water Commission will conduct field sampling for the
    Energy and Environmental Research Center in the summer of 1997 to
    investigate the source of sulfate found in ground water in the Elk
    Valley aquifer. They have estimated the cash equivalent cost of these
    services to be approximately $12,000.
        Research is being conducted at the University of North Dakota
    through its Energy and Environmental Research Center and at field sites
    in North Dakota and Montana. In addition, a portion of the pesticide
    research was conducted at North Dakota State University. Cooperative
    efforts have resulted in work also being performed at cooperative
    institution locations such as, University of Waterloo, Victoria
    University, University of Montana, the Red River Resource Conservation
    and Development Council offices, and the North Dakota State Water
    Commission. The anticipated completion date for the original objectives
    of the project, specifically the field related research, was fall 1995.
    This research has been completed and the sites have been
    decommissioned, with the exception of those relating to long-term
    nitrate and sulfate monitoring and analysis. Work on nitrate and
    sulfate trends and occurrence such as activities resulting from initial
    findings of this research program, is scheduled for completion in 1999.
    The Red River Water Management Consortium was established in 1996 as a
    mechanism for transferring the information derived from this research
    program to the technical community and to the public for use in
    addressing water quality and quantity issues relating to agriculture
    and agricultural development. It is anticipated that Red River Water
    Management Consortium activities will continue for several years in
    order to meet the objectives as defined by the non-federal sponsors and
    the agency. Keeping with the Administration's policy of awarding
    research grants competitively, no further Federal funding is requested.
        The last agency evaluation of this project was conducted in
    September 1996. The U.S. Department of Agriculture Technical Project
    Officer attended a meeting of the Red River Water Management Consortium
    to evaluate and determine the status of this effort, which is currently
    the focus of research program activities. The Project Officer was
    impressed with the progress made by the Red River Water Management
    Consortium during its first year and believes this program is an
    excellent example of how federal and state agencies, research and
    academic institutions, private industry, and the general public can
    work together to solve problems in an economical manner to benefit
    people, communities, and the nation.
                           beef improvement--arkansas
        The Arkansas Beef Improvement Program utilizes beef cattle farms to
    demonstrate cost-effective management practices. An Arkansas Beef
    Improvement Program Executive committee provides overall direction for
    the program. A second aspect of the Arkansas Beef Improvement Program
    is to inform all Arkansas cattle producers of the knowledge gained from
    the program. This project addresses primarily local needs by setting
    goals, evaluating resources and selecting the management practices that
    will help the cattle producer achieve those goals in the decision-
    making process. In view of significant needs for Extension efforts in
    high priority national interest topics, such as improved pest
    management systems, funds are not proposed to continue this program. At
    the discretion of the state, Smith-Lever formula or other funding could
    be redirected to support this program.
        The original goal of the Arkansas Beef Improvement Program was to
    enhance the profitability and efficiency of Arkansas cattle producers.
    Accomplishments to date include the establishment of demonstration
    farms, collection of benchmark data including soil tests, production
    information, forage analyses and budgets, and renovation of pastures to
    increase grazing capacity. Identification of mineral deficiencies in
    beef cattle have been detected and corrected through proper
    supplementation and ration balancing. Three of the ten farms averaged a
    32 percent increase in pounds of beef sold per animal unit. Various
    management changes including parasite control and forage/pasture
    management have been instituted. Use of a cow-calf enterprise budget
    has helped the producers identify both efficient and inefficient
    management practices and take corrective actions. Additional
    accomplishments for the Beef Improvement Program:
      --Increased the net calf crop percentage from 85.6 percent to 96.0
            percent--an increase of 10.4 percent
      --Supplemental feed costs decreased by $23.93 per animal resulting in
            a total farm saving of approximately $3,000
      --205-day adjusted weaning weights have increased 7.6 percent--from
            478 to 514 pounds
      --Preweaning average daily gain has increased 7.5 percent--from 1.87
            pounds to 2.01 pounds
      --Weaning weight efficiency increased 5.1 percent--from 45.4 percent
            to 47.7 percent
      --Production costs decreased 36.9 percent, with the break-even cost
            per pound of beef sold decreasing from $.60 to $.50.
        $184,000 was appropriated each fiscal year for this project from
    fiscal year 1993 through 1996. In fiscal year 1996 and 1997, $197,000
    was appropriated each year. A total of $946,000 has been appropriated.
    $95,000 has been provided by the state of Arkansas.
        Ten Arkansas demonstration farms were selected, one in each of ten
    counties, to reflect the different types of cattle operations and
    cattle producers in the area. Farm sizes ranged from 140 to 920 acres
    with an average of 360 and herd sizes ranged from 20 to 170 head,
    averaging 66 head per farm. The Arkansas project started with 6
    demonstration farms in 1992 and added 4 more farms in 1993. When the
    farms were selected, it was agreed the Extension team would work with
    the Arkansas cattle producer for 5 years.
        Therefore, the first 6 demonstration farms completed the program at
    the end of 1996, and the remaining 4 farms will complete the program at
    the end of 1997. Data from the final year will be collected and
    summarized for evaluation. The objective of the Arkansas program was to
    demonstrate cost-effective management practices. The Arkansas Beef
    Improvement Program has been very successful with achieving its
    objectives. Keeping with the Administration's policy of awarding grants
    competitively, no further Federal funding is requested for this grant.
        A CSREES review of the project is conducted annually. The 1996
    review noted the project is taking a sound approach to improving beef
    production efficiency and profitability in Arkansas. The review
    complimented the approach by the project to disseminate the results
    widely through publications and educational programs for the benefit of
    other producers in Arkansas and beyond.
                             delta teachers academy
        The Delta Teachers Academy, which operates out of offices located
    in New Orleans, Louisiana, is conducted by the organization known as
    the National Faculty, headquartered in Atlanta, Georgia. It should be
    noted that our State Extension partners are not involved in this
    project. The National Faculty Delta Teachers Academy was launched in
    1992 with a pilot grant of $500,000 from the United States Department
    of Education. The United States Department of Agriculture's funding for
    the project began in 1994. The Delta Teachers Academy project is
    providing approximately 645 teachers at 40 sites throughout the seven
    Lower Mississippi Delta states with development opportunities by
    teaming them with university scholars in on-site sessions and
    residential summer institutes. The subjects focused on during these
    training opportunities are English, geography, history, mathematics,
    and science. According to the grant recipient, the 219-county area
    comprising the Lower Mississippi Delta region has been cited in reports
    by the Educational Testing Service and the National Center for
    Education Statistics as notably lagging in student performance in core
    academic areas. In 1989, Volunteers in Service to America characterized
    the area as the poorest region in the country. According to the
    Southern Regional Education Board, at least five of the Delta states
    have 20 percent or more of their school-age populations in poverty,
    with Mississippi topping the list at 34 percent. In its report to
    Congress in 1990, the Delta Development Commission cited serious
    educational problems including poor student performance in core content
    areas, demoralized teachers with little or no opportunity for academic
    development, and region-wide difficulty in recruiting and retaining
    qualified teachers. The Commission also stressed the links between
    these problems and the pervasive poverty and depressed economic
    conditions that characterize much of the seven-state Delta region. The
    Commission's report also cited that 75 percent of the region's work
    force lacks the basic reading skills necessary for technical training
    and specifically cites the need for improved teacher training as one
    means for breaking the cycle of poverty and economic
    noncompetitiveness. In view of the significant need for research and
    extension in high priority national interest topics such as integrated
    pest management systems, funds are not proposed to continue this grant.
        The original and continuing goal of the project is to address the
    problem of insufficient professional development opportunities for the
    elementary and secondary teachers of the seven-state region. The
    Academy project has focused on the core subjects of English, geography,
    history, mathematics, and science. Humanities, language arts, social
    studies, reading, civics, and interdisciplinary subjects are also
    covered by some sites. The Delta Teachers Academy began by offering
    educational development activities for 100 teachers from approximately
    50 rural districts at 10 sites. Training has now been expanded to
    include 645 teachers at 40 sites across the entire seven-state region.
    The project has improved teacher recruitment and retention in the
    region.
        A total of $13.661 million dollars has been appropriated to the
    Department of Agriculture for this project, including $2 million
    dollars in fiscal year 1994, $3.935 million dollars in fiscal year
    1995, $3.876 million dollars in fiscal year 1996, and $3.850 million
    dollars in fiscal year 1997. There are no non-federal funds identified
    for this project.
        The Delta Teachers Academy project is coordinated out of The
    National Faculty's Southern Region office in New Orleans, Louisiana.
    The project is being conducted at 40 sites selected from within the
    seven-state Lower Mississippi Delta region including the states of
    Arkansas, Kentucky, Illinois, Louisiana, Mississippi, Missouri, and
    Tennessee.
        The original objective was to provide three full years of training
    to each faculty team established by the Delta Teachers Academy program.
    Training consists of four two-day academic sessions and one two-week
    summer institute for each team. This objective has been met for the
    original 24 faculty teams first funded under the fiscal year 1994
    Department of Agriculture grant. The 15 additional teams established in
    1995 have received two years of in service training, and the one new
    team established in fiscal year 1996 has received one year of training.
    By the end of the current fiscal year 1997 grant, 39 of the 40 faculty
    teams established by the Delta Teachers Academy will have met the
    original objective of the program. Objectives for the fiscal year 1997
    grant include completing training for the 240 teachers at the 16 sites
    established during 1995 and 1996 and expanding professional development
    activities to an additional 340 teachers at 19 new sites throughout the
    seven-state Delta region. Additional objectives include sustaining
    professional development activities for the 350 teachers at 27 former
    Delta Teachers Academy sites through a new Academy Fellows Program and
    cultivating 15 to 20 potential sites for establishing new programs in
    fiscal year 1998. The anticipated completion date for any new program
    sites established in fiscal year 1997 would be at the end of the year
    2000. Keeping with the Administration's policy of awarding grants
    competitively, no further Federal funding is proposed for this grant.
        An assessment of the short-term impact of the Delta Teachers
    Academy by Westat, Inc. of Rockville, Maryland was completed in May
    1995. Westat's study found that the vast majority of participants
    reported that the Academy had met their personal and professional needs
    by renewing their enthusiasm for teaching, improving their self-
    confidence, increasing their sense professionalism, improving their
    knowledge of specific content areas, enhancing their teaching methods,
    and providing opportunities to interact with peers. The study also
    provided considerable evidence that teachers are applying what they
    have learned from the Academy in their own classrooms. For example:
      --86 percent said Academy activities had enhanced their knowledge of
            the academic subjects they teach;
      --88 percent said the Academy had helped them develop new teaching
            skills and strategies;
      --95 percent said they were now better equipped to pursue further
            professional development;
      --8 percent said the Academy had prepared them to assume leadership
            roles in their schools;
      --89 percent noted changes in their students' work habits, attitudes,
            aspirations, and achievements.
        United States General Accounting Office review of the Academy's
    programs was also conducted in fiscal year 1995. The General Accounting
    Office report--GAO/RCED-95-208 included summary statistics on over
    1,000 teacher evaluations of Academy sessions as well as the General
    Accounting Office's own survey of participants. The General Accounting
    Office found that on average, participants reported that the Academy
    was more effective than any other teacher development program they had
    participated in, was very effective in renewing or enhancing knowledge
    in one or more academic subjects, and was generally effective in
    enhancing the teaching skills and strategies required for teaching
    challenging academic content.
        In addition, a site visit of the Delta Teachers Academy offices in
    New Orleans, Louisiana and of the National Faculty's Summer Institute
    at Tulane University was conducted by the Cooperative State Research,
    Education, and Extension Service's National Program Leader for Higher
    Education and Evaluation, during July 1996. The site visit confirmed
    that participating teachers are very enthusiastic about the Delta
    Teachers Academy program, that the instruction provided by The National
    Faculty's university scholars is on target and appropriate to the K-12
    teachers' needs, and that the facilities are very well suited to
    program requirements. The site visit further confirmed that the Delta
    Teachers Academy has strengthened the participating teachers' ability
    to teach by improving their content knowledge base, helped them become
    leaders of other teachers by requiring them to conduct staff
    development back at their home schools, and had a positive impact on
    student learning. School superintendents report greater student
    enthusiasm, more homework, and higher test scores for students whose
    teachers were in the Delta Teachers Academy program.
    extension specialist (ar) (extension farm management education project)
        The Federal funds support a small/family farm management and
    marketing education program, headquartered at the South Central Family
    Farm Research Center, a USDA-ARS facility in Booneville, Arkansas. The
    program takes research generated at the Center and adapts it to
    management and marketing education programs to meet the needs of small
    family farmers and provides support to county and state extension
    personnel who actually deliver these programs. According to the grant
    recipients, nearly three fourths of all U. S. farms have gross sales
    less than $50,000. In the 10 state area served by the Booneville Center
    this percentage is even higher. Both the research and extension
    programs are targeted to the needs of this small, family farm audience.
    The eight specific objectives of this project cover a variety of
    management and marketing needs of smaller farm operators to help them
    improve family income through improved management and marketing skills.
    However, in view of significant need for extension efforts in high
    priority national interest topics, funds are not proposed for this
    project. At the discretion of the State, Smith-Lever formula or other
    funds could be used to support this project. The original goal of the
    program was to develop a small/family farm management and marketing
    education program based on the research program of the Booneville
    Research Center, which considers the limitations and potentials faced
    by small family farmers as they decided how to improve farm efficiency
    and technology use, how to minimize risk under severe capital
    constraints, and how to combine farm enterprises on limited acreage to
    best utilize available family labor while minimizing capital
    investment.
        This project began in fiscal year 1992 with an appropriation of
    $92,000. Subsequent federal funds were $92,000 in fiscal year 1993;
    $92,000 in fiscal year 1994; $92,000 in fiscal year 1995; $99,000 in
    fiscal year 1996 and $99,000 in fiscal year 1997. Appropriations to
    date total $566,000.
        The Arkansas Cooperative Extension Service has provided the
    following state funds: $59,040 in fiscal year 1992; $55,680 in fiscal
    year 1993; $55,446 in fiscal year 1994; $55,446 in fiscal year 1995;
    $54,446 in fiscal year 1996; and $46,364 in fiscal year 1997.
    Nonfederal funds provided to date amount to $324,422.
        The Arkansas Extension Farm Management Program is headquartered in
    Booneville, Arkansas, and serves the 10 south central states included
    in the service area of the ARS South Central Family Farm Research
    Center. The original proposal in 1992 was for a 12 month period;
    however the emphasis of the program has shifted as the educational
    needs of the target audience and as the research program of the Center
    have changed. During the current fiscal year, program emphasis is on
    provision of information about alternative farm enterprises and
    updating farm management application software. The current phase of the
    program runs through February of 1998. No further federal funding is
    requested.
        CSREES performed a merit review of this program in January 1997 as
    we reviewed the proposal for 1997. The review concluded the project has
    been successful in meeting the specific educational needs of an
    underserved clientele group. The review also pointed out this program
    serves as an excellent example of cross-agency, and public-private,
    coordination and cooperation.
                       extension specialist, mississippi
        The Basic Weather Service and Extension project is a two phase
    program. The first year funding will be used to gather and disseminate
    critical agricultural weather data for producers and researchers in
    Mississippi and surrounding states. The grant proposal states that the
    Ag Weather Service facility was closed recently at Stoneville,
    Mississippi. This action has created a void in the availability of and
    access to critical weather data that producers and researchers use to
    make management decisions and formulate research projects,
    respectively. This is a first year project and the goal is to collect,
    maintain, and disseminate weather information for producers and
    researchers in Mississippi and surrounding states. In view of the
    significant high priority national interest extension topics such as
    IPM, funds are not proposed for this project. At the discretion of the
    state, Smith-Lever formula or other funds could be used to support this
    project.
        This is a new program which is being planned and initiated this
    year. The first year appropriation is $50,000. The State of Mississippi
    through the Mississippi Cooperative Extension Service and Delta
    Research & Extension Center is providing $41,350 in state appropriated
    funds to support this project in 1997.
        The project will be conducted at the Delta Research & Extension
    Center in Stoneville, Mississippi. This project is expected to continue
    into a Phase II program. Keeping with the administration's policy of
    awarding grants competitively, no further Federal funding is proposed
    for this grant.
        This is a new project being initiated this fiscal year and for this
    reason no evaluation has been conducted yet.
                     income enhancement demonstration, ohio
        The Federal funds support the Agricultural Business Enhancement
    Center which plays a major role in the development of the agricultural
    sector of Northwest Ohio. The Center provides a variety of management
    training programs, helps farms and other agribusinesses develop
    comprehensive business plans, and facilitates business networking. This
    grant is targeted to local Northwest Ohio needs. Farmers and other
    agribusiness firms must be able to adapt to a large number of major
    changes affecting the entire food system from the farmer to the
    consumer. These include changes in farm programs, globalization of
    markets, new technologies, information systems, consumers' concerns for
    food safety and nutrition, and society's concern for protecting the
    environment. Individuals, families, firms and communities in Northwest
    Ohio need to understand the changes, develop and implement effective
    strategies for managing change. In view of significant need for
    extension efforts in high priority national interest topics, funds are
    not proposed for this project. At the discretion of the State, Smith-
    Lever formula or other funds could be used to support this project. The
    original goal of the project was to help people develop new businesses
    and restructure and expand existing businesses in order to enhance
    incomes in Northwest Ohio. Recent accomplishments include several
    workshops to improve the management and marketing capacity of local
    farms and agribusiness firms. At the close of a special workshop for
    women in agriculture, 75 percent said their participation would improve
    management of the family farm. The Center has a major role in examining
    the feasibility of a new tomato processing plant-in the region. The
    Center continues to conduct economic research on market opportunities,
    provide a variety of management training programs, help individual
    farms and other agribusinesses develop comprehensive business plans,
    and facilitate networking with businesses in other regions of the
    United States and around the world.
        The project began in fiscal year 1991. Appropriations have been as
    follows: $145,000 in fiscal year 1991; $250,000 in fiscal years 1992
    through 1995; and $246,000 in fiscal years 1996 and 1997.
    Appropriations to date total $1,637,000. The State of Ohio has
    appropriated the following funds: $35,100 in fiscal year 1991; $72,368
    in fiscal year 1992; $56,930 in fiscal year 1993; $30,547 in fiscal
    year 1994; $49,935 in fiscal year 1995; $51,432 in fiscal year 1996;
    and $48,664 in fiscal year 1997. Non-federal funding provided to date
    totals $344,976.
        The Agricultural Business Enhancement Center is located in Bowling
    Green, Ohio and serves eight counties in the Toledo Metropolitan Area.
    Project leadership and data analysis is being provided by the
    Department of Agricultural Economics, Ohio State University, Columbus,
    Ohio. The original proposal in 1991 was for a period of 12 month. The
    current phase of the program will be completed in September 1997. No
    further Federal funding is requested for this grant.
        CSREES performed a merit review of the project in January 1997 as
    it evaluated the project proposal for 1997, and concluded that it plays
    a major role in enhancing the competitiveness of the agricultural
    sector in eight counties of Northwest Ohio and that it has been
    effective in stimulating economic development in that area.
                      integrated cow/calf management--iowa
        CHIPS is an integrated cow-calf resource management (IRM) program
    which originally targeted an eleven county area in southeast Iowa. The
    intent of the program is to improve the area's rural economy by
    maximizing the profit potential of individual livestock operations. The
    CHIPS concept was also initiated to promote the development of forage
    systems which utilize highly erodible land (HEL), including land to be
    released in the CRP program. The geographical area where CHIPS services
    are offered systematically expanded to over 20 southeast and south
    central Iowa counties through fiscal year 1995. Expansion of the CHIPS
    program in area covered, services offered, and cooperator numbers
    continued to increase in 1996, with technical support expanding to an
    additional 14 counties in east central and southwest Iowa. Southeast
    Iowa contains extensive areas of marginal lands which are highly
    erosive (HEL) and should not be intensively farmed with row crops.
    These rolling hills are capable of producing high quality forages and
    are supportive to the cattle industry. 1996 marks the beginning of the
    release of Conservation Reserve Program (CRP) contracts--with thousands
    of these acres categorized as HEL. CHIPS is instrumental in assisting
    producers as sound management decisions are finalized regarding these
    CRP acres. CHIPS's long-term sustainable approach supports cow-calf
    production on this marginal ground and provides one-on-one assistance
    as economic and production decisions are made. The importance of the
    CHIPS program is highlighted by the current depressed economic state of
    the cow-calf industry. Negative financial returns have been a reality
    over the past 18 months and most economists predict this financial
    environment will continue in 1998. However, in view of significant
    needs for Extension efforts in high priority national interest topics,
    such as improved pest management systems, funds are not proposed to
    continue this program. At the discretion of the state, Smith-Lever
    formula or other funding could be redirected to support this program.
        The overall goal of CHIPS is to have a positive effect on the
    area's economy by improving the long-term profit potential of the local
    cattle industry. To address this broad project goal, CHIPS has set
    forth the following objectives:
      --Improve profit potential of cooperator farms
      --Identify issues and trends in management data.
      --Raise the awareness and understanding of over 2,000 agricultural
            producers in southeast Iowa about cow-calf production on highly
            erosive land and the integrated resource management concept.
      --Provide over 130 producers with intensive technical assistance to
            develop goals and individualized farm recommendations,
            including management areas such as pasture and forage
            production, rations, utilization of resources, record systems,
            and government fan-n program compliance. During 1997, the
            number of operations served is expected to increase to
            approximately 200.
      --Help producers develop management skills to improve efficiency and
            reduce costs of production as CHIPS recommendations are
            implemented.
        Over 130 cooperators, involving approximately 11,000 beef cows, are
    currently enrolled and participating in the CHIPS program. Four full-
    time technicians and one part-time specialist have conducted over 600
    farm/office consultations during fiscal year 1996 to develop specific
    on-the-farm recommendations and assist with the problem solving and
    decision making process. These contacts involved a wide variety of
    technical assistance, with primary emphasis on nutrition, cost-
    effective ration development, genetic evaluation, value added
    practices, and cow production concerns. Over 60 cooperators have
    incorporated the Cow Herd Appraisal of Performance Software (CHAPS) and
    Standardized Performance Analysis (SPA) programs in their operations.
    During fiscal year 1996, 3000 head of beef animals were permanently
    identified to facilitate record and data collection. More than 7500
    cattle were weighed and monitored to evaluate performance and
    production levels. Over 250 forage samples were collected and analyzed,
    with the information being utilized in over 300 individualized ration
    recommendations. Selected management recommendations are highlighted by
    CHIPS technicians on a monthly basis. These financial and/or
    performance impacts are summarized in a report prepared and distributed
    quarterly.
        Two networking projects are being developed through the efforts of
    the staff involved with the CHIPS program. A CHIPS Heifer Development
    Program was initiated in November, 1996, coordinating the management of
    over 200 breeding heifers from 10 CHIPS cooperators. The goal of this
    project is (1) to incorporate technological advances in the area of
    heifer development, and (2) to improve the genetic base of these ten
    operations through the use of artificial insemination, genetic
    evaluations, and nutritional management. A CHIPS Feedlot Program is
    also being developed which will provide cooperators, regardless of the
    size of the operation, an opportunity to retain ownership of their
    animals from birth to market. This value-added approach will expand the
    marketing opportunities for individual cow-calf operations and improve
    the profit potential for cooperators with Genetically superior animals.
    A state-wide bull test evaluation is also being monitored by CHIPS
    personnel in conjunction with the Iowa Cattlemen's Association.
        $138,000 was approved for fiscal year 1992; $138,000 was approved
    for fiscal year 1993; $276,000 for fiscal year 1994; $350,000 for
    fiscal year 1995; $345,000 for fiscal year 1996; and $345,000 for
    fiscal year 1997. Federal funding through fiscal year 1997 totals
    $1,592,000.
        CHIPS participants pay client fees of approximately $3.00 per cow.
    This fee structure is on a sliding scale which adjusts for cow herd
    size. To date, approximately $60,000 has been collected from CHIPS
    cooperators.
        The CHIPS program is currently being operated in southeast and
    south central Iowa and involves the following counties: Van Buren,
    Davis, Jefferson, Wapello, Appanoose, Monroe, Mahaska, Keokuk,
    Washington, Henry, Des Moines, Louisa, Wayne, Marion, Lucas and Lee in
    southeast Iowa and Clarke, Decatur, Ringgold, Union, Adair, Adarns, and
    Taylor in the south central area. The fiscal year 1996 expansion effort
    extends CHIPS services to the following counties in east central and
    southwest Iowa: Jackson, Dubuque, Jones, Cedar, Clinton, Scott, Linn,
    Johnson, Fremont, Page, Mills, Montgomery, Pottawattamie, and With this
    expansion effort CHIPS is offering program services to approximately 60
    percent of the state's cow-calf operations.
        The CHIPS program was initially projected to address the goals and
    objectives of the project in a three year time frame. The objectives
    and goals of the CHIPS program will continue to be modified to meet the
    needs of the cooperators and to adjust to the rapidly changing cattle
    industry. The level of technical assistance and method of program
    delivery will require adaptation to meet the new objectives which
    emerge. Expansion of value added services is an area of increased
    interest by cooperators. Discussion with Precision Beef Alliance, a
    value added pasture-to-plate program, is scheduled. Keeping with the
    administration's policy of awarding grants competitively, no further
    Federal funding for this grant is requested.
        A CSREES review of this project is conducted annually. The CSREES
    project liaison met with the project leader during 1996 to discuss
    plans for expansion of the CHIPS program. The 1996 review found a
    comprehensive approach to enhancing the cow-calf industry in Iowa with
    a strong educational effort in addition to hands-on assistance with
    records and management decision making. The review noted activities to
    make CHIPS self-supporting and to evaluate its impact on producers.
                      pilot technology project, wisconsin
        Primary industrial extension activity of the Manufacturing
    Technology Transfer program is the delivery of technical assistance to
    manufacturing companies. Executive direction in determining the
    assistance required will be provided by the Stout Technology Transfer
    Institute with direct consultation and long-term in-plant assistance
    delivered primarily through the efforts of university Project Managers
    and Co-op students. Direct assistance may be delivered through staff of
    the University of Wisconsin System (both two-and four-year
    institutions, and Extension services); the Wisconsin Technical College
    System; secondary schools; the private sector; professional societies,
    and private consultants, or attendance at state or national seminars.
    The projects also draws on many other state resources to add expertise
    and capacity to network facilitation and in-plant extension activities.
    American's manufacturers continue to face tremendous global
    competition. There are enormous pressures to improve the quality of
    products; reduce the time consumed to bring new products to market; and
    there remains an ever increasing demand to reduce the cost of products.
    Currently there is a strong movement in manufacturing to use speed-to-
    market combined with new product introduction as a tool to obtain a
    competitive advantage. While high quality and cost efficiencies
    continue to be mandatory commitments for today's manufacturers, great
    value is now being placed on speed-to-market. Large companies are not
    the only ones influenced by these trends. Small and medium size
    manufacturers often supply larger firms. Hence, they must be able to
    quickly process large amounts ants of information and solve complex
    problems. However, in view of significant needs for research in other
    high priority national interest topics, funds are not proposed to
    continue this grant. At the discretion of the State, other funding
    could be used to support this research.
        The Manufacturing Technology Transfer program's principal objective
    is the development of a competitive, secure manufacturing base through
    the mechanism of industrial extension. The program principally targets
    small and medium size manufacturers in rural Wisconsin. This funding
    will: (1) continue to provide valuable industrial extension service to
    the target audience; (2) support the continued empirical development of
    an industrial extension model, and (3) investigate the use of super
    computer technologies to support global competitiveness of
    manufacturers. Specific accomplishments have been to:
      --Perform plant evaluations.
      --Identify opportunities for productivity improvements.
      --Implement new organizational and operational methods.
      --Investigate new manufacturing technology, with focus on super
            computing.
      --Establish quality assurance/total quality systems.
      --Establish ongoing training programs.
      --Deliver on-site instruction in new technologies, improved methods
            and processes.
        This project has been underway since fiscal year 1992 and was
    funded for $165,000 in fiscal year 1992, fiscal year 1993, fiscal year
    1994, fiscal year 1995, and for $163,000 in fiscal year 1996 and fiscal
    year 1997 a total of $986,000. No non-federal funds have been provided
    for this project.
        The work will be carried out by the University of Wisconsin-Stout.
    The original proposal in 1992 was for a period of 12 months. However,
    the Manufacturing Technology Transfer Program was developed as a
    continuously evolving industrial extension strategy for serving the
    needs of the manufacturing community. As an ongoing project, the
    Manufacturing Technology Transfer Program is measured by success in
    meeting the objectives of the past five years' proposals, including the
    delivery of modernization assistance and development of an industrial
    extension model. The current phrase of the program will be completed in
    1997. In keeping with the Administration's policy of awarding grants
    competitively, no further Federal funding is requested for this grant.
        To measure the success of the project, a client evaluation process
    has been developed which includes an evaluation questionnaire. At the
    conclusion of interaction, each client is asked to evaluate services by
    completing a survey which reflects the program's stated goals and
    results are available annually. Evaluations indicate significant
    forward strides in creation, new businesses, expanded productivity, and
    enhanced international competitiveness.
                      range policy development, new mexico
        The project is collecting economic data on a statewide basis. The
    data is being used to build an economic model that will allow
    policymakers to better understand how local and state economies are
    tied to primary industries, notably those industries using public
    lands. In New Mexico and throughout the western states, local economies
    are frequently tied to the use and management of public range and
    forest lands. By describing how local industries provide personal
    income as well as local, state, and Federal tax revenues, we may be
    better prepared to estimate the impacts of proposed legislation and to
    craft policies that will enhance, rather than detract, from local
    economies. However, in view of the significant high priority national
    needs for extension projects such as IPM, additional funding is not
    proposed for this grant. At the states discretion, Smith-Lever b&c
    funding could be used to continue this project. Each New Mexico county
    will have a detailed input/output model developed from state and county
    tax revenue data. The results of the economic model forecasts will be
    shared with county decisionmakers in public forums across the state.
        This project was initiated in December 1994. It has been funded
    year-to-year to accomplish annual objectives. The first tier of
    objectives were met in 2 years. The project objectives are being
    revised for fiscal year 1997, and we anticipate another 2 years to
    complete the second phase of the project in September 1998. The total
    appropriation has been $594,000. The project budget does not indicate
    any non-federal support. However, the economists working with this
    project have initiated a regional research project to follow up with
    the model, and the regional project includes investments from
    universities in seven western states.
        According to the project coordinator, most of the original
    objectives have been accomplished. The investigators are currently
    collecting data to allow incorporation of other industry and government
    sectors into the model. These objectives should be accomplished in 2
    years. Keeping with the Administration's policy of competitively
    awarding grants, no further Federal funding is proposed.
        The proposal for continuing funding underwent merit review by a
    team of CSREES National Program Staff in June 1996 and a review of
    progress by the project liaison in November 1996. Both reviews were
    positive and returned recommendations that the project receive the
    funding earmarked for it in fiscal years 1996 and 1997.
                   rural center aids/std prevention, indiana
        This program created the Rural Center for AIDS/STD Prevention,
    formerly named the Rural Center for the Study and Promotion of HIV/STD
    Prevention, jointly between Indiana University, Bloomington, Indiana
    and Purdue University, West Lafayette, Indiana. The Center is
    headquartered at Indiana University. The purposes of the Rural Center
    for AIDS/STD Prevention are (1) the development and evaluation of
    innovative educational material and approaches designed to reduce HIV/
    STD risk behavior and incidence in rural areas, and (2) the
    investigation of the social and behavioral barrier to HIV/STD
    prevention, the findings from which can be applied to the creation of
    prevention programming. The grant request states that many perceive
    that HIV/STD in only a problem in large urban areas. However, HIV/STD
    are found everywhere, including small towns and rural areas, suburbs,
    and large cities. HIV/STD are becoming increasingly serious in non-
    urban areas. In view of significant needs for extension efforts in high
    priority National interest topics such as improved pest management
    systems, funds are not proposed to continue this program. At the
    discretion of the State, existing Smith-Lever funding could be
    redirected to support this program.
        The goals of this project are (1) the development and evaluation of
    innovative educational material and approaches designed to reduce HIV/
    STD risk behavior and incidence in rural areas, and (2) the
    investigation of the social and behavioral barrier to HIV/STD
    prevention, from which findings can be applied to the creation of
    prevention programming. Information has been compiled on the incidence
    and costs of rural HIV/STD; educational materials have been developed
    for field testing and evaluation; a national rural HIV/AIDS
    videoconference has been conducted; and a newsletter established.
    Accomplishments in fiscal year 1996 included the development of
    computer software and peer educational material; expansion of the
    Prevention Resources Library; analysis of selected HIV/STD-related
    determinants of rural adolescents, adults, and migrant farmworkers;
    needs assessments of women and children with HIV; modeling of the HIV
    epidemic; and caregiver/persons with AIDS/community linkages. In fiscal
    year 1997, proposed projects include assessing the health and family
    correlates of HIV/STD-risk behavior, development of HIV/STD prevention
    education material, modeling the effects of multiple drug therapies,
    and assessing the HIV education needs of rural special education
    students.
        This is the fourth year of funding for this program. Work began on
    January 3, 1994. The fiscal year 1997 funding for this program is
    $246,000. Total funds appropriated to date are is follows : $250,000 in
    fiscal years 1994 and 1995; and $246,000 in fiscal years 1996 and 1997
    for a total amount of $992,000. The source of non-federal funds for
    this program is state of Indiana appropriated funds to Indiana
    University. The amount of non-federal funds are $145,406 in fiscal year
    1994; $83,141 in fiscal year 1995; $91,979 in fiscal year 1996; and
    $115,166 in fiscal year 1997 for a total non-federal funding amount of
    $435,692.
        The work is being carried out jointly in the Department of Applied
    Health Science, and the Center for AIDS Research, Indiana University,
    Bloomington, Indiana, and the Department of Sociology, Purdue
    University, West Lafayette, Indiana. The Center was established to
    provide leadership, particularly in the Midwest, in efforts toward
    stopping the spread of HIV infections and sexually transmitted diseases
    in rural areas since no other such center existed. The first year's
    objectives were to develop a rural AIDS education needs assessment,
    develop innovative youth educational material, develop a resources
    center, evaluate a new school-based curriculum, develop family
    intervention strategies for decreasing adolescent risk behaviors, to
    assess the clinical and psychological needs of rural women and children
    with HIV, assess the needs of family caregivers for rural persons with
    AIDS, and examine the financial impact of HIV/STD on rural families.
    Since these projects are funded on an annual basis, the completion date
    for project objectives has been the end of each fiscal year. Keeping
    with the Administration's policy of awarding grants competitively, no
    further Federal funding for this grant is requested.
        The agency receives quarterly and annual progress reports on the
    project. Based on these reports, the agency has found that the Center
    has consistently met its objectives in educational material development
    and educational program delivery. The Center has become the primary
    source of HIV, AIDS, and other STD educational materials and programs
    for rural America.
                          rural development, nebraska
        The Center for Rural Community Revitalization and Development,
    Nebraska Cooperative Extension Service has supported an on-going
    applied research/outreach effort to improve the delivery and impact of
    land grant programming to small and rural communities and businesses.
    The grant has allowed the institution and other State and Federal
    agencies to refine the delivery and efficiency of programming within
    the state of Nebraska. It has supported the development of program
    partnerships and alternative means of providing technical support to
    rural constituencies. The Center is providing cutting-edge approaches
    in the development and delivery of technical assistance to rural
    constituencies. Information age technology is being incorporated into
    the delivery of both university and Federal/State agency programming.
    In view of significant needs for research in high priority national
    interest topics, funds are not proposed to continue this project. At
    the discretion of the State, Smith-Lever formula or other funding could
    be used to support this project. The original goal was to provide
    improved technical assistance to distressed rural businesses and/or
    emerging businesses in distressed communities. Through a series of 72
    workshops in 67 communities over 1,341 business owners/managers were
    provided technical assistance. Currently, new strategies are being
    developed to provide technical assistance in a more cost efficient
    method.
        The project has been operating since October 1978 and Federal
    appropriations through fiscal year 1993 were $1.74 million. For fiscal
    years 1994 and 1995, $400,000 was appropriated each year, for fiscal
    year 1996 and 1997, $386,000 was appropriated each year. Total funding
    to date is $3,326,000. All Federal funds have been matched by an
    equivalent amount of non-federal funds each year of operation through
    fiscal year 1995. The fiscal year 1995 amount was $99,305. The non-
    federal support has been primarily in the form of staff for the past
    two fiscal years.
        Research is being conducted at the University of Nebraska. The
    original completion date was September 30, 1989. The original
    objectives of the research project have been met. The completion of
    additional objectives is scheduled for September 30, 1998. However, in
    keeping with the Administration's policy of awarding grants
    competitively, no further Federal funding for this grant is requested.
    Research could be continued at the State's discretion using formula
    funds.
        The agency evaluates merit of research proposals as submitted. No
    formal evaluation of this project has been conducted.
                 rural development through tourism, new mexico
        The Rural Economic Development Through Tourism Project is a rural-
    based economic development activity to create new jobs and sources of
    income in small and rural communities in a seven county area of New
    Mexico. The focus of the development is on tourism and related
    businesses. The program supports training, strategic planning, and
    technical assistance for communities and tourism businesses. This is a
    pilot project to demonstrate the effective development and
    implementation of training, education, and technical assistance related
    to rural tourism. Tourism development is a strong area of interest to
    many small and rural communities throughout the United States. However,
    in view of significant needs for extension efforts in high priority
    National interest topics, funds are not proposed to continue this
    program. At the discretion of the State, other funds such as Smith-
    Lever could be used to support this effort. The New Mexico Cooperative
    Extension was to spearhead a comprehensive program to assist small and
    rural communities in increasing economic development opportunities
    through tourism. A regional task force composed of extension
    representatives and community leaders from business, industry,
    education, and government at the federal, state, and local levels
    guides the development and implementation of effective and efficient
    programming to support rural tourism development. The results of REDTT
    include a video, a public relations program, an image study, a regional
    tourism map and guide, a regional tourism bus package, festival
    planning workshops, development of a regional agricultural tour, and
    development of a mini-grants funding program.
        In fiscal years 1992 through 1995, $230,000 was appropriated each
    year. In fiscal year 1996, $227,000 was appropriated. For fiscal year
    1997, $227,000 has been appropriated for a total funding amount of
    $1,374,000. In fiscal year 1992, $38,764 of state matching funds were
    provided. For fiscal years 1993, 1994, 1995, and 1996, $39,360 of state
    funds were provided. Fiscal year 1997 funds of $39,040 are being
    provided.
        Research/programming is being supported at the New Mexico State
    University. The original completion date was September 30, 1993. The
    original objectives of the research project have been met. The
    completion of additional objectives is scheduled for March 31, 1993.
    Keeping with the Administration's policy of awarding grants
    competitively, no further Federal funding is requested for this grant.
        The agency evaluates the merit of research proposals as they are
    submitted. No formal evaluation of this project has been conducted.
                          rural development, oklahoma
        This program provides technical assistance to small business in
    support of job creation. It provides evaluation of new products and
    processes that may result in new industries or that may be applied to
    improve existing manufacturing processes. The program has resulted in
    job creation and industrial development through the operation of
    business incubators, new product and process fairs, marketing
    assistance to rural entrepreneurs, and financial assistance for plant
    expansion and new business starts. The operation of the rural incubator
    program that provides a stable and nurturing environment that small
    businesses need to grow into profitable concerns. These incubators
    consist of buildings designed for the specific purpose of starting a
    new manufacturing or technology-based company. Also small business
    needs access to technical assistance, worker training, technology
    transfer, financial aid, and business management assistance in order to
    stay competitive in domestic and world markets. However, in view of
    significant needs for research in other high priority national interest
    topics such as improved pest management systems, funds are not proposed
    to continue this grant. At the discretion of the State, other funding
    could be used to support this research, such as Smith-Lever.
        The original goal of the program was to assist rural business in
    Southeast Oklahoma to get systematic access to improved technology,
    training, financial and business management assistance. Many
    accomplishments have resulted including financial assistance. Rural
    Enterprise, Inc., is a Certified Development Corporation for the Small
    Business Administration. As a result, Rural Enterprise, Inc., has
    obtained financing for entrepreneurs and businesses totaling
    $66,392,855. Specific technical assistance efforts have included:
    working with a company regarding different ways to cut a radius in a
    board to allow a forklift to pick up pallets from the side making it a
    4-way unit; working with a technology transfer center to assist a
    client in the design of a muffler for air tools to provide statistical
    data on decible reduction and frequency harmonics reductions; working
    with a company to identify and solve an engineering problem they were
    having with a new product.
        Appropriations to date are as follows: $433,000 in fiscal years
    1988 and 1989; $430,000 in fiscal year 1990; $431,000 in fiscal year
    1991; $300,000 in fiscal years 1992 through 1995; and $296,000 in
    fiscal years 1996 and 1997. Appropriations total $3,519,000. No non-
    federal funds have been provided for this project.
        The work is being carried out at Rural Enterprises, Inc., in
    Durant, Oklahoma. The original proposal in 1988 was for a period of 12
    months. However, the objectives of Rural Enterprises, Inc., are on-
    going because of the nature of the activity. The clientele is diverse
    and decentralized. The engineering and management consultation model
    being pursued with individual clients results in a situation where
    hundreds of problems are being pursued simultaneously and when solved
    are replaced by new issues resulting from international competition,
    regulations, training needs, and changeover costs. The next phrase of
    the program will be completed in 1997. In keeping with the
    administration's policy of awarding grants competitively, no further
    Federal funding is requested for this grant.
        CSREES staff responsible for project liaison have conducted on-site
    visits and have formed evaluations through the agency's merit review
    process. Rural Enterprises itself conducts in ongoing evaluation
    process to measure the organization's effectiveness and efficiency in
    accomplishing its objectives and this is documented on a quarterly
    basis through our reporting system. Significant numbers of jobs and new
    businesses have resulted from this program.
                         rural rehabilitation, georgia
        The program has tested the feasibility of providing satellite-based
    adult literacy education, in association with vocational rehabilitation
    services, to handicapped adults in rural Georgia. The program has
    developed curriculum, tested and adapted technology, established
    student recruitment and retention strategies, expanded to Statewide
    coverage, and provided successful adult literacy education. A state
    task force has estimated that 25 percent of Georgia's adult population
    is functionally illiterate. Illiteracy is regarded as a form of
    disability in Georgia. In view of significant needs for extension
    efforts in high priority National interest topics such as improved pest
    management systems, funds are not proposed to continue this program. At
    the discretion of the State, existing Smith-Lever funding could be
    redirected to support this program. The original goal of this program
    was to prove that distance learning can be an effective tool for
    reaching and teaching functionally illiterate adults in rural areas.
    This program has demonstrated that satellite-based literacy training,
    in cooperation with vocational rehabilitation services, can
    successfully provide adult literacy education designed to improve
    critical reading, writing, and thinking skills for handicapped rural
    adults. The program now enrolls about 640 students per quarter, with
    approximately 70 percent expected to complete the full eight quarters
    of literacy education. Over the past eight years, test scores and
    attendance rates of students in the satellite based program have shown
    that distance leaming is an effective delivery system for instructing
    low-level readers and non-readers. Test scores and attendance rates of
    students in this program have been comparable to those of students in
    traditional, urban classes.
        Funding for this program was initially appropriated in fiscal year
    1989, and the program has been in operation since March 1989. Through
    fiscal year 1997, appropriations for this program have been as follows:
    $129,000 in fiscal year 1989; $256,000 in fiscal year 1990; $256,000 in
    fiscal year 1991; $256,000 in fiscal year 1992; $250,000 in fiscal year
    1993; $250,000 in fiscal year 1994; $250,000 in fiscal year 1995;
    $246,000 in fiscal year 1996; and $246,000 in fiscal year 1997. Funds
    appropriated to date total $2,139,000.
        The fiscal year 1997 source of non-federal funds provided for this
    program are state appropriated funds is from the Georgia Department of
    Adult Education. Prior years' sources also included private
    contributions from the Woodruff Foundation and other local foundations.
    Through fiscal year 1997, the total amount of non-federal funds
    provided the project has been $6,697,581. The breakdown by fiscal year
    is $164,000 in fiscal year 1988; $270,500 in fiscal year 1989; $809,675
    in fiscal year 1990; $656,765 in fiscal year 1991; $65,000 in fiscal
    year 1992; $1,019,821 in fiscal year 1993; $20,000 in fiscal year 1994;
    $872,500 in fiscal year 1995; $1,500,000 in fiscal year 1996; and
    $1,319,320 in fiscal year 1997.
        The Georgia Tech Satellite Literacy Project is sponsored and
    operated by four organizations: Georgia Institute of Technology's
    Center for Rehabilitation Technology, the Center for Rehabilitation
    Technology (CRT), Inc., Literacy Action, Inc. and the Georgia
    Department of Technical and Adult Education. The program grantee is
    CRT, Inc., a private, not-for-profit business advisory board to the
    Center for Rehabilitation Technology, College of Architecture, Georgia
    Institute of Technology, from which the literacy instruction is
    provided.
        The 100 classes at 77 adult literacy classroom sites, dispersed
    throughout the State of Georgia and one site in Virginia, include 18
    technical schools, 42 adult learning centers, 8 high, middle or
    elementary schools, 3 universities, 3 libraries, 2 rehabilitation
    centers, and one other site.
        It was anticipated that it would take three years to demonstrate
    that distance leaming can be an effective tool for reaching and
    teaching functionally illiterate adults in rural areas. That original
    objective was met in fiscal year 1991. Additional objectives since
    fiscal year 1991 have been to expand the outreach of the satellite
    based adult literacy program to enough additional sites throughout the
    state of Georgia so that all potential participants have reasonable
    access to the program; to continually upgrade the quality of class
    programming and the technical capacities of the system. It is
    anticipated that the latest technological upgrades, expanding the
    capacity of the program more than twenty-five-fold (from seventy-seven
    to over 2,000 downlink sites), and a six-fold increase in broadcast
    hours, and making materials available as supplemental tools to all
    Georgia literacy classes, will be completed by the end of the current
    project period, February 28, 1998. Keeping with the Administration's
    policy of awarding grants competitively, no further Federal funding is
    requested for this project.
        The agency receives annual reports on the project. Based on these
    reports, the agency has found that the project has made progress in
    demonstrating the feasibility of utilizing distance learning technology
    and teaching methods to provide adult literacy education programs to
    handicapped adults throughout the state of Georgia. The project has
    been successful in applying the latest distance education technology to
    both control the program cost per participant and, most recently, to
    expand the availability of the program.
             technology transfer projects, oklahoma and mississippi
        The original work plans involved the transfer of uncommercialized
    technologies from Federal laboratories and universities to rural
    businesses and communities. Over time, the objectives have evolved to
    providing more one-on-one assistance to small manufacturers. This type
    of assistance responds to the stated needs of the small manufacturing
    community and fills a recognized gap in the existing service provider
    community. Manufacturing extension programs throughout the country have
    identified one-on-one engineering technology assistance as a critical
    need for small manufacturers as they attempt to become more competitive
    and profitable. Oklahoma State University and Mississippi State
    University are the only public service providing organizations that
    have the demonstrated capability to provide such assistance in their
    respective areas. However, in view of significant needs for research in
    other high priority national interest topics such as improved pest
    management systems, funds are not proposed to continue this grant. At
    the discretion of the State, other funding could be used to support
    this effort, such as Smith-Lever. The primary goal of these programs is
    to contribute to an increase in business productivity, employment
    opportunities and per capita income by utilizing technology and
    information from Federal laboratories; Rural Enterprises Development
    Corporation and Industrial Technology Research and Development Center
    in Durant, Oklahoma; Mississippi State Food and Fiber Center;
    Vocational-Technical Education System; Center for Local Government
    Technology; Cooperative Extension Service; and other university
    departments and non-campus agencies. Specific program objectives are
    to:
      --Develop greater profitability of existing enterprises.
      --Aid in the acquisition, creation or expansion of business and
            industry in the area.
      --Establish an effective response process for technological and
            industrial related inquires.
      --Devise effective communication procedures regarding the program for
            the relevant audiences.
        Funding appropriated to date is as follows: $350,000 in fiscal
    years 1984 and 1985; $335,000 in fiscal year 1986; $333,000 in fiscal
    years 1987 through 1990; $331,000 in fiscal years 1991 through 1995;
    and $326,000 in fiscal years 1996 and 1997. Appropriations to date
    total $4,674,000.
        Although no non-federal funds have been required, Oklahoma State
    University and Mississippi State University have provided considerable
    amounts of matching support from state funds over the life of the
    project. For the past four years, for example, support has included a
    significant portion of engineering faculty salaries as well as the
    administrative support of county and district extension staff.
        The work is being carried out at Mississippi State University and
    Oklahoma State University which are providing on-site assistance to
    small manufacturers. The original proposal in 1984 was for 12 months.
    The original objectives have been, and continue, to be met. Although
    individual client projects have a beginning and end, the technology
    transfer process is continuous. Over the past years, specific and
    measurable annual objectives and the achievement of objectives have
    been documented in annual reports. The objectives of both programs have
    been to: (1) continue the delivery of high-quality engineering
    assistance and technology transfer services to small manufacturers; (2)
    conduct joint workshops, client referral, and joint research and
    application projects; and (3) demonstrate a value of service to
    clients. The current phase of the program will be completed in 1997. In
    keeping with the Administration's policy of awarding grants
    competitively, no further Federal funding is requested for this grant.
        Site visits and merit reviews have been conducted annually on these
    projects as well as client surveys by project staff themselves. Survey
    results have documented significant job creation, productivity
    enhancement, and local community economic activity.
                             wood biomass, new york
        The objective of this program is to expand, implement, and gain
    acceptance of wood biomass as a sustainable, renewable and
    environmentally friendly fuel source. Moreover, the program is viewed
    as a means of stimulating alternative forest products for the Nation's
    Central and Northern hardwood forests regions. The principal
    researchers believe that the project is of national interest. Biomass
    research studies through the U.S. Department of Agriculture and the
    Department of Energy span 20 or more years. As a result, the Nation is
    in a position to scientifically produce alternative fuels for power
    generation systems. Moreover, the Department of Agriculture and the
    Department of Energy research can provide information on the value of
    tree plantings to carbon sequestration, rural economic development, and
    soil erosion and sedimentation associated with conventional
    agriculture. However, in view of the significant research needs on
    national high priority issues, funding for this project is not
    proposed. At the State's discretion, Hatch Act or other funding could
    be used to support this effort. The goal of this, project is to
    promote, via applied research and technology transfer: wood biomass for
    energy as an alternative farm product; the wise stewardship of land
    resources; the use of domestic, renewable and sustainable energy; and
    enhanced farm profitability. To accommodate this, scientists at the
    State University of New York are planting willow trials on several
    sites and under several conditions. Site preparation occurred during
    the spring and summer of 1996. Some planting occurred during the fall
    of 1996, and more is scheduled for the spring of 1997. Cornell
    University has hired a person to coordinate technology transfer
    resulting from this and predecessor projects.
        This aspect of the program began with an appropriation of $200,000
    in fiscal year 1995; $197,000 was appropriated in fiscal years 1996 and
    1997 for a total of $594,000. Four state partners and approximately 18
    private partners contribute resources at a ratio of approximately 1.5
    to 1 for this project.
        The field work is being conducted near Syracuse, New York.
    Electronic and print media allows Cornell's technology transfer
    activities to extend far beyond that point. The scope of this project
    has local, state, regional, national, and international implications.
    The completion date for the original objectives of the project, willow
    cultivar planting, was September 30, 1996. With the addition of some
    new dimensions to the project, the completion date is now April 1,
    1998. Because of the timing of one of the awards and some weather-
    related problems, not all of the original objectives have been met.
    Most of the unmet objectives should be completed by early summer.
    Keeping with the Administration's policy of awarding grants
    competitively, no further Federal funding is requested for this grant.
        This project is reviewed annually through a merit examination of
    the annual proposed plans of work. In addition, the Project
    Administrator monitors progress through the reading of a series of
    required reports, plus frequent phone and e-mail contacts. The Project
    Administrator also met with the Principal Investigator in his office to
    discuss the project during the investigator's travels to the
    Washington, DC, area.
                            data information system
        Question. Please provide a description of system development
    activities that have been funded.
        Answer. The Cooperative State Research, Education, and Extension
    Service--CSREES--is in the process of funding a cooperative agreement
    with the University of Arkansas to provide national leadership in
    coordinating the efforts of our university partners in helping us
    determine appropriate content for a Research, Education, and Economics
    Information System--REEIS--wide information system. In addition, the
    University of Arkansas will provide essential services in managing and
    coordinating a national Steering Committee responsible for overseeing
    the overall design, development, testing, and implementation of REEIS.
    Similarly, funds have been allocated to employ a technical services
    manager and a program analyst to oversee contracting with outside
    sources to design and launch REEIS and to comply with the necessary
    clearances and regulations applicable to information technology
    systems. In addition, funds have been allocated to secure a temporary
    director through the Intergovernmental Personnel Act--IPA--to
    coordinate and guide the overall aspects of development, testing, and
    implementing REEIS. Remaining funds are being allocated for contracting
    with a private sector firm to conduct a strategic audit of available
    data and a national needs assessment.
        Question. What is the national, regional or local need for this
    activity?
        Answer. USDA's Research, Education, and Economics--REE--mission
    agencies and their university partners lack a central, integrated,
    user-friendly electronic information system capable of providing a
    knowledge base of the thousands of programs and projects for which they
    are responsible that focus on food, agriculture, natural resources, and
    rural development. Such an information system is increasingly needed to
    enable the Department and its partners to readily conduct both
    comprehensive baseline and ongoing assessments as well as evaluations
    of research, education, extension, and economics programs and projects.
    In recent years, this need has become more urgent for several reasons.
    First, the United States needs a visionary public funded research and
    development program to produce essential knowledge and innovations for
    meeting growing competition in a global market--which is largely
    attributable to the expanding research and development efforts of
    foreign nations. Second, a comprehensive information system is needed
    to serve as a primary reference source for development of new research
    and education projects on such diverse issues as increasing
    productivity in agriculture and processing, improving the safety and
    quality of food, and enhancing the sustainability of the environment
    and rural communities. Third, Federal/State policy makers and
    administrators are requiring empirical analyses to account for
    historical, current, and future use of public funds and to provide a
    basis for redirecting funds to higher priority problems. Fourth, the
    Government Performance and Results Act--GPRA--has imposed reporting
    demands which current, decentralized information systems are not
    prepared to adequately satisfy.
        Question. What was the original goal of this initiative and what
    has been accomplished to date?
        Answer. The original goal of this initiative was to develop an
    information system that can provide real-time tracking of research,
    extension and education projects and programs; has the capability to
    communicate vertically between field, state and Federal locations; will
    enable the REE agencies and their partners to conduct rapid and
    comprehensive policy assessments and program evaluation analyses;
    facilitates assessment of technologies and practices employed in
    extension, education, economics and research activities at the field
    and/or regional levels; provides clear and transparent public access to
    relevant parts of the information; and provides information management
    tools to enhance the timeliness and accuracy of REE-wide responses to
    inquiries about program objectives and expenditures.
        Question. How long has this work been underway and how much has
    been appropriated by fiscal year through fiscal year 1997?
        Answer. Congress first appropriated $0.4 million for REEIS in
    fiscal year 1997 to begin planning its design and development. We are
    in the process of establishing a National Steering Committee to provide
    advice and guidance throughout the development and implementation
    process. The Steering Committee will be chaired by a notable
    administrator of extension and research at a key land-grant university.
    It will be comprised of both users and producers of Research,
    Education, and Economics agencies' data, including program officials
    and program leaders, information system managers from other Federal
    agencies, representatives from Federal oversight agencies, program/
    project leaders representing partner institutions, and private sector
    users of REE data. Ultimately, this body will be responsible for
    recommending work specifications and for assessing the quality of work
    performed by an experienced and successful private contractor
    specializing in public-sector information systems.
        Question. What is the source and amount of non-federal funds
    provided by fiscal year?
        Answer. Non-federal funding does not apply at this time.
        Question. Where is this work being carried out?
        Answer. Leadership responsibility for REEIS resides within the
    Cooperative State Research, Education, and Extension Service's Science
    and Education Resources Development division. This provides for
    effective integration of the Current Research Information System, the
    Food and Agricultural Education Information System, and appropriate
    extension data bases. CSREES is working closely with all REE agencies
    and with the university system via a cooperative agreement with the
    University of Arkansas. We hope also to use the Intergovernmental
    Personnel Act to secure an IPA from another university to carry out
    REEIS essential management responsibilities. In addition, a process is
    underway to engage a private sector firm specializing in public-sector
    information systems to design, develop, test, and implement REEIS.
        Question. What was the anticipated completion date for the original
    objectives of the project? Have those objectives been met? What is the
    anticipated completion date of additional or related objectives?
        Answer. It is anticipated that REEIS can be operational by the year
    2000. The current appropriation of $400,000 will cover start-up costs
    such as establishment of a National Steering Committee, preparation and
    specifications for contracting with an outside firm, selection of a
    contractor, a needs assessment, identification of functional
    requirements, a draft plan for designing and developing the system
    including recommendations for in-house hardware, operating system, and
    software programs. The $600,000 increase request for fiscal year 1998
    will allow for implementing, testing, and refining a prototype,
    including preparation of an operations manual and a full-scale
    implementation and maintenance plan. The Research, Education, and
    Economics Information System meets a high priority national need for a
    continuing national information system. REEIS is being designed to meet
    the data information needs of all REE agencies and their university and
    private sector cooperators. It will link data systems on research,
    education, extension, and economics. Therefore, annual maintenance
    costs will be ongoing.
        Question. When was the last agency evaluation of this project?
    Provide a summary of the last evaluation conducted.
        Answer. An evaluation of Research, Education, and Economics
    Information System is not appropriate at this early stage of
    development.
                                     travel
        Question. Please provide the Committee with a breakdown of your
    actual travel costs in fiscal year 1996.
        Answer. In fiscal year 1996, the CSREES cost for Domestic travel
    was $1,693,795 and the cost for Foreign travel was $44,858.
        Question. Please identify foreign travel obligations for fiscal
    years 1994, 1995, and estimates for fiscal years 1996 and 1997.
        Answer. The information follows.

                        CSREES foreign travel obligations

            Fiscal year
    1994..........................................................   $65,054
    1995..........................................................    33,506
    1996..........................................................    44,858
    1997 (estimate)...............................................    79,848

        Question. How many CSREES personnel were engaged in foreign trips
    in these years [fiscal years 1994, 1995, 1996, and 1997] and for what
    purposes?
        Answer. The information follows.

                                  FOREIGN TRIPS
    ------------------------------------------------------------------------
                                                                     No. of
                 Purposes of foreign trips                Fiscal     CSREES
                                                           year    personnel
    ------------------------------------------------------------------------
    External CIP Review--Science Policy Presentation
     for NE Division of Agronomy--FAO's Meeting and
     IPM--Project development, site visits, and
     project reviews of International Programs
     projects.--5th World Congress on Genetics Applied
     to Livestock Production--40th International
     Congress of Meat Science and Technical
     Conference--International Society of Animal
     Genetics Conference--Meeting of the Society for
     Nutrition Education--NC-119 Meeting--NE-103
     Meeting--Participate in the North American
     Association for Environmental Education and
     Manage two auxiliary meetings of Extension
     Environmental Education faculty--USDA Water
     Quality Project Review...........................       1994         21
    U.S. Delegate to International Council of IUFRO-XX
     World Congress--Project development, site visits,
     and project reviews of International Programs
     projects.--Biodiversity Convention--International
     Symposium on Nutrition & Health--Presentation on
     Agricultural Biotechnology Technology Transfer
     and Workshop--CIP Review--Chair Report of CIP
     Review--Aquaculture Policies Information
     Exchange--CGIAR Meeting--Caribbean Basin
     Agricultural Research Meeting--Presenting papers
     on Policy Options on Plant Protection and
     Pesticides--Horticultural Society Meeting--
     Poultry Science Association and Collateral
     Meeting--Lead U.S. Delegation and Case Study OECD
     Conference--``Patron of Congress'' presenting a
     paper--To present invited papers--Regional IPM
     Project Meeting..................................       1995         14
    Review of Forestry Programs with Advisory Council
     of the Pacific Islands--International Workshop on
     Soil and Water Quality at Different Scales--NCR-
     59--Soil Organic Matter--Regional Research
     Committee--Project development, site visits, and
     project reviews of International Programs
     projects.--Farm Privatization Project Review--
     Scientific Exchange--Joint Meeting--American and
     International Evaluators' Association--U.S.
     Scientific Exchange Team on Biotech Applications--
     Seafood Sciences and Technology Society Meeting--
     Kenaf and Allied Fibers UNFAO--World Aquaculture
     Society meeting--External Panel, U.S. A.I.D
     Funded Pond--ADAP Directors Meeting--Tauile'ile
     Center for Tropical Agricultural Research--Ag
     CATIE on Horticultural Extension, Research, and
     Education--World's Poultry Congress and
     Exhibition--3rd Symposium on Industrial Crops and
     Products--IPM Project--International Congress of
     Meat Science and Technology--Caribbean Food Crops
     Society and CBAG Meeting--Paper on American
     Evaluation Association--NCR-22 Meeting--NADP/NTN
     Meeting--Conduct Workshop on GPRA of 1993--
     American Evaluation Association Meeting--Present
     selected paper ``The Institutional Evolution of
     the Modern Polish Ag System''--Regional IPM
     project--National Extension Leadership
     Development--NELD--Seminar--Expert Consultation
     on Rural Youth Program...........................       1996         22
    Global Conference on Sorghum Ergot--ADAP and
     Western Regional Joint Meeting--Project
     development, site visits, and project reviews of
     International Programs projects.--Caribbean Food
     Crops Society and Tstar CBAG Meeting--Asian
     Center for Livestock Waste Management Meeting--
     2nd Symposium on the Epidemiology and Control of
     Salmonella in Pork--43rd Congress of Meat Science
     and Technology--2nd International Workshop on
     Transgenic Animals and Food Production--XV
     Panamerican Congress of Veterinarian Science
     Meeting--Guest Lecturer Bodles Research Station--
     USDA representative to co-convene the South
     African Binational Commission--Scientific
     Conference for SERD--The International Biotech
     Risk Assessment Symposium--American Society of
     Plant Physiology--CSREES Administrative and
     Financial Review of University of Guam and
     American Somoa University--International Congress
     of Plant Molecular Biology--Review of the Forest
     Science Department of the University of British
     Columbia, Canada--Meeting of the Society for
     Nutrition Education--Meet with State counterparts
     and participate in paper sessions in food safety,
     health, and nutrition.--The VII Meeting of
     International Grassland Congress--Present paper
     at the International Soil Erosion Congress.......       1997         28
    ------------------------------------------------------------------------

                                     ______

                      Questions Submitted by Senator Bond
                             fund for rural america
        Question. For fiscal year 1997, the Fund for Rural America is
    structured in such a way that, in effect, it excludes large, visionary
    and ambitious projects such as the National Corn Genome Initiative--
    NCGI--from participation. The focus and the funding limits make it
    infeasible. I believe that this project is of vital interest to our
    efforts to retain our leadership position in agricultural research and
    to ensure that our producers have the tools necessary for
    environmentally responsible and sustainable agricultural production
    into the next century. Some day, someone in some country will develop
    this research and I feel strongly that it must be us. If not, we will
    likely risk much of the competitive advantage that visionary leaders of
    the past have earned for us today.
        This project was specifically mentioned in Farm Bill report
    language and is precisely the kind of basic science that will be the
    basis for us being competitive into the next century. While I
    understand that many Fund for Rural America projects may yield early
    and visible benefits and are important, we should also have the vision
    to provide the tools that will be the key to success in the future.
        I have started a dialogue with Dr. Gibbons of the Office of Science
    and Technology Policy and Dr. Lane at the National Science Foundation
    to see if another agency is willing, better funded or better suited to
    take this on.
        I understand some modest efforts are underway but we know that an
    unfocused, underfunded or piecemeal approach will not do the job.
        Does the Department have any intention of reconsidering its
    approach to the Fund for Rural America for fiscal year 1998 and fiscal
    year 1999 so that a project of this nature could become eligible?
        Answer. The Department will evaluate fiscal year 1997 Fund
    operations in developing guidelines for fiscal year 1998 and fiscal
    year 1999 programs. It is unlikely, given the original mandate provided
    for in the 1996 Federal Agriculture Improvement and Reform Act, that
    the Fund will shift dramatically in focus to emphasize more fundamental
    research. This suggests that to be competitive, projects such as the
    National Corn Genome, would need to emphasize outcome-oriented research
    projects that include the end user through technology transfer.
        This likely continued emphasis on applied research and related
    education and extension does not mean that the Fund is unresponsive to
    the need to ``retain leadership in agricultural research'' and ``ensure
    . . . environmentally responsible and sustainable agriculture
    production.'' The Fund was designed to further these goals by combining
    the knowledge generated from fundamental research with limited support
    for applied activities that lead to faster and hopefully larger payoffs
    on research dollars.
        USDA has been very active in pursuing ways to increase Federal
    support of genomic mapping and sequencing activities including the
    sequencing of corn. However, prior to proceeding with a program
    designed to map one specific commodity, a number of scientific and
    administrative issues must be addressed. USDA has taken the lead in
    bringing together the National Science Foundation and the Department of
    Energy to discuss how to determine what should be the focus of a genome
    program for agriculturally important species. As a result, USDA asked
    the National Academy of Science, National Research Council-Board on
    Agriculture in collaboration with the Board on Biology to conduct a
    discussion of this issue at the April 26th Academy meeting. Over 60
    participants, including representatives from universities, private
    industry, commodity groups, and Federal agencies, engaged in a daylong
    discussion entitled ``Designing an Agricultural Genome Program.'' An
    abbreviated draft report of this discussion will be released in May.
    Conclusions of the meeting included: (1) Strong support for continued
    and increased funding of investigator initiated individual efforts in
    genomic research, as is supported currently by the USDA, CSREES,
    National Research Initiative Competitive Grants Program--NRI, (2) A
    recommendation for the development of a genome program that would
    include both broad and more specific objectives of a) 100,000 Expressed
    Sequence Tags--EST's--for forty agricultural species--plant, animal,
    and microbe--that would provide important base-level genomic
    information, and b) a more specific sequencing activity on corn and
    sorghum, (3) A recommendation to resolve the proprietary issues of
    genomic research prior to proceeding on an extensive publically funded
    genomic effort. For example, the entire set of expressed corn genes may
    likely be isolated by private industry by the year 2000. Will the
    genomic information be in the public domain or will the Federal
    government find it necessary to fund the genome effort itself to assure
    public access? Because of the proprietary nature of industry efforts in
    genome sequencing, USDA is bringing together industry and Federal
    agencies to discuss this issue so that duplication of effort can be
    minimized. An interagency task force also is being established under
    the National Science and Technology Council (NSTC) to develop an
    initial plan, with the NRI Chief Scientist serving as chair.
        Further science-based discussions of the genome issue will occur at
    a June National Academy Colloquium in Irvine, California entitled
    ``Protecting Our Food Supply: The Value of Plant Genome Initiatives.''
                                     ______

                     Questions Submitted by Senator Bumpers
                            special research grants
        Question. Would you provide me an update on the following CSREES
    special grant items: Farm and Rural Business Finance; The Food Safety
    Consortium; Forestry (UAM); Global Marketing Support Service; The
    Institute for Food Science and Engineering; and Rice Modeling?
        Answer. The information for these special research grants follows:
        Farm and Rural Business Finance.--This program, which has a fiscal
    year 1997 appropriation of $106,000, focuses on three principal areas.
    One is the financial management and performance of rural businesses.
    The second area includes research on financial markets and credit
    institutions serving rural America. The third area addresses the impact
    of public policies and programs on the financial health of rural
    America. The work is carried out at the University of Illinois and the
    University of Arkansas. The program has completed projects on the
    financial structure and efficiency of grain farms, risk and financial
    implications of coordination in hog production, commercial bank access
    to agency market funds through government-sponsored enterprises, and
    competitive challenges for bankers in financing agriculture.
        The Animal Science Food Safety Consortium.--Research for this grant
    program, which has a fiscal year 1997 appropriation of $1,690,000,
    focuses on developing detection, prevention, and monitoring techniques
    that will reduce or eliminate the presence of food borne pathogens and
    toxic substances from the Nation's red meat and poultry supplies. The
    consortium is organized and operated along institutional lines with a
    coordinator and directors managing the research program. Research is
    conducted at the University of Arkansas at Fayetteville, the University
    of Arkansas for Medical Science at Little Rock, Arkansas Children's
    Hospital, Iowa State University, and Kansas State University.
    Researchers under this grant studied Salmonella infection in infants
    and children, the application of polmerase chain reaction technology to
    detect and differentiate Campylobacter jejuni and the more prevalent
    camplobacter coli in pork, and demonstrated under commercial conditions
    that electronic identification systems to track and determine
    contamination points in beef cattle are feasible from an implant
    retention, operational, and retrievability standpoint.
        Forestry Research.--Research supported by this grant, which has a
    fiscal year 1997 appropriation of $523,000, offers programs of teaching
    and research to the landowners of Arkansas and the surrounding region
    by the Arkansas Forest Resources Center. The Center includes one of
    only three Arc View learning centers for natural resources, and has a
    staff well versed in the use of advanced technologies. This research is
    being conducted at the School of Forest Resources, the University of
    Arkansas at Monticello. Significant progress has been made in several
    areas, such as developing intensive fiber farming systems as
    alternatives to soybeans for Mississippi farmers, taking the first step
    toward biological control of the Southern pine beetle by discovering
    the nutrient needs of predators of the beetle so they can be grown and
    studied in artificial cultures, and conducting the first survey of
    nonindustrial landowners in Arkansas for 15 years. Ongoing projects
    include a broad array of topics concerned with best management
    practices, ecological characteristics, effects of different management
    intensities, and streamside buffer zone effectiveness.
        Global Marketing Support Services.--This grant program, which has a
    fiscal year 1997 appropriation of $92,000, provides research and
    service to agribusinesses. The objective of the university research is
    to identify potential foreign markets for Arkansas products and to
    conduct and disseminate foreign market assessment evaluation studies to
    agribusiness firms. This research is being conducted at the University
    of Arkansas in Fayetteville. Some of the recent results include, twelve
    ``Industry/Company Opportunity Reports'' that provided local businesses
    with information about potential export markets; a report on consumer
    attitudes in Mexico and Columbia toward imported products; an
    evaluation of the food system in China, with emphasis on poultry
    sector; two new fact sheets; and additions to an electronic export
    information database that is accessed by local firms.
        Institute for Food Science and Engineering.--Research for this
    grant program has a fiscal year 1997 appropriation of $750,000. As the
    flagship center for the Institute for Food Science and Engineering, the
    Center for Food Processing and Engineering facilitates and encourages
    value-added research and improves the efficiency and effectiveness of
    processing agricultural products. This research will be conducted at
    the University of Arkansas at Fayetteville. Research demonstrated
    promise for a high pressure water spray to remove phomopsis decay and
    brown rot tissue from peaches for processing. Progress was also made in
    modifying commercially-produced rice hull silicate to create silica
    gel. Other research results indicated that holding green and ripe
    peaches in elevated carbon dioxide atmosphere could reduce acidity and
    decay, possibly allowing fruits to ripen prior to processing without
    excessive losses to decay. The Institute also provided information to
    new food business entrepreneurs on food regulations, safety, labeling,
    ingredients, packaging, and financial aspects of starting a food
    business and on market products.
        Rice Modeling.--Research for this grant program, which has a fiscal
    year 1997 appropriation of $395,000, is used to develop a rice industry
    model with domestic and international components to aid U.S. farmers,
    millers, and policymakers in making production, investment, marketing,
    and public policy decisions. This research is being carried out at the
    University of Arkansas, Fayetteville, and the University of Missouri,
    Columbia, and is needed to assist both the U.S. rice industry and
    national policymakers in assessing the impact of existing and proposed
    changes in public policies for rice. This research enables improved
    analysis of both international and domestic policy changes on rice
    production, stocks, prices of substitute crops and consumption.
                             federal administration
        Question. Would you provide me an update on the Geographic
    Information System funded through CSREES Federal Administration?
        Answer. This program, which has a fiscal year 1997 appropriation of
    $844,000, is designed to transfer evolving geographic information
    systems technologies to state and local governments. This technology
    includes Internet access for information, databases, and
    telecommunication for cooperative system development. This research is
    being carried out by the National Center for Resource Innovation
    Chesapeake Bay located in Rosslyn, Virginia, with regional centers in
    Georgia, Arkansas, Wisconsin, North Dakota, and Washington. This
    project has provided the impetus and linkages to facilitate planning
    work done in South Georgia with some assistance given to local tax
    assessment and parcel identification by a Department of Commerce-
    sponsored Economic Development Authority. The Chesapeake project has
    linked seven state conservation entities in an effort to develop better
    watershed models and decision support systems. The Arkansas portion of
    the project has focused on training to educate county employees with
    regard to the technology of geographic information systems and
    geographic positioning systems. The Wisconsin portion has continued to
    simultaneously support the high technology end of the evolution of new
    tools and seek new ways to implement change while measuring the impact
    of such implementation. The work in North Dakota has continued to focus
    on geographically-referenced real time weather information for payments
    and others. The efforts in Washington have provided training for a
    number of state personnel and others from various levels and
    institutions on how to utilize geographic information systems.
                               extension programs
        Question. Would you provide me an update on the following CSREES
    Extension items: Beef Producers Improvement (Arkansas), and Delta
    Teachers Academy?
        Answer. The information on these Extension programs follows:
        Beef Producers Improvement, Arkansas.--The Arkansas Beef
    Improvement Program, which has a fiscal year 1997 appropriation of
    $197,000, utilizes beef cattle farms to demonstrate cost-effective
    management practices. This project addresses primarily local needs by
    setting goals, evaluating resources, and selecting the management
    practices that will help the cattle producer achieve those goals ink
    the decisionmaking process. This work is being carried out at ten
    Arkansas demonstration farms, one in each of ten counties, to reflect
    the different types of cattle operations and cattle producers in the
    area. Research to date include the establishment of demonstration
    farms, collection of benchmark data, including soil tests, production
    information, forage analyses and budgets, and renovation of pastures to
    increase grazing capacity.
        Delta Teachers Academy.--The Delta Teachers Academy, which has a
    fiscal year 1997 appropriation of $3,850,000, provides approximately
    645 teachers at 40 sites throughout the seven Lower Mississippi Delta
    states with development opportunities by teaming them with university
    scholars in on-site sessions and residential summer institutes. The
    Delta Teachers Academy is coordinated out of The National Faculty's
    Southern Region office in New Orleans, Louisiana. The project is being
    conducted at 40 sites selected from within the seven-state Lower
    Mississippi Delta region including the states of Arkansas, Kentucky,
    Illinois, Louisiana, Mississippi, Missouri, and Tennessee. The Academy
    project has focused on the core subjects of English, geography,
    history, mathematics, and science. Humanities, language arts, social
    studies, reading, civics, and interdisciplinary subjects are also
    covered by some sites. The Delta Teachers Academy began offering
    educational development activities for 100 teachers from approximately
    50 rural districts at 10 sites. Training has now been expanded to
    include 645 teachers at 40 sites across the entire seven-state region.
    The project has improved teacher recruitment and retention in the
    region.
                                     ______

                      Questions Submitted by Senator Leahy
                           integrated pest management
        Question. How much funding is the Department directing towards
    Integrated Pest Management and environmentally friendly techniques?
    What is the status of the USDA's goal to have 75 percent of U.S.
    agriculture using IPM? What research activities are being undertaken to
    help farmers reach this goal? What research activities are USDA
    undertaking to develop alternatives to comply with the Food Quality
    Protection Act?
        Answer. The President's budget for fiscal year 1997 includes $34.9
    million for the Department's IPM Initiative and an additional $119.5
    million for the broad category of ``IPM and Biocontrol.''
        The Department's National Agricultural Statistics Service is
    currently conducting national surveys of major field crops and selected
    fruits and vegetables to measure levels of IPM adoption. Much more work
    is needed to refine and implement a sound measurement methodology.
    Since the ERS report was published in 1994, additional studies have
    been completed by Department analysts and outside experts, and most
    support ERS' conclusion that 50 percent or more of the nation's crop
    acreage is currently managed under a ``low'' level of IPM but this
    varies significantly by crop and part of the country. Several analyses,
    including the one published by Consumers Union in ``Pest Management at
    the Crossroads,'' have concluded that considerable more work is needed
    to help producers move along the IPM continuum to the ``medium'' and
    ``high'' levels. We believe that an accelerated effort is needed, and
    warranted, to help growers reduce reliance on high-risk pesticides and
    enhance the sustainability of farm operations.
        The IPM programs supported and conducted by the Department and its
    land-grant university partners develop and deliver solutions to the
    pest management problems faced by our Nation's farmers and urban
    residents. These programs incorporate fundamental knowledge of pest
    biology into education and training programs for farmers and other pest
    managers. In many cases, land-grant university scientists use the basic
    or fundamental knowledge generated by Agricultural Research Service
    scientists or through support from the National Research Initiative as
    the basis for further applied research, research validation trials, and
    finally disseminate this information to agricultural producers through
    Cooperative Extension. The Department's IPM programs are designed to
    develop and help farmers and other pest managers implement new pest
    management approaches to critical pest problems, increase profitability
    and protect the environment. The Agricultural Research Service's
    Areawide IPM Program is demonstrating the effectiveness of new
    technologies over large areas. Areawide projects are participatory
    programs that blend ARS resources and expertise with those of CSREES
    and its land-grant university partners to get IPM methods widely
    implemented in a production region. The Regional Integrated Pest
    Management Grants Program provides a science basis for the development
    of alternative approaches for managing pests including insects, mites,
    weeds, plant pathogens, and ectoparasites. Research supported by this
    program includes the development of individual pest control tactics and
    the integration of multiple tactics into an IPM system. The Pest
    Management Alternatives Program is designed to develop alternative pest
    management tactics to replace those lost through EPA cancellation or
    voluntary withdrawal. Research supported by this program develops new
    and environmentally-friendly tactics for the highest priority needs.
        The Department's IPM research programs will play a critical role in
    developing pest management alternatives that comply with the ``Food
    Quality Protection Act of 1996.'' A special program addressing Food
    Quality Protection Act Issues will address pest management on food and
    feed crops impacted by implementation of the Food Quality Protection
    Act. USDA and EPA will support projects that result in: 1) a better
    understanding of how these pesticides are used, how important each
    particular use pattern is and the attributes and constraints of
    existing alternatives and/or how a significant reduction of risk to
    human health or the environment that would result from replacement or
    mitigation technologies; 2) identification of situations where no
    current viable alternatives exist and documentation of evidence of
    significant potential losses; 3) significant producer involvement; 4)
    natural controls as partial or effective solutions to pest management
    problems; and 5) solutions capable of being rapidly brought to bear on
    critical problems. The goal of this program is to develop or identify
    alternatives for critical needs to insure that crop food producers have
    reliable methods of managing pest problems.
                                     ______

                  Questions Submitted by Representative Fazio
                                 pm-10 research
        Question. The subcommittee approved $873,000 for fiscal year 1997
    through the CSREES budget for PM-10--research about particulate matter
    and air quality that is critical both to California and the rest of the
    nation. The need in our state is great but, unfortunately, this
    research money is currently being split between California and
    Washington State. Describe the nature of research going on at the
    institutions in both states and any other states under this research
    program, tell us how they complement one another, and what your
    proposal in the fiscal year 1998 budget is in this area?
        Answer. As directed by Congress in establishing the PM-10,
    California and Washington special grant, the funding from CSREES is
    divided equally between the two states. Research both by the University
    of California at Davis, and Washington State University address serious
    public concerns related to particulate emissions and resulting effects
    on air quality and potential effects on human health. The overall
    objectives of both the California and Washington program is to
    determine the role of agricultural land and production and management
    practices as sources and causes of particulate emissions, and to
    develop alternative or improved practices to reduce these emissions.
    Because of quite different climatic and soils conditions and types of
    cropping systems and management practices, some specific research
    objectives differ quite distinctly between the two states' programs.
    However, a number of significant collaborative projects are being
    jointly conducted by California and Washington on PM-10 air quality
    problems that are critical to both states, and to other Western states.
        The PM-10 research in California is centered around the intensive
    production of cotton, grain crops, and fruit and nut crops, such as
    almonds, figs, and other high-value crops. Production of these crops
    requires intensive tillage, cultivation, and harvesting operations
    which can create potential problems for dust or particulate emissions.
    Research by scientists at the University of California at Davis is
    developing sampling and monitoring programs to determine the source and
    extent of PM-10 particulates in these agricultural production areas,
    and are collaborating with Washington scientists on developing unique
    biological ``fingerprinting'' techniques to more precisely pinpoint the
    sources of origin. In addition, the California research is developing
    knowledge on the PM-10 emission-potential of various field crop
    operations to be used as a basis for developing new control methods for
    PM-10 emissions from California agriculture. In addition, the data from
    these studies have already been incorporated into San Joaquin Valley
    air authority implementation plans. Two computer models, CALMET and
    CALGRIO, developed by California scientists for urban air quality
    assessment, will be extended for region-wide assessment and planning of
    agricultural impacts on air quality in both California and Washington.
        In Washington, the production of the major crops of dryland wheat
    and grain in low rainfall areas requires the extensive use of crop-
    fallow rotations to conserve soil moisture. This results in leaving
    large acreages of soils with no crop cover, with potential for periodic
    severe wind erosion and severe air pollution problems. Other PM-10
    particulate emission problems are related to the practice of crop
    residue burning in grass seed production fields to control pests and
    permit efficient operation of planting equipment. Research by
    Washington State University and USDA scientists is developing new data
    on the sources of PM-10 emissions during wind events, and the sources
    of such emissions as a basis for effective and economic control
    practices, These studies include work with turners and scientists in
    Oregon and Idaho on alternative conservation or no-tillage cropping
    systems to increase water intake and reduce soil loss by wind, and to
    conserve crop or vegetative residue cover on soils susceptible to wind
    erosion. Washington scientists are also finalizing a wind erosion and
    dust emission prediction model adapted to the western U.S. This
    prediction tool along with a new Manual of Best Management Practices
    for reduction and control of PM-10 emissions is expected to be
    incorporated into recommended air authority state implementation plans
    in Washington, and subsequently in most other western states.
        The PM-10 research in both California and Washington includes
    strong collaboration between federal and state scientists in other
    states with similar PM-10 concerns, and with other ongoing research
    that is complementary. For example, both states have cooperative wind
    erosion and PM-10 emissions research underway using specialized field
    dust samplers and laboratory wind tunnels, with federal and state
    scientists in Texas and Kansas who have extensive experience and
    laboratory.
        Question. Do you intend to keep or alter the state distribution in
    the future--what would make you consider doing so?
        Answer. The research in both California and Washington is providing
    information that may prevent agricultural losses and protect human
    health. However, in keeping with the Administration's policy of
    awarding research grants competitively, no other federal funding for
    this program as currently positioned is requested. Research could be
    continued at the state's discretion using formula funds, or the
    principal investigators could apply for the competitive grants program
    under the National Research Initiative.
                    pest containment and quarantine facility
        Question. I was impressed by the emphasis in each of the
    testimonies by Undersecretary Woteki, Dr. Knipling, and Dr. Robinson
    about the fight against pests and the fight for integrated pest
    management and for food safety. The continuing emphasis on these
    technologies, bioengineered pest-resistant plants, and monitoring
    pesticide levels under the Food Quality Protection Act will have
    increasing importance in the years to come.
        Those missions just happen to dovetail with the mission of the Pest
    Containment and Quarantine Facility at UC-Riverside and UC-Davis. We
    need about $7 million to complete the federal share for this project.
    Although USDA traditionally does not request funds for these CSREES
    projects, I think you are aware of the value of this facility for
    exactly the priorities you have laid out in your testimony. Perhaps you
    could outline for the committee just how a facility like Riverside/
    Davis facility can complement some of the missions you have emphasized
    today.
        Answer. Plant pest management, including pests such as insects,
    nematodes, bacteria, fungi, viruses and weeds, is in a state of
    transition. Traditional pest control strategies based on use of
    synthetic chemical pesticides are being phased out. This is due to
    several factors including: pest populations that have developed
    resistance to chemical pesticides; public pressure to avoid pesticide
    contamination of food and the environment; discovery that some
    pesticides thought to be safe may in fact be carcinogenic; and high
    costs of multiple pesticide applications. The most attractive
    alternative to synthetic chemicals is biological pest control. This
    strategy includes use of parasites; microorganisms; predators; and
    genetically-engineered insects, microorganisms, or resistant plants.
    Sophisticated biological pest control methods are made possible by the
    development in recent years of recombinant DNA technology, which allows
    cloning of genes and stable insertion of such genes into the insects or
    microorganisms. To assay the efficacy of exotic or genetically-
    engineered bio-control agents, quarantine and physical containment
    facilities may be needed to insure safety before field releases are
    made.
        Question. How would USDA accomplish some of these missions without
    this facility--I understand that the containment level offered by the
    proposed Davis facility for this type research is available at very few
    installations throughout the U.S.?
        Answer. Currently, there are a limited number of facilities with
    Biosafety level 3 capability available for biological control
    experimentation with recombinant germplasm and with exotic pests that
    can be used to undertake this research. The facilities at the
    University of California-Davis and the University of California-
    Riverside could significantly accelerate the efforts to develop new,
    innovative, and environmentally-compatible pest control technologies.

                              Subcommittee Recess

        Senator Cochran. This concludes today's hearing. Our next
    hearing will be on Thursday, May 1, at 10 a.m., in room 124 of
    the Dirksen Senate Office Building. At that time we will hear
    from witnesses on the budget request for the Commodity Futures
    Trading Commission and the Food and Drug Administration. Until
    then, the subcommittee stands in recess.
        [Whereupon, at 12 noon, Tuesday, April 22, the subcommittee
    was recessed, to reconvene at 10:08 a.m., Thursday, May 1.]

    AGRICULTURE, RURAL DEVELOPMENT, AND RELATED AGENCIES APPROPRIATIONS FOR
                                FISCAL YEAR 1998

                                  ----------

                             THURSDAY, MAY 1, 1997

                                           U.S. Senate,
               Subcommittee of the Committee on Appropriations,
                                                        Washington, DC.
        The subcommittee met at 10:08 a.m., in room SD-124, Dirksen
    Senate Office Building, Hon. Thad Cochran (chairman) presiding.
        Present: Senators Cochran and Bumpers.

                      COMMODITY FUTURES TRADING COMMISSION

    STATEMENT OF BROOKSLEY BORN, CHAIRPERSON
    ACCOMPANIED BY MADGE BOLINGER, DIRECTOR, OFFICE OF FINANCIAL MANAGEMENT

                                Opening Remarks

        Senator Cochran. The subcommittee will please come to
    order. Today we continue our hearings on the fiscal year 1998
    budget submitted by the President. This morning we will
    consider the budget request for the Commodity Futures Trading
    Commission and the Food and Drug Administration. We are pleased
    to welcome the Chairman of the Commodity Futures Trading
    Commission, Brooksley Born. We invite you to come sit at the
    witness table with your assistant.
        We will put your entire statement, which we have, in the
    record. We thank you for that and we encourage you to make any
    summary comments or remarks that you think would be helpful to
    the committee in understanding the budget request. Then we will
    have an opportunity to discuss the issues raised or ask
    questions.
        You may proceed.

                          Statement of Brooksley Born

        Ms. Born. Thank you very much, Mr. Chairman.
        The Commodity Futures Trading Commission very much
    appreciates this opportunity to discuss the President's fiscal
    year 1998 budget request for the Commission. With me today is
    Madge Bolinger, who is the Director of the Commission's Office
    of Financial Management.
        The CFTC is a small agency with an important mission. It
    oversees the Nation's 11 futures and option exchanges and
    supervises 64,000 commodity professionals who trade on the
    floor of these exchanges or represent customers. These markets
    are growing rapidly, having more than doubled in trading volume
    during the past decade.
        The President's fiscal year 1998 budget request for the
    Commission is $60,101,000, with a staffing level of 600. This
    request represents an increase of $5 million and 20 staff
    persons over the fiscal year 1997 appropriation. About $4
    million of the request is required for the Commission to
    sustain its current level of services; $1 million is to fund
    the requested 20 additional staff-years.
        The Commission's tasks are to ensure the integrity of the
    U.S. futures and option markets, protect customers from fraud
    and other trading abuses, monitor the markets to detect and
    prevent price distortion and manipulation, and maintain the
    competitive strength of the Nation's exchanges.
        The requested increase will be used to continue enhancement
    of the Commission's enforcement and surveillance programs and
    slightly to expand the Commission's industry oversight
    function. Approximately 75 percent of the requested dollar
    increase above the current level of services will be dedicated
    to enforcement efforts to increase our investigative
    activities, litigation support, and cooperative law enforcement
    efforts. The Commission's goal is to send a strong message that
    fraudulent activity and other violations of the Commodity
    Exchange Act will be promptly and thoroughly investigated and
    proceeded against vigorously.
        The increase will also enhance the ability of the
    Commission to use its new integrated market surveillance
    system, which will assist Commission staff in monitoring
    systemic risk in the marketplace. This increase will also
    provide the resources to sustain the necessary level of
    oversight over the compliance programs of the Nation's futures
    and option exchanges and the National Futures Association.
        The increase in funding and staffing is well justified and
    will benefit agricultural producers and processors, financial
    services firms, energy concerns, and many other sectors of the
    economy that depend on the important price-discovery and risk-
    shifting functions of the futures and option markets.
        The Commission remains committed to the elimination of
    unnecessary regulatory burdens and is currently reviewing and
    amending its regulations to streamline them as appropriate in
    light of the Commission's mandate to protect the public
    interest.
        The Commission is also committed to working with Congress
    to improve and update the Commodity Exchange Act through
    legislative amendments. Bills to amend the act have been
    introduced in Congress which would result in the pervasive
    deregulation of our futures and option markets and thus would
    pose grave dangers to the public interest. Our current
    regulatory system has allowed our futures markets to become the
    strongest and most respected in the world by convincing market
    participants from around the world that they are safe, fair,
    and transparent.
        The Commission is strongly opposed to the provisions of the
    bills which would eliminate Government regulation of much of
    our exchange trading in futures and options and would leave
    those who use and rely on the integrity of our markets exposed
    and unprotected. Even if those provisions were enacted, the
    Commission's funding needs for fiscal year 1998 would not
    decrease.
        The Commission recognizes that this subcommittee faces
    difficult appropriations decisions this year. Nonetheless, we
    believe that the increase that the President has requested for
    fiscal year 1998 is essential for the Commission to fulfill its
    congressional mandate and to keep pace with a growing, complex,
    and dynamic marketplace.
        Thank you very much, Mr. Chairman. I would be happy to
    answer any questions that you or other members of the
    subcommittee may have.

                               Prepared Statement

        Senator Cochran. Thank you very much, Ms. Born. We have
    your complete statement and it will be made part of the record.
        [The statement follows:]
                      Prepared Statement of Brooksley Born
        Mr. Chairman and Members of the Subcommittee: I appreciate the
    opportunity to discuss with you the President's fiscal year 1998 budget
    request for the Commodity Futures Trading Commission (``CFTC'' or
    ``Commission'').
                             cftc's budget request
        As you know, the President's fiscal year 1998 budget request for
    the Commission is $60,101,000, with a staffing level of 600. This
    request represents an increase of $5 million over the fiscal year 1997
    appropriation. Approximately $4 million of that request is required for
    the Commission to sustain its current services level, and $1 million is
    to fund the requested 20 additional staff years.
        The Commission recognizes that this Subcommittee and Congress face
    difficult fiscal decisions this year. Nonetheless, we believe that the
    increase the President has requested for fiscal 1998 is not only
    justified but essential if the Commission is to continue to strengthen
    its enforcement and market surveillance programs as well as to carry
    out its other statutory responsibilities fully and effectively.
               overview of funding levels and operational effects
        The Commission enforces the requirements of the Commodity Exchange
    Act (``Act'' or ``CEA''). It is responsible for ensuring the integrity
    of the U.S. futures and option markets, protecting customers from fraud
    and other trading abuses, monitoring the markets to detect and to
    prevent price distortions and manipulation, and maintaining the
    competitive strength of the nation's exchanges. We continue to work to
    protect the vital economic functions of hedging and price discovery
    performed by our futures and option exchanges. Prices established by
    domestic futures exchanges affect what we pay at the grocery store, the
    service station, and copper plumbing and our lumber. Similarly, prices
    on the exchanges assist producers and processors in obtaining fair
    prices for their commodities.
        The Commission oversees 64,000 commodity professionals who trade on
    the floor of the exchanges or represent customers. Our goal is to
    ensure that these firms and individuals meet standards of fitness and
    maintain financial integrity, use proper sales practices and provide
    adequate risk disclosures to their customers.
        These responsibilities have become more challenging in the face of
    dramatic market growth and innovation. Examples of this growth and the
    great expansion of the Commission's oversight and regulatory
    responsibility include the following:
        Increased exchange trading volume.--The CFTC supervises all trading
    of futures and option contracts on eleven U.S. futures exchanges. The
    commodity futures and option markets have experienced and continue to
    experience dramatic growth. They have expanded from agricultural
    markets to markets in futures and options on financial instruments,
    such as interest rates, stock indices and foreign currencies, and
    commodities of global significance , such as energy and metals.
    Exchange futures and option trading has more than doubled in the last
    decade (from 216 million to 495 million contracts)--an increase of 131
    percent. This growth is expected to continue with a volume of 562
    million contracts projected for 1998 (an increase of 160 percent over
    1986). CFTC's programs have encouraged this healthy growth by assuring
    market participants around the world that our markets are safe, fair
    and transparent.
        Growth of over-the-counter derivatives.--The CFTC, along with other
    financial regulators, exercises general oversight of the rapidly
    growing and evolving over-the-counter market in derivative instruments.
    It has responsibility to address fraud and manipulation in significant
    portions of that market. The CFTC also works with the international
    regulatory community to address disclosure and market integrity issues
    in the market. This enormous market, currently estimated to be in
    excess of $50 trillion world-wide, has developed in the past decade.
        Growing managed funds.--The CFTC regulates commodity pool operators
    and commodity trading advisors. Funds committed to professional
    management for futures trading have grown exponentially, from $115
    million in 1975 to over $25 billion today, not counting hedge funds
    also registered as commodity pools. This area of financial investment
    includes a growing number of pension and mutual funds. The Commission
    has worked with industry groups and other regulators to improve and to
    simplify disclosure requirements which allow customers to make informed
    investment decisions.
        Rapid innovation.--The CFTC approves all contracts traded on
    futures and option exchanges and all rules of such exchanges and the
    National Futures Association. Since 1986, the CFTC has approved over
    400 new contracts for trading on exchanges. Many of these new,
    innovative contracts have brought new market users within CEA
    protection for the first time. The CFTC has worked closely with both
    the exchanges and industry representatives to make certain new
    contracts will create hedging opportunities and enhance price discovery
    and price basing of the underlying commodities.
        Expanded Congressionally mandated responsibilities.--The CFTC's
    authority and responsibilities have grown substantially since the
    Commission was created in 1975. After three years of intense
    Congressional scrutiny, Congress passed the Futures Trading Practices
    Act of 1992 giving the CFTC a number of new responsibilities to ensure
    market integrity. Ongoing activities include enforcing the heightened
    audit trail standards for exchanges and improving the CFTC's oversight
    and enforcement programs. In 1995 Congress reaffirmed these obligations
    by adopting a reauthorization of the Commission, which authorized
    appropriations through fiscal year 2000.
        Growing internationalization of the markets.--Financial and
    commodities markets are becoming increasingly global, further
    increasing the complexity of the CFTC's oversight responsibilities. The
    agency must respond promptly and effectively to international
    developments, such as the collapse of Barings Plc. and the issues
    surrounding Sumitomo Corporation's copper trading. The agency has
    ongoing responsibilities to ensure that its regulatory framework is
    capable of responding to the domestic implications of problems arising
    anywhere in the world. It has become a leader in encouraging
    international cooperation and improvement of regulation abroad.
        Technology developments.--The exchanges, commodity professionals
    and users of the markets are turning to newly developed technology to
    cope with the huge growth in this industry. Likewise, the CFTC has had
    to augment its staff as well as its hardware and software to keep pace
    with the growth in the markets. Technology also presents some
    increasing regulatory challenges to the CFTC, including the need to
    police futures and option trading advice and sales offered illegally
    via the Internet.
                                 cftc resources
        Despite its increasing responsibilities, the CFTC's budget remained
    essentially flat from fiscal year 1992 through fiscal year 1994.
    Consequently, the Commission reduced personnel, substantially cut non-
    staffing expenses, and delegated additional duties to self-regulatory
    organizations. The CFTC also deferred computer upgrades and systems
    development for important market surveillance and other activities. In
    short, the Commission and its staff were stretched very thin, and it
    became extremely difficult to provide the oversight and enforcement
    presence on which market users and the economy at large depend.
        Over the past three years, the Administration and Congress have
    recognized the need for a stronger CFTC and have provided for an
    increase in staffing, particularly in enforcement personnel. The
    budgetary support of the agency in recent years has reflected the
    recognition of the critical need to supervise the futures and option
    markets effectively and to enforce the laws against fraud and
    manipulation in those markets.
        In fiscal year 1998, the requested increase will be used to
    continue enhancing the Commission's enforcement and surveillance
    programs and slightly to expand its industry oversight activities.
    Approximately 75 percent of the program increase will be dedicated to
    enforcement activities to increase its investigative activities,
    litigation support and cooperative law enforcement efforts.
        Additional funding will also allow the Commission to continue the
    efforts started in fiscal year 1996 to redesign and implement an
    integrated market surveillance system which will assist Commission
    staff in monitoring systemic risks in the marketplace. One of the major
    enhancements of the system will be the ability to obtain and analyze
    daily option large trader data along with daily futures large trader
    data. Currently, we receive futures large trader data daily, but
    options data is only available on a weekly basis. The system will
    reduce the overall reporting burden of certain commodity professionals,
    who will report large trader data only to the CFTC rather than to
    multiple exchanges.
        This increase will also provide the resources to sustain the
    necessary level of oversight over the compliance programs of the
    futures and option exchanges and the National Futures Association.
        The President's fiscal year 1998 budget request will increase the
    Commission's staffing level by about 3 percent. This slight increase
    would restore some of the erosion in staffing in the early 1990's and
    would put the CFTC at an authorized staffing level 3 percent lower than
    its fiscal year 1992 authorized staffing level.
        The requested increase in funding and staffing is well justified
    and will benefit agricultural producers and processors, financial
    services firms, energy concerns and many other sectors of the economy
    that depend on the price discovery and risk-shifting functions of
    futures and option markets.
                         highlights of fiscal year 1996
                                  enforcement
        As mentioned earlier, the majority of the budgetary increases that
    the Commission has received since fiscal year 1995 have been for the
    enforcement program. In fiscal year 1995, the Commission began
    restructuring and enhancing its Division of Enforcement, and that
    effort continues today. A strong, effective enforcement program is one
    of the Commission's top priorities. Our goal is to send a strong
    message that fraudulent activity and other violations of the CEA will
    be promptly and thoroughly investigated and proceeded against
    vigorously. As a result of the Commission's civil injunctive actions in
    fiscal year 1996, approximately $6.4 million in customer funds and
    other assets were placed under the protection of receivership.
    Case Highlights
        During fiscal year 1996, resources were devoted to significant
    cases which not only addressed the specific wrongdoing alleged in a
    particular complaint, but also communicated to the public the
    Commission's concern with a specific area or highlighted the
    Commission's view regarding the significance of acts and practices that
    have the potential to cause significant harm to markets, customers, and
    market participants. Those cases include the following:
      --The filing and simultaneous settlement of an administrative action
            against Deloitte & Touche and one of its former partners. The
            Commission's order found that the partner failed to conduct an
            audit of a futures commission merchant (``FCM'') in accordance
            with generally accepted auditing standards and failed to
            investigate properly and to report on material inadequacies in
            the FCM's internal controls. Deloitte was held liable for the
            partner's violations. Deloitte agreed to pay a $100,000 civil
            penalty and to comply with certain undertakings. The partner
            agreed to the entry of a cease and desist order and a
            Commission censure. In re Deloitte & Touche, CFTC Docket No.
            96-10 (filed September 26, 1996).
      --The filing and simultaneous settlement of an administrative action
            against Fenchurch Capital Management, Ltd. The Commission's
            order found that Fenchurch attempted to manipulate and did
            manipulate the value of its position in ten-year U.S. Treasury
            note futures contracts by cornering the available supply of the
            cheapest-to-deliver notes. According to the Commission's order,
            Fenchurch increased its position in the issue through a series
            of repurchase transactions at a time when the notes were in
            tight supply. Fenchurch exacerbated the tightness in the supply
            of the cheapest-to-deliver notes by increasing its position and
            intentionally withholding the notes from the market.
            Fenchurch's conduct took place after expiration of trading on
            the futures contract, while those holding short positions in
            the market were preparing to make delivery. The Commission's
            action and its underlying investigation were coordinated with
            the Securities and Exchange Commission (``SEC'') and the
            Chicago Board of Trade (``CBT''), both of which filed related
            charges. The Federal Reserve Bank of New York also assisted the
            Division in its investigation. In settling the CFTC's action,
            Fenchurch consented to the entry of a cease and desist order
            and to various undertakings related to its Treasury market
            trading. Fenchurch also agreed to conduct a review of its
            policies and procedures and, if necessary, to formulate and to
            implement reforms of those policies and procedures. Fenchurch
            agreed to pay a civil monetary penalty of $600,000, which also
            satisfied Fenchurch's obligations under the SEC's consent order
            of permanent injunction. In re Fenchurch Capital Management,
            Ltd. [Current Transfer Binder] Comm. Fut. L. Rep. (CCH) para.
            26,747 (CFTC July 10, 1996).
        Also, resources were devoted to enhance a ``quick strike''
    enforcement response capability. This effort has resulted in
    instituting injunctive actions within weeks, or even days, of
    discovering suspected illegal activity. To date, examples of notable
    cases brought by the Commission using this new capability include the
    following:
      --The filing of an injunctive complaint against Donald Chancey and a
            firm controlled by him alleging violations of the anti-fraud
            and registration provisions of the CEA and Commission
            regulations in connection with an unregistered commodity pool
            operator. According to the complaint, the defendants solicited
            individuals to invest in a pool by making misrepresentations
            that the funds would be invested in silver futures and that the
            past trading of the pool had been profitable. The complaint
            alleges that the defendants placed few actual trades and that
            those resulted in losses. The defendants allegedly used some of
            the funds solicited to pay purported interest to certain
            earlier investors and converted the majority of the funds to
            their own use. The day the complaint was filed, the federal
            district court entered an ex parte order freezing the
            defendants' assets and protecting and granting the Commission
            access to books and records. The court also appointed a
            temporary equity receiver. The Division used the Internet to
            inform the public about this enforcement action and to solicit
            information concerning the whereabouts of Chancey, who
            disappeared before the Commission filed its action against him.
            The Division posted a picture of the defendant on its home page
            and later posted notices publicizing the court sanctioned
            auction of the defendants' property. CFTC v. Donald B. Chancey,
            et al. No. 7:96-CV-61 (M.D. Ga. filed July 1, 1996).
      --An injunctive action filed against Ken Willey. Willey allegedly
            defrauded pool participants by distributing account statements
            which misrepresented the changes in net asset value and income
            and loss realized by individual participants. According to the
            complaint, the defendant illegally received investor funds in a
            name other than that of a commodity pool and commingled pool
            property with assets of other persons. The day the complaint
            was filed, the federal district court entered a consent order
            of preliminary injunction freezing Willey's assets, protecting
            and granting Commission access to books and records, and
            enjoining future violations of the nature alleged.
            Subsequently, the court entered an order finding Willey in
            contempt and ordering him jailed until he complied with the
            preliminary injunction. After six months of incarceration,
            Willey was released from jail without ever complying with the
            order to produce books and records. In the interim a receiver
            was appointed, and a motion for summary judgment was filed by
            the Commission on all counts except fraud. The Commission is
            awaiting the outcome of the summary judgment motion and a
            distribution of assets to investors by the receiver. CFTC v.
            Ken Willey, Civ. No. 96-0200 (E.D. Wash. filed April 19, 1996).
                 fraud in foreign currency futures and options
        An important part of the Commission's Enforcement program in recent
    years has focused on the fraudulent off-exchange sales of foreign
    currency futures and option contracts to the public. These cases
    typically involve boiler room operations that seek to lure in the
    vulnerable through high-pressure sales tactics and false promises of
    quick riches. In recent years, we have seen a rise in cases of
    ``affinity fraud,'' in which members of particular ethnic or religious
    groups are targeted as victims of the fraudulent activity.
        The Commission has brought 19 cases involving the illegal sale of
    foreign currency futures or option contracts to the general public
    since 1990. In those cases, more than 3,200 customers invested over
    $250 million in foreign currency schemes, much of which was lost.
        One of these cases, Dunn v. CFTC, U.S. (1997), rev'g 58 F.3d 50 (2d
    Cir. 1995), was decided by the Supreme Court in February of this year.
    In that case the Commission alleged that the defendants had solicited
    and accepted funds from approximately 400 customers and that Dunn had
    informed customers that they had suffered losses of at least $95
    million at the time the defendants ceased operations. The Supreme Court
    decided the narrow issue of whether futures and options are treated the
    same under the so-called Treasury Amendment, which exempts from the CEA
    some transactions in foreign currencies that would otherwise be covered
    by the CFTC's jurisdiction. The Court concluded that options are
    treated in the same manner as futures under the Treasury Amendment.
        Our enforcement experience demonstrates that fraud of the retail
    public is rampant in this area and will require a strong enforcement
    presence for the foreseeable future. The Commission strongly believes
    that, whether through judicial interpretation of the existing statutory
    provisions or through the legislative initiatives now pending before
    both Houses of Congress, its authority vigorously to pursue the
    investigation and prosecution of foreign currency futures and option
    scams targeted at public customers should be affirmed.
                         exchange contract designation
        In fiscal year 1996, the Commission approved 92 new futures and
    option contracts--an approval rate of one every 2.7 work days. Many of
    the innovative new contracts approved by the Commission were designed
    to meet specialized hedging needs of firms in the agricultural sector.
    For example, the Commission approved five CBT corn yield insurance
    futures contracts based on the states of Illinois, Indiana, Nebraska
    and Ohio as well as the U.S. as a whole. These contracts were designed
    to provide a vehicle for crop insurance companies and other commercial
    and agricultural entities to hedge financial risk related to
    fluctuations in the yields of corn.
        Early in fiscal year 1997, the Commission proposed rules for new
    ``fast-track'' procedures for processing exchanges' contract
    designation applications and rule changes. Those rules were adopted by
    the Commission on February 27, 1997. Under the rules, certain contract
    applications may be approved within 10 days following receipt by the
    Commission, while other contracts may be approved within 45 days. Most
    exchange rules will go into effect within 10 days after they are filed
    with the Commission.
                           hedge-to-arrive contracts
        Recently, a number of agricultural producers have used various
    grain contracts referred to as hedge-to-arrive (``HTA'') contracts.
    High grain prices experienced in fiscal year 1996 and the ``rolling
    forward'' of these contracts created financial strains on some grain
    elevators and producers. As a result, on May 15, 1996, the Commission's
    Division of Economic Analysis released statements of policy and
    guidance regarding HTA contracts. In the first statement the Division
    stated that it would not base a determination of the legality of any
    such contracts existing as of May 15, 1996, under the forward contract
    exclusion of the CEA solely on the fact that the parties entered into a
    subsequent agreement to use cash payments to unwind these contracts.
    The second statement provided guidance regarding the risk implications
    of particular features of these contracts. On November 13, 1996, the
    Commission filed three administrative complaints involving HTA
    contracts, which are currently pending before the CFTC's administrative
    law judges.
                                market oversight
        The CFTC's mandate requires it to oversee the activities of futures
    and option exchanges, the National Futures Association (``NFA''), an
    industry self-regulatory organization, and commodity professionals.
    These oversight activities are designed to protect customer funds, to
    prevent trading and sales practice abuses, and to ensure the financial
    integrity of regulated firms. The CFTC's ongoing oversight activities
    include the following: financial and sales practice audits; rule
    enforcement reviews; trade practice investigations; review of margin,
    clearance and settlement rules; and activities ensuring that firms
    carrying customer funds are adequately capitalized and have properly
    segregated customer funds from firm funds.
                         exchange audit trail standards
        The Commission has devoted considerable effort to encouraging
    compliance with the enhanced exchange audit trail standards that became
    effective in October 1995 for high volume exchanges. The enhanced audit
    trail standards, which were mandated by the Futures Trading Practices
    Act of 1992, require these exchanges to demonstrate that their trade
    records are unalterable, continuous, independently timed, and properly
    sequenced to the extent practicable. In late 1994 and early 1995, the
    Commission tested each high volume exchange's audit trail system and
    provided recommendations for system improvements. The exchanges were
    informed that adoption of the recommendations would place them within a
    ``safe harbor'' for good faith efforts to comply with the enhanced
    standard. Two of the four exchanges tested adopted all of the
    recommendations, and the Commission determined that they are in the
    safe harbor. In fiscal year 1996, the Commission staff re-tested the
    audit trail systems of the other two exchanges, the Chicago Mercantile
    Exchange (CME) and the CBT, to determine whether they were in
    compliance with the heightened standards.
        On August 12, 1996, the Commission issued a report which addressed
    exchange compliance with the heightened audit trail standards. The
    report outlines further steps to be taken by the exchanges and the
    Commission to assure future compliance and to address pending exchange
    dual trading petitions. The Commission has been proceeding with the
    plan set forth in the report to address those petitions.
        The Commission has recently re-tested the Comex Division of the New
    York Mercantile Exchange and is currently testing the New York Cotton
    Exchange (NYCE). NYCE recently qualified as a large-volume exchange
    subject to the heightened audit trail standards under the Act.
                the close of cbt's march wheat futures contract
        On March 20, 1996, in the final few minutes of trading on the CBT
    March 1996 wheat futures contract, the price rose an unprecedented
    $2.30 per bushel to $7.50. Regulatory reviews of the March wheat
    expiration were conducted by CFTC and CBT staff, which reviewed records
    and conducted interviews to determine whether the CBT properly enforced
    its rules and whether any violations of the CEA may have occurred. On
    November 26 1996, the Commission made public a staff report which
    included a detailed analysis of the matter. Based on the report, the
    Commission instituted a review of the adequacy of six disciplinary
    actions initiated and settled by the CBT and made a number of
    recommendations to the CBT to improve its procedures which is still
    ongoing.
                     chicago board of trade delivery points
        On December 18, 1996, the Commission notified the CBT that, in the
    Commission's view, its corn and soybean contracts no longer met
    requirements under Section 5a(a)10 of the CEA of providing delivery
    terms which ``tend to prevent or diminish price manipulation, market
    congestion, or the abnormal movement of such commodity in interstate
    commerce.'' This action was prompted by the failure of the CBT to
    respond to changes in the cash grain markets, including a number of
    warehouse closings at its primary delivery point in Chicago. During
    1995 the delivery capacity in Chicago was reduced by about 50 percent
    as three of the six regular elevators at that location ceased normal
    operations. In late 1996 a fourth warehouse announced intentions to
    cease operation. Nevertheless, in October 1996, the CBT membership
    rejected proposals of CBT's Board to expand delivery capacity under the
    futures contracts. Problems in the expiration of CBT's 1996 grain
    futures contracts (other than March 1996) were avoided only as a result
    of intensive monitoring of the markets by the CFTC and the CBT.
        Following the requirements of the CEA, the CBT had until March 4,
    1997, to adopt and submit contract amendments to correct the
    deficiency. The CBT has formed a task force to formulate contract
    changes. This task force made recommendations to the Exchange's
    executive committee on March 3, 1997, and on March 4 those
    recommendations were approved by the entire Board for submission to
    CBT's membership. The CBT membership voted on those recommendations on
    April 15, 1997, and approved the changes by a 2-1 margin. In addition,
    CFTC published the highlights of the CBT's proposal in the Federal
    Register and has requested public comments on the proposal. CBT made a
    formal submission to CFTC on April 17, 1997, for approval.
        The Commission's December 18, 1996 letter also requested the CBT to
    review the terms of its wheat contract and to report back to the
    Exchange by April 18 (120 days). We understand that this matter is also
    under study at the CBT.
                            international activities
        The Commission continued its coordination and cooperation with
    foreign regulators during fiscal year 1996. Major international
    activities of the Commission included the following:
      --Coordination and cooperation with foreign regulators concerning
            Sumitomo Corporation's copper trading.
        Co-sponsorship of a conference with Japan's Ministry of
    International Trade and Industry (MITI) and the U.K. Securities and
    Investment Board (SIB) on November 25-26, 1996, concerning regulatory
    issues posed by commodity futures markets. Seventeen countries
    responsible for the supervision of the world's leading commodity
    futures markets issued the London Communique at the conclusion of the
    conference. The Communique sets out the proposal of the authorities to
    strengthen the supervision of these markets world-wide, particularly in
    the areas of the contract design, market surveillance including large
    trader reporting mechanisms, and information sharing. The CFTC is
    actively engaged in the work program the authorities agreed to
    undertake to accomplish that goal.
      --Active participation in the International Organization of
            Securities Commissions' (``IOSCO'') Technical Committee and its
            Working Parties.
      --The conduct of the CFTC's sixth annual training seminar for foreign
            futures regulators, covering the operation of U.S. futures
            markets and the U.S. regulatory system governing futures
            trading. This seminar brought together 79 participants from 29
            foreign nations.
      --The adoption of a multilateral understanding, Declaration on
            Cooperation and Supervision of International Futures Exchanges
            and Clearing Organizations (``Declaration''), by eighteen
            international futures regulators as a result of a joint CFTC-
            SIB initiative.
      --The execution of a Memorandum of Understanding with New Zealand on
            September 19, 1996, concerning consultation and mutual
            assistance in the exchange of information in connection with
            enforcement matters.
      --Continued information sharing and cooperation with foreign
            authorities. In fiscal year 1996, the CFTC made over 50
            requests for assistance to 38 foreign authorities. The CFTC
            also responded to over 55 requests for information from more
            than 25 foreign authorities.
                       regulatory coordination and reform
        Regulatory coordination and reform remain an important part of the
    CFTC's agenda. The CFTC is a member of the President's Working Group on
    Financial Markets along with the Treasury Department, the SEC, and the
    Federal Reserve Board of Governors. The Working Group continues to meet
    regularly to coordinate regulatory policy. The CFTC also works closely
    with other agencies, including the U.S. Departments of Agriculture and
    Energy.
        The Commission is committed to the elimination of unnecessary
    regulatory burdens and is currently reviewing its regulations to
    streamline them as appropriate in light of the Commission's mandate to
    protect the public interest in our futures and option markets. The new
    fast-track approval procedures adopted last week and described above
    are part of this effort.
                              pending legislation
        Bills to amend the CEA have been introduced in Congress, S. 257 and
    H.R. 467. In testimony before the Senate Committee on Agriculture,
    Nutrition and Forestry on S. 257, the Commission presented its view
    that the bill would result in the pervasive deregulation of our futures
    and option markets and thus would pose grave dangers to the public
    interest. The changes included in the bill would radically alter the
    regulatory system that has allowed our futures exchanges to become the
    strongest and most respected in the world and would leave those who use
    and rely on the integrity of those markets exposed and unprotected. For
    these reasons, the Commission strongly opposes the provisions of the
    bill which would eliminate federal oversight and regulation of futures
    and option exchange trading.
        The CFTC was created in 1975 because Congress recognized the need
    for an expert, independent agency to protect the important national
    interests that are served by futures and option markets and to ensure
    market integrity through oversight of the exchanges and the thousands
    of intermediaries who invest individual, pension and corporate funds in
    these markets. The price-discovery and risk-shifting functions of these
    markets, long utilized by agricultural producers and processors, are
    now essential to the economic well-being of many sectors of the U.S.
    economy. While the safety and integrity of the futures markets are as
    important as ever to agricultural processors, producers, and consumers,
    they are now equally important to financial institutions, multinational
    corporations, mutual fund advisors and participants in the cash markets
    for energy, metals and many other products. These bills would adversely
    affect the safety and integrity of our markets.
        We do not yet know whether the outcome of the legislative process
    will result in any significant changes in the Commission's mandate. Any
    major changes in its legislative authority would likely take a period
    of time to implement. As to fiscal year 1998, the Commission believes
    the demands on its resources would actually be greater if the
    legislation were to pass since many rule changes and other Commission
    actions would be necessary to implement the more significant proposals
    in the draft legislation. Furthermore, a major shift in emphasis and
    resources from market oversight and supervision of regulated persons to
    enforcement activities would likely be necessary.
        The Commission recognizes the need to ensure that the CEA adapts to
    changes in the market place and thus continues to provide an effective
    level of regulation and public protection. We are committed to working
    with Congress to improve the Act through legislative amendments.
                                   conclusion
        The CFTC is committed to building on the achievements of the last
    several years to fulfill its Congressional mandate and to keep pace
    with a complex, dynamic marketplace. To accomplish this goal and to
    make essential improvements to our enforcement, surveillance and
    oversight programs, the Commission requires the proposed increase in
    its fiscal year 1998 appropriation. This increase will enable the
    Commission to heighten its surveillance of major market centers and to
    ensure that its surveillance system upgrade stays on schedule. It will
    sustain the necessary level of oversight over the compliance programs
    of the exchanges and the NFA. Additional funding also will enable the
    Commission's enforcement program to respond more quickly to fraud,
    manipulation and other wrongdoing in the marketplace, to provide a
    greater level of customer protection and better to promote market
    integrity.
        Thank you, Mr. Chairman. I would be happy to respond to any
    questions.

                   Proposed Legislation to Deregulate Markets

        Senator Cochran. Ms. Born, the legislation that you
    mentioned being considered by the Senate Agriculture Committee
    now for reforms in the law authorizing the CFTC's regulatory
    powers, if enacted, you say would not have any effect on your
    budget needs for the fiscal year. Did I understand that
    correctly?
        Ms. Born. For fiscal year 1998, I believe that is correct.
    It would have a long-term impact on the Commission's
    operations. In the short term, we feel that the need for rule
    changes and alteration of the methods of policing these markets
    would require the same amount of appropriations.
        In the long term, we would need to shift all of our
    activities or most of our activities from our current oversight
    and surveillance activities that are designed to deter and to
    detect manipulation and fraud before they occur, and have to
    shift our resources and emphasis to enforcement, since we would
    no longer have the ability to detect these activities early on
    and to deter them.

                                Trading Activity

        Senator Cochran. There has been, I am told, a good bit of
    shift and change at the Board of Trade in Chicago and at the
    Merc in terms of business going elsewhere or people trading
    bypassing these exchanges. What affect, if any, does that trend
    have on your budget needs?
        Ms. Born. Well, in fact last year, 1996, was the biggest
    year CBOT ever had. It had its highest trading volume and it
    had an increase in its profits of 26 percent. Overall last
    year, 1996, was the second largest trading volume for all of
    our exchanges put together.
        We do not see any significant falloff in the trading volume
    or activity on these markets. Almost 500 million contracts were
    traded last year.

    Proposal to Alter Delivery Specifications for Corn and Soybean Futures
                                   Contracts

        Senator Cochran. The supplemental which we are considering
    now in the Senate, and the House as well, contains some
    language regarding the Chicago Board of Trade's proposal to
    alter the delivery provisions of its corn and soybean futures
    contracts which was put in on the House side, and we have
    language that was approved by our committee yesterday on this
    subject, too. I would like to have your comments about it just
    for clarification.
        You have indicated to us that the House language would
    conflict with the Commission's statutory obligation to approve
    or initiate disapproval proceedings with respect to the Chicago
    Board of Trade's rule amendments within 180 days of their
    submission. Could you explain to us what the problem is and do
    we need to address that in legislation?
        Ms. Born. I do not think any legislative action is needed
    on this issue. Let me explain what the current situation is.
        The Commission notified the Chicago Board of Trade in
    December 1996 that its corn and soybean contracts no longer met
    the provisions of the act with respect to delivery under
    section 5a(a)(10) of the act in that they did not tend to
    prevent or diminish the likelihood of manipulation or price
    distortion. This was because Chicago was a primary delivery
    point, and four out of the six remaining grain elevators in
    Chicago had closed down last year, leaving virtually no
    delivery capacity there.
        That started a statutory procedure under section 5a(a)(10)
    that gave the Chicago Board of Trade 75 days to make a proposal
    to the Commission to amend the delivery provisions. They made
    that proposal on the 16th of April, and we currently have that
    out for public comment through the 15th or 16th of June.
        The Commission's statutory obligation at this point is to
    determine whether the new proposal meets the delivery
    requirements of the act. If it does, we would then approve it.
    If it does not, we would have the statutory responsibility and
    authority to amend it or supplement it to impose appropriate
    delivery standards.
        The House Appropriations Committee report language
    recommended that we delay action until a GAO study goes into
    effect. The problem that we have with that language is that,
    within 180 days of the submission to us by CBOT on April 16, if
    we have not acted to approve, disapprove, or amend, as is our
    statutory responsibility, CBOT's proposal might go into effect
    automatically and we might lose all statutory oversight power
    at that point.
        We believe that the Appropriations Committee put that
    language in the report not realizing that the likely
    implications of the language was that the CBOT proposal would
    go into effect, because I think that the motivation for that
    language was a concern about the CBOT proposal.
        Senator Cochran. That language is in the House report. The
    Senate yesterday included language in its report which reflects
    the fact that the Commission has solicited public comment on
    the Chicago Board of Trade's proposal and indicates that, after
    consideration of public comments and using appropriate
    criteria, the Commission should complete the process and make a
    decision.
        So you would prefer, as I understand it then, the Senate
    report language? When we get to conference we will have an
    opportunity to discuss this and in our statement of managers we
    can express the sense of Congress on this subject. We should,
    since there are conflicting provisions now between the House
    and Senate reports.
        Ms. Born. I have not seen the specific language that you
    just referred to, but from your description it sounds as though
    it would be more consistent with our statutory obligations
    under the act and what we would prefer to do.
        Senator Cochran. Let me read it so we are sure that the
    record is correct here on what our committee report says:

        The committee is aware that the Commodity Futures Trading
    Commission has solicited public comment on the Chicago Board of
    Trade's proposal to amend its delivery specifications for corn
    and soybeans. The provisions of the Commission Exchange Act
    require futures delivery points that ``will tend to prevent or
    diminish price manipulation, market congestion, or the abnormal
    movement of such commodity in interstate commerce.'' Giving due
    regard to public comments received and using the appropriate
    criteria, the Commission should complete the process and render
    a decision after taking into account the analysis available to
    it.

        Ms. Born. That seems completely acceptable and appropriate,
    Mr. Chairman.
        Senator Cochran. Thank you very much.
        Senator Bumpers.

                          Statement of Senator Bumpers

        Senator Bumpers. Mr. Chairman, I must confess that this
    whole issue is immensely complex to me.
        Senator Cochran. Yes, it is. It is enough to give us all a
    headache.
        Senator Bumpers. I visited Ms. Born and I visited with
    people on the other side of the issue, and I do not understand
    the Board of Trade's proposal on contract delivery proposal on
    corn and soybeans. I will do my very best to educate myself
    before I have to deal with it if I do have to deal with it.
        But let me ask you this. Have you testified before the
    Senate Agriculture Committee on the bill? I guess it is on
    reauthorization, is it not?
        Ms. Born. It is not on reauthorization, Senator Bumpers. It
    is on amendments to the CEA.
        Senator Bumpers. Does it include corn and soybeans?
        Ms. Born. It does not.
        Senator Bumpers. That is not a part of it?
        Ms. Born. No; the Commission is reauthorized until the year
    2000. I did testify on S. 257, which would amend the Commodity
    Exchange Act, in February before the Senate Agriculture
    Committee.

                    Proposed Professional Markets Exemption

        Senator Bumpers. What is it that the so-called Harkin-
    something bill does? What does it do?
        Ms. Born. Well, it does a number of things. It is a very
    broad-reaching bill. The provision that most directly deals
    with exchange trading, as opposed to over-the-counter trading
    in derivatives, is called the professional markets exemption,
    which would exempt from Federal oversight and regulation any
    futures exchange which chose to restrict trading on the
    exchange to business entities with $1 million or more of net
    worth.
        The exchanges have said that at least 90 percent of their
    current trading volume is on behalf of such eligible entities,
    and therefore with very simple rule changes they would be able
    to eliminate Federal oversight of those markets.
        Under the Senate bill, the Commission would still have the
    ability to bring enforcement actions after the fact for fraud
    and manipulation. We would, however, lose all the requirements
    for recordkeeping and reporting by the exchanges. There would
    be no standards for their contracts like these delivery
    provisions. There would be no audit trail requirements. There
    would be no standards for their rules or for their governance.
        Also, if the commodity professionals we regulate, of which
    there are 64,000, chose to deal solely on the exempted
    exchanges, we would lose all oversight power over those people.
    They would no longer have to register. There would not be any
    fitness standards. There would not be any net capital
    requirements or other financial integrity standards.
        So, in effect, we would lose the current ability we have to
    detect and prevent manipulation and fraud in these markets,
    although once manipulation and fraud, in fact, occurred we
    would be able to start an enforcement investigation and bring a
    suit against that. However, up until now, for the last 70 years
    the major thrust of futures and option regulation has been on
    prevention and detection of these abuses, rather than allowing
    the abuses to go ahead and occur, because of the enormous
    disruption to our economy that that might involve.
        Senator Bumpers. The Chicago exchanges say that they have
    grown 10 percent over the last several years and their
    competitors have grown 500 percent, and they attribute that to
    the fact that they have to comply with literally dozens or
    hundreds of onerous, unnecessary regulations of the CFTC. And
    they think it is time to eliminate a lot of that.
        As you said, right now I assume any new trading that they
    devise, that they want to do, they have to get your approval
    on, do they not?
        Ms. Born. That is right, and we have a fast track approval
    where----
        Senator Bumpers. How fast?
        Ms. Born. Ten days for cash-settled contracts that are not
    agricultural. For agricultural contracts or for physical
    delivery contracts, like a copper contract that required
    physical delivery, we have a 45-day time period because we put
    that out for public comment so that the industry, the
    commercial interests that rely on these markets, the
    agriculture producers and processors, the copper industry, will
    have an opportunity to comment publicly about how this would
    impact on their marketplace.
        Senator Bumpers. How does Cargill and Archer Daniel and
    people like that feel about the Harkin bill? Do you know?
        Ms. Born. A number of the agricultural groups, including
    specifically Cargill, but a number of the agricultural trade
    organizations as well, have come out and expressed grave
    concern about the professional markets exemption.
        Senator Bumpers. Thank you, Mr. Chairman.

                    CFTC Enforcement Activities and Staffing

        Senator Cochran. Thank you, Senator.
        Ms. Born, we noticed that the budget request is $5 million
    over the level of this current fiscal year. Your testimony
    indicates that $4 million of that would be to allow the CFTC to
    sustain its current services level and $1 million is requested
    to fund 20 additional staff-years. We have tried over the years
    to add funds as needed for enforcement activities and your
    testimony indicates that 75 percent of the program increase
    requested for 1998 will be dedicated to enforcement activities.
        I am wondering whether the funds that we have previously
    been adding to the budget for enforcement activities have been
    used to add staff resources in the enforcement area over the
    last 3 years? And I am curious to know what new enhancements
    are proposed with the funds that you say will be needed this
    year, for this next fiscal year.
        Ms. Born. We have had about a 10-percent increase in our
    enforcement onboard staff between fiscal year 1995 and fiscal
    year 1996. We currently have about 157 people onboard in
    enforcement, and we are authorized to have 169 people. There
    are hiring processes under way to hire the other 12--that is,
    we are recruiting and interviewing people for those positions.
        In terms of the future use of this additional funding, of
    the 20 people who would be hired 10 would be new enforcement
    personnel, one would be an additional person for the Office of
    General Counsel to assist the Commission in the additional
    adjudicatory proceedings that our beefing up of the enforcement
    activities has generated, and one would be for the Office of
    Proceedings, which is our adjudicatory process, staffing again
    required because of the increase in the enforcement activities
    of the Commission.
        That means that 60 percent of the new staffing we are
    requesting is enforcement related. The funds relating to those
    12 positions happen to represent 75 percent of the additional
    $1 million in programmatic increase, because the enforcement-
    related people would be paid more highly than some of the other
    people we are hiring.

             Increased Effectiveness of CFTC's Enforcement Division

        Senator Cochran. We notice that part of the reason for the
    additional funding is to continue the restructuring and
    effectiveness of the Enforcement Division. Has that been the
    result? Have you been able to draw a conclusion as to whether
    effectiveness has been increased as a result of these new
    expenditures?
        Ms. Born. In my view it has been very greatly increased.
    There has been a complete reorganization of our Enforcement
    Division. We have a new Director of Enforcement. He has been
    onboard for a year and a half now. We also have new heads of
    the enforcement activities in our three major regional offices,
    Chicago, New York, and Los Angeles.
        There has been an enormous enhancement of the ability of
    the Enforcement Division to deal with extremely complex
    financial fraud activities, which are a major part of our
    enforcement activities at this point. There has also been a
    great enhancement of the ability to have very quick strike
    force ability. A number of our cases are frauds where money is
    being siphoned offshore or otherwise secreted, and it is
    terribly important for our enforcement staff to be able to
    quickly investigate a matter, institute an injunctive
    proceeding in a Federal district court, and obtain an immediate
    temporary restraining order and then a preliminary injunction
    freezing the assets and freezing the availability of books and
    records and other documents.

                           Office Space leasing costs

        Senator Cochran. One thing that stands out in the budget
    request is the increase for the Commission's office space
    leasing costs. Compared to this year's level, the next fiscal
    year will require $1.592 million more to pay those costs. What
    is the reason for that?
        Ms. Born. Fiscal year 1998 will be the third year of our
    lease on our Washington space. We were required to move our
    offices 2 years ago into a new building and were very lucky to
    be able to negotiate leasehold improvement funds that could be
    applied against our rent for the first 2 years to the extent
    that we did not expend them in leasehold improvements.
        Because of prudent management by my predecessors, a great
    deal of money was saved, and therefore we got substantial
    rebates against the first 2 years of the rent. Next year will
    be the first year that we will have to pay the full amount. We
    have run out of our leasehold improvement funds.

                             Technology Investments

        Senator Cochran. Technology investments are another item
    you discuss in the submitted testimony. There are increases
    reported for enhancements of the system. What are these
    enhancements and are they necessary to maintain current service
    levels, or are you trying to keep pace with the growth in the
    markets? For what reason are these investments necessary?
        Ms. Born. The amount that is an increase is an amount that
    is just to continue our ordinary activities. It is for computer
    processing and programming services that we ordinarily need,
    but were able to obligate in fiscal year 1996, and therefore
    they appear as an increase for fiscal year 1998, but are in
    fact a continuation of our ordinary level of costs.
        Let me just ask Madge Bolinger if that is correct.
        Ms. Bolinger. That is correct.
        Ms. Born. So while we have expended or will expend
    approximately that same amount this year for our ongoing
    computer programming and processing services, we were able to
    obligate that money in fiscal year 1996 and therefore did not
    have to use this year's funds to do that.

                           Risk Management Education

        Senator Cochran. The Department of Agriculture, according
    to the Secretary of Agriculture, has begun a new effort to
    teach farmers how to use new types of crop insurance and
    agricultural futures and options to help manage risks. Is the
    Commission involved in this in any way, and, if so, could you
    tell us what part you are playing in this new effort?
        Ms. Born. Certainly we have been actively involved with the
    Agriculture Department in this effort. Section 192 of the FAIR
    Act called on the Secretary of Agriculture to provide risk
    management education opportunities to agricultural producers
    because of their increasing needs for risk management as
    Government price supports diminish. That same provision states
    that the CFTC would cooperate with the Secretary of Agriculture
    in his design and implementation of this program.
        That is now well under way under the Agriculture
    Department's leadership. We are part of a group that the
    Agriculture Department has put together to design and implement
    an educational program, and there is going to be a summit
    meeting with various groups who we hope will play an active
    role in the teaching process in September.
        Commissioner Joseph Dial of our office has been appointed
    by me to be the liaison to that group and is our point person
    on this effort. We feel it is very important.

                       Competitiveness of U.S. Exchanges

        Senator Cochran. There is, I am told, concern among the
    exchanges that, in spite of your statements about the growth in
    the markets over the last decade and the volume of trading that
    occurred on the exchanges in this last year, that they are
    losing ground to foreign and over-the-counter markets, and that
    some of this may be due to the burden of the regulatory
    restraints that are imposed on the exchanges by the CFTC.
        What is your reaction to this? Is overregulation a reason
    that U.S. exchanges claim they are losing market share to
    overseas exchanges and are those claims correct?
        Ms. Born. We do not believe so. At Congress' request in the
    1992 amendments to our act, our staff conducted a study in 1994
    of competitiveness between U.S. and foreign exchanges, which
    concluded that regulatory differences did not put our exchanges
    at a competitive disadvantage.
        That study was recently updated in a summary way by our
    staff, and I would be happy to provide those reports to members
    of this subcommittee.
        But let me say beyond that that the Commission is committed
    to streamlining our regulation to the extent possible
    consistent with protecting the public interest. The Commission
    has only been up to full strength, all five members, since last
    September, after several years of not having a full complement.
    Currently all five Commissioners are very committed to reducing
    unnecessary regulatory burdens. We have taken a number of steps
    already in amending our rules that we think streamline the
    regulation and modernize it, and are currently working with the
    exchanges to find other areas in which the regulatory burdens
    can be reduced.
        We clearly feel that healthy, competitive markets in the
    United States are very much in the public interest and very
    important.

                          Proposed Promarket Exemption

        Senator Cochran. My concluding question is on the subject
    of the promarket exemption in the reform legislation, or the
    deregulation proposal, that is pending here in the Senate. You
    have expressed opposition to this provision, which would exempt
    professional markets from regulation. Would you tell us why you
    think that exemption should not be approved by the Congress?
    Would it really impair the integrity and security of the
    futures markets?
        Ms. Born. We believe that it would. It would eliminate all
    the Federal standards under which these markets have been
    operating since the 1920's. Because more than 90 percent of the
    current volume of trading is represented by the eligible
    entities for a professional market, we believe that the
    exchanges would adopt professional markets in a broad-based way
    and suggest that small traders enter the markets only through
    commodity pools and mutual funds and otherwise.
        So we think that the provisions would have very broad
    effects. They would eliminate such things as the requirements
    of competitive trading, open pricing, large trader reports,
    which the Commission uses to determine who the large players in
    the market are and whether their activities in the markets are
    explainable by normal economic forces or whether a squeeze is
    under way by large institutions.
        We would no longer have for commodity professionals who
    trade on these markets any standards, such as the fitness
    standards which say that if you are convicted of a felony you
    are statutorily disqualified from trading on the markets. There
    would be no net capital requirements for commodity
    professionals who have client money. There would be no
    requirement of customer funds segregation.
        We do not have insurance for customer funds in this
    industry, unlike the securities industry, and therefore
    segregating those funds is necessary to protect customers
    against broker insolvency.
        We would no longer have the tools to prevent or detect
    fraud on the floor of the exchanges, like the audit trail
    provisions for example.
        We think this would be a very pervasive deregulation. As I
    said, our only powers that would remain would be enforcement
    powers after fraud or manipulation occurred, and the Senate
    bill, unlike the House bill, also allows us to keep emergency
    powers. The problem is we would be unable to detect an
    emergency in its incipiency, and therefore we do not think
    those emergency powers would give us the powers we need.
        Senator Cochran. Senator Bumpers, do you have any other
    questions or comments?

                       Competitiveness of U.S. Exchanges

        Senator Bumpers. Mr. Chairman, not to belabor the point and
    take too much time, but to pursue the very line of questioning
    you were pursuing.
        Ms. Born, if the Chicago Board of Trade, for example, is
    correct in their assertion that unregulated competition is
    driving them out of business and that they have, in fact, only
    grown 10 percent while their competitors have grown 500
    percent, would that not be an indication that something needs
    to be addressed?
        Ms. Born. I would be concerned if that were true. In fact,
    as I said, they have grown 130 percent over the last 10 years,
    more than doubled.
        Senator Bumpers. 130 percent of what? Volume, trades, or
    what?
        Ms. Born. Volume of trades. Over the last 10 years
    nationwide our exchanges have gone up to 500 million contracts.
    CBOT had its biggest year ever last year, and its profits were
    up by 26 percent in 1996, to $19 million.
        Senator Bumpers. Do they file all that with you? Do they
    file their annual financial statement with you?
        Ms. Born. We receive a financial statement, yes.
        Senator Bumpers. And what was their profit? What was the
    increase in their profit last year?
        Ms. Born. Twenty-six percent. And they also built a $183
    million new trading floor last year, that just opened this
    spring.
        Senator Bumpers. Well, they argue two things. No. 1, it is
    not just their domestic competitors. They say this is now a
    global business and that some exchanges have moved to London
    because London, because of the time zones, can do more business
    in more time zones than they can do here, and that is how
    competitive. There is not anything unusual about that, I guess.
    Maybe other companies do that, too. But in any event, I did not
    understand it either, Ms. Born.
        Ms. Born. I do not understand. That is the first time I
    have heard that particular argument.
        Senator Bumpers. You have heard that they are moving people
    to London?
        Ms. Born. I know the London markets have for a long time
    been very dynamic markets. There is a very large market there
    called LIFFE, the London International Financial Futures
    Exchange. And there is also a very old market called the London
    Metal Exchange. They are two of the largest in the world.
        Where much of the growth has been internationally has been
    in a number of other countries, a lot of emerging countries
    included, that in the past decade have recognized how valuable
    to the U.S. economy our futures exchanges have been in
    providing hedging against interest rate risk and stock index
    risk. A number of European, South American, and Asian countries
    have in the last decade set up futures exchanges that are
    focused on their domestic underlying cash markets. That is, the
    German exchange, for example, has a contract on the interest
    rates of the German Government securities, their German bond.
    They also have, I think, a contract on the German stock market
    stock index.
        Our staff study found that the vast majority of these
    foreign contracts do not compete on a head-to-head basis with
    U.S. contracts because they are focused on the domestic markets
    of the foreign country.
        All these markets are regulated by their domestic
    governments, and indeed all the major markets in the world have
    more government oversight and regulation than would be possible
    under the professional markets exemption.
        For more than a decade the Commission has been working with
    these foreign regulators to raise the level of foreign
    regulation. We have had some very bad scandals abroad because
    foreign regulators have lacked some of the basic tools we have.
        For example, the Sumitomo matter last year in London
    occurred because the London governmental authorities did not
    have large trader reporting and therefore could not detect
    Sumitomo's large position. I think it likely that Sumitomo went
    from NYMEX, our market, to the London Metal Exchange in order
    that it could trade in the manner in which it was in an
    undetected way. Since the Sumitomo matter, the London
    regulators have required large trader reporting and made a
    number of other significant improvements.
        We hold annual international regulators seminars for
    foreign regulators because the U.S. regulations and statute are
    the model for the world. Last fall we had our sixth annual
    international regulators meeting, where 80 participants from 30
    foreign countries came to Chicago for a week to be trained by
    CFTC staff on our regulatory regime. And we are working with
    the principal regulators in the 17 countries with the largest
    exchanges to adopt international best practice standards for
    how futures markets should be regulated, to make sure that all
    these markets are safely regulated.
        We cannot really do our job here if there are systemic
    risks coming from foreign markets.
        Senator Bumpers. Thank you, Mr. Chairman.

                                Role of the CFTC

        Senator Cochran. Well, I think we have been educated a
    little bit this morning, or a lot, in terms of the role of the
    CFTC and the issues that are being considered by our
    legislative committees. I am on the legislative committee and I
    had the opportunity to attend some hearings on this subject and
    to listen to the arguments on both sides of some of these
    issues, and it is a very complex and highly technical set of
    facts that we are all having to work with and trying to
    understand.
        It may be over all of our heads, to be real honest.
        Ms. Born. It is very complex.
        Senator Cochran. But we are working very hard to come to
    grips with all of this and make correct decisions, well-
    informed decisions. So we appreciate very much your patience
    and your willingness to discuss these things with our
    committee.
        Senator Bumpers. When I was Governor I was down at the
    penitentiary one time and I said: You know, it seems to me that
    these guys need a little more opportunity to do things to
    occupy their minds. He said: They occupy their minds. I said:
    How do they do it? And he said: They gamble.
        I said: What do they gamble on? He says--he looked up at a
    telephone line along the highway and he says: They will stand
    out in this field and bet which one of those blackbirds will
    fly first on that. I said: That sounds like the exchange
    markets. [Laughter.]
        Senator Cochran. Thank you very much for being here and for
    your cooperation with our subcommittee. We appreciate it very
    much.
        Ms. Born. Thank you very much, Mr. Chairman, and I would be
    very pleased to provide any information on any of these
    subjects at any time to you or other members of the
    subcommittee.

                              Submitted Questions

        Senator Cochran. Thank you. We may very well submit some
    questions on some of the specifics in the budget that we did
    not touch on this morning, and we would appreciate your
    responding to those questions in a timely way.
        Ms. Born. We would be delighted to do so.
        Senator Cochran. Thank you.
        Ms. Born. Thank you very much.
        [The following questions were not asked at the hearing, but
    were submitted to the agency for response subsequent to the
    hearing:]
                     Questions Submitted by Senator Cochran
             market surveillance system and technology investments
        Question. The testimony submitted for the record indicates that
    additional funding is proposed in the fiscal year 1998 budget to allow
    the Commission to continue efforts started in fiscal year 1996 to
    redesign and implement an Integrated Market Surveillance System. What
    enhancements of this system are included in the fiscal year 1998 budget
    request? Is this amount included in the increase to maintain current
    service levels? What other technology investments are included in the
    fiscal year 1998 request?
        Answer. No enhancements are budgeted for this system in fiscal year
    1998, and there is no amount included in our current services level or
    program level for enhancement to the integrated market surveillance
    system. The ``additional funding'' statement in the testimony refers to
    three additional FTE's for the Market Surveillance program, a portion
    of whom will be used to analyze the additional large trader data that
    the redesigned integrated market surveillance system will be handling.
                             technology investments
        Question. What technology investment has the Commission made in
    each of the last five years to keep pace with the growth in the markets
    and what future investments are planned?
        Answer. In fiscal year 1992, we established a separate operating
    environment on our existing mainframe computer to begin testing for
    conversion to a new operating system. The new operating system was
    needed to improve the efficiency of the mainframe and thereby to
    accommodate the increased processing capacity resulting from the growth
    in the markets. We also upgraded our local area network communications
    infrastructure in Chicago and New York to keep pace with staff
    utilization of computers and to provide greater stability and better
    performance. We also expanded the scope of our correspondence tracking
    system to allow more staff members to keep pace with a growing level of
    correspondence. In addition, the Commission installed an imaging system
    for use in expediting the processing, distribution and use of a variety
    of printed information including storage and retrieval of market-
    related news events.
        In fiscal year 1993, we developed systems to simplify several
    difficult functions. One system, used in conjunction with the imaging
    system, resulted in accelerating the flow of information related to the
    Commission's legal opinions and interpretations and decisions of
    administrative law judges in futures cases. Another system was designed
    and implemented for tracking the Commission's review of exchange rule
    change proposals, thereby allowing quicker response to exchange and
    public inquiries regarding outstanding reviews. We also developed a
    system to support the investigations of trade practice abuses and other
    illegal market activities. As we did in New York and Chicago the year
    before, we upgraded our local area network communications
    infrastructure in Los Angeles to provide greater stability and better
    performance. We also began operation of the new mainframe operating
    system that was tested on our existing mainframe in fiscal year 1992.
        In fiscal year 1994, we undertook several modernization steps to
    accommodate market growth and to allow the Commission to keep pace with
    the evolving migration to network-based applications. Specifically,
    capacity of communications links between CFTC locations was upgraded,
    allowing Commission staff interactively to access and manipulate shared
    information, thereby allowing intra-office collaboration. We upgraded
    the Commission's network servers and replaced older personal computers
    to accommodate the higher-performance computing requirements. The
    Commission moved toward adopting a client-server based software
    development and application platform standard which offers the
    opportunity for creation and maintenance of highly effective
    applications for shared use by all Commission staff regardless of
    physical location. We began design of a system for managing and
    tracking the reparations process--the first application of the client-
    server architecture. We also developed a new version of the Exchange
    Database system which processed additional data elements, provided
    enhanced search and retrieval capabilities and provided new reports to
    assist in detecting market aberrations. The Commission also conducted
    reviews of several emerging automated systems being developed by or for
    the exchanges including the New York Mercantile Exchange's ACCESS
    system and the joint Chicago Board of Trade and the Chicago Mercantile
    Exchange AUDIT system.
        In fiscal year 1995, as part of our modernization program, we
    continued with the routine replacement of the oldest personal computers
    allowing the Commission more effectively to utilize sophisticated
    software. We also upgraded the communications interface between our
    mainframe computer and our personal computers, thereby facilitating the
    direct manipulation and importing of mainframe data by staff with their
    personal computers. We also upgraded the local area network
    communications infrastructure of our headquarters office in Washington.
    We implemented the Reparations Case Tracking System designed in fiscal
    year 1994. We developed enhancements to the existing (old) market
    surveillance system to allow for easier analysis of extremely complex
    trading data. We also prepared a Computerized Trading Report which
    analyzed the Chicago Mercantile Exchange's GLOBEX trading system and
    the New York Mercantile Exchange's ACCESS system. The report focused on
    the potential for enhancing access by market participants, improving
    the Commission's ability to audit the markets, and reducing the
    opportunity for trading abuses.
        In fiscal year 1996, the Commission awarded a contract and began
    work on a multi-year effort for redevelopment of mission-critical
    surveillance systems. The re-engineering and relocation of these
    systems from the mainframe to a client/server environment offered a
    number of advantages. Financially, the Commission would avoid an
    inevitable upgrade of our mainframe computing facilities which would be
    necessary to accommodate a six-fold increase in data storage and
    processing requirements. Furthermore, since the surveillance system was
    responsible for about 80 percent of our mainframe utilization, this
    project was instrumental to our larger cost-saving goal of closing our
    mainframe data center in compliance with OMB Circular 96-02,
    Consolidation of Data Centers, by our deadline of June 2000. In fiscal
    year 1996, the Commission also established a website. The website
    includes background information about the Commission, press releases,
    speeches, and reports such as the Commitments of Traders and Bank
    Participants in Futures and Option Markets, Commission Orders and
    Advisories. The website also includes information about public programs
    such as Reparations. The Reparations program provides a method for the
    public to seek compensation for money lost to illegal futures schemes.
    The Commission also continued with its routine replacement of the
    oldest personal computers to the more efficient and serviceable
    industry standard models.
        Regarding future investments, the Commission intends to continue
    with our modernization program in a number of areas. Each year we will
    replace a number of personal computers from the oldest stock with
    computers representing current technology. Likewise, we will maintain
    the required level of performance of network servers to service these
    higher-performance personal computers and our increased use of client/
    server applications instead of mainframe applications. Accordingly, we
    will use network servers with large amounts of magnetic storage,
    thereby eliminating our reliance on magnetic tape for storage of
    massive amounts of data. Within the next two years we plan to select
    and install new operating systems on all personal computers and network
    servers enabling a web-browser-like interface, thereby improving the
    ease with which our staff will be able to access and manipulate the
    increasing volume of information. In combination with our evolving
    Internet and the ever-increasing expansion in global use of the
    Internet, staff will be able to access all relevant information through
    a single interface. In addition, we will adopt the use of higher speed
    communications in both our local and wide area networks. We also plan a
    low-cost upgrade of communications interface cards with our servers and
    other key equipment to address the additional capacity required as we
    migrate our mainframe applications to the client/server environment and
    continue to automate other office procedures. With regard to our wide
    area network, we plan to increase our use of electronic receipt and
    transmission of information in place of magnetic tapes, diskettes and
    paper.
        While these technology infrastructure enhancements are made, work
    will continue on the development and phased implementation of the
    Commission's new surveillance system. The new system will provide for
    the collection and integration of daily options with futures data to
    permit more complex analyses of activity in our markets. This will
    greatly enhance our ability to detect and deter market manipulation,
    Additionally, migration of systems from the mainframe environment to
    the Commission's client/server architecture will continue until all
    systems are operational in the client/server architecture and the
    mainframe data center will cease operation.
        All new systems are being developed for operation in the new
    architecture. It is anticipated that this action will be completed by
    June, 2000.
                 internet, technology and regulatory challenges
        Question. Chairperson Born, you indicate in your prepared testimony
    that technology presents increasing regulatory challenges to the CFTC,
    including the need to police futures and option trading advice and
    sales offered illegally via the Internet. What is the CFTC doing to
    meet these new regulatory challenges?
        Answer. The CFTC is meeting the challenges posed by new technology
    in various ways. First, the Division of Enforcement established an
    Internet monitoring and surveillance program in fiscal year 1996. Under
    the program, Enforcement staff monitors futures related ``web sites''
    and ``homepages'' on the Worldwide Web, as well as messages posted on
    Internet bulletin boards. Staff also monitors various news groups and
    chat rooms relating to commodity futures and visited by Internet users.
    This monitoring of the Internet has generated enforcement inquiries
    concerning issues such as possible registration violations, possible
    misrepresentations of the success of trading programs and the offer of
    potentially illegal off-exchange products.
        To date, the monitoring program has generated dozens of referrals
    for Enforcement staff and has resulted in the filing of a number of
    enforcement cases. For example, in September 1996, the Commission filed
    and simultaneously settled two cases resulting from this surveillance.
    In both cases, the Commission issued orders pursuant to which the
    respondents agreed to stop providing advisory services to Internet
    subscribers until they register as CTA's and comply with applicable
    regulatory requirements. In re Brown, CFTC Docket No. 96-8 and In re
    Marks, CFTC Docket No. 96-9. Enforcement staff was able to move quickly
    against Brown and Marks; both had agreed to enter into consent orders
    with the Commission within weeks of the time they first engaged in
    activities on the Internet. As a result of early detection, Brown had
    not successfully solicited any customers at the time his page was
    withdrawn. Marks agreed to refund all money received from subscribers
    and to transmit an electronic mail message over the Internet to all
    former subscribers notifying them of the action.
        Second, the Commission is using the Internet both to disseminate
    and to gather information. Enforcement's homepage provides a brief
    summary of the types of abuses commonly investigated and prosecuted by
    the CFTC, provides descriptions of recently filed cases and encourages
    the public to report suspected abuses by providing an electronic
    questionnaire that can be filled out by visitors to the website.
    Enforcement has also used the Internet to obtain information from the
    public regarding particular matters. An example is the case of CFTC v.
    Chancey, Civ. No. 7:96-61 (M.D. Ga. filed July 1, 1996), an injunctive
    action against Donald Chancey and a firm controlled by him alleging
    fraud and registration violations in connection with the activities of
    an unregistered CPO. Enforcement is using its homepage to solicit
    information concerning the whereabouts of Chancey, who disappeared
    before the Commission filed its action against him. The Division has
    also posted on its homepage a picture of the defendant, as well as
    notices publicizing the court-sanctioned auction of Chancey's property.
                              enforcement funding
        Question. Please tell us what additional funding and staff
    resources have been allocated to the Commission's enforcement efforts
    in each of the last three fiscal years, what enhancements are proposed
    for fiscal year 1998 and what future resources, funding and staff
    years, will be required to bring these efforts up to the level you
    believe is required to enable the Commission to effectively supervise
    the futures and option markets and to enforce the laws against fraud
    and manipulation in those markets.
        Answer. In fiscal year 1995, the Commission obligated $17.9 million
    and used 198 FTE's, and in fiscal year 1996, the Commission obligated
    $19.0 million and used 202 FTE's for enforcement related efforts. In
    fiscal year 1997, the Commission allocated $21.9 million and 225 FTE's
    for enforcement related efforts.
        It is difficult to project with any great precision what future
    resources the Commission will require in order effectively to supervise
    the futures and option markets and to enforce the anti-fraud and anti-
    manipulation laws applicable to those markets; many of the factors that
    dictate the Commission's specific future use of resources are beyond
    its control. For example, factors such as market events or the
    development of new financial products can require a quick response by
    the Commission, which, in turn, can require the reallocation of
    resources. However, the passage of proposed legislation reducing the
    Commission's regulatory tools to prevent and to detect fraud and
    manipulation would require substantial additional resources for
    enforcement activities. At the core of the Commission's supervisory
    efforts is a strong and fully staffed Division of Enforcement which
    enables both quick detection of wrongdoing and timely prosecution of
    administrative and injunctive actions when necessary. The Commission
    remains dedicated to using its resources as efficiently as possible to
    ensure that its enforcement efforts keep pace with the demands placed
    on it by the markets.
             program and staffing increases other than enforcement
        Question. In addition to the Commission's enforcement activities,
    please indicate what other program and related staffing increases are
    proposed in the fiscal year 1998 request and the importance of the
    increased resources requested for each of these activities.
        Answer. The Commission is requesting a net program increase of
    $263,000 for all other programs. This net increase covers the
    compensation cost of three FTE's in the Contract Markets program, two
    FTE's in the Audit and Review program, and three FTE's in the Market
    Surveillance program. The three FTE's requested for the Contract
    Markets program will allow the Commission to keep pace with workload
    stemming from the Futures Trading Practices Act of 1992 as well as
    allow the Commission responsibly to respond to innovation in the
    marketplace. The two FTE's requested for the Audit and Review program
    will allow the Commission effectively to continue its oversight of the
    compliance programs of the self regulatory organizations and to conduct
    selected audits and examinations of registrants. The three FTE's
    requested for the Market Surveillance program will enhance the
    surveillance of exchange markets by developing additional software for
    complex analyses used for special reports. The increases will also
    enable the program to analyze a twofold increase in the number of large
    trader reports received, resulting from the collection of option large
    trader reports, as well as facilitate the change from a mainframe to a
    client-server environment for the surveillance system. The increase
    will also allow the surveillance staff to develop appropriate
    surveillance procedures to deal with intermarket analysis.
                                current services
        Question. I understand that of the $4 million increase requested to
    enable the Commission to sustain its current services level, 42 percent
    is for mandatory pay increases, 40 percent is for leased office space,
    and the remaining 18 percent is for systems analysis and other costs.
    (a) What mandatory pay increases does the fiscal year 1998 budget
    include? (b) Please provide a breakdown of the systems analysis and
    other costs required for the Commission to maintain current services in
    fiscal year 1998.
        Answer. Mandatory pay increases include an anticipated cola/
    locality increase effective in January 1998, which is estimated to be
    on average approximately 3.1 percent, and the annualization of the
    January 1997 cola/locality pay increase which averaged 3.3 percent.
    Also included are costs for within-grade increases for fiscal year 1998
    and the annualization of fiscal year 1997 within-grade increases. Other
    mandatory pay increases include increased costs in the agency
    contribution for personnel benefits. The total cost of all mandatory
    pay increases for fiscal year 1998 is $1,678,000.
        The $659,000 requested for systems analysis is comprised of
    $534,000 for applications programming support and $125,000 for systems
    programming support. Other costs required for the Commission to
    maintain current services include $1,592,000 for rental of office space
    for headquarters and regional offices and a net increase of $60,000 for
    all other object classes.
                    DEPARTMENT OF HEALTH AND HUMAN SERVICES

                          Food and Drug Administration

    STATEMENT OF MICHAEL A. FRIEDMAN, M.D., LEAD DEPUTY
                COMMISSIONER
    ACCOMPANIED BY:
            ROBERT J. BYRD, DEPUTY COMMISSIONER, MANAGEMENT AND SYSTEMS
            WILLIAM B. SCHULTZ, DEPUTY COMMISSIONER, POLICY
            DENNIS P. WILLIAMS, DEPUTY ASSISTANT SECRETARY, BUDGET,
                DEPARTMENT OF HEALTH AND HUMAN SERVICES
            MARY K. PENDERGAST, DEPUTY COMMISSIONER/SENIOR ADVISOR TO THE
                COMMISSIONER

                           Introduction of Witnesses

        Senator Cochran. Our next subject is the budget of the Food
    and Drug Administration. We are pleased to welcome to our
    subcommittee Dr. Michael Friedman, who is the Lead Deputy
    Commissioner of the Food and Drug Administration; along with
    Robert J. Byrd, Deputy Commissioner, Management and Systems;
    William B. Schultz, Deputy Commissioner for Policy; and Dennis
    P. Williams, Deputy Assistant Secretary for Budget of the
    Department of Health and Human Services.
        We know that you have others with you and if you would like
    to introduce any of them, please feel free to do so.
        We will ask Dr. Friedman to make whatever comments or
    remarks he thinks might be helpful to our committee's
    understanding of the budget request. We do have your full
    statement and it will be printed in the record in full.
        Dr. Friedman, welcome. You may proceed.

                         Dr. Friedman's Opening Remarks

        Dr. Friedman. Thank you very much, Mr. Chairman. We do
    appreciate this chance to spend some time providing you with
    information this morning.
        You have introduced and kindly allowed to accompany me, my
    colleagues. There are, as you pointed out, other agency key
    staff who will be available to answer questions after my
    opening remarks.
        Sir, as you well recognize, the mission of our agency is to
    promote and to protect the public health of Americans, and
    today I serve as a spokesman for an agency deeply committed to
    ensuring that our citizens have confidence in the quality of
    their food, the medicines, the devices that are crucial to
    their health care, and the tens of thousands of other FDA-
    regulated products which we use daily.
        We recognize this is an enormous responsibility. My written
    statement describes in far greater detail our performance, a
    performance that demonstrates a capacity for self-critical
    evaluation and a pragmatic striving for improvement. Our
    performance also reflects a commitment to our mission, our
    responsiveness to the public and to Congress, and our
    stewardship of every tax dollar that is entrusted to us.
        In the interest of conciseness, I would like to just
    briefly overview some aspects of our activities over the past
    year and to focus on three top priority requests which we have
    highlighted in our budget and which we are prepared to discuss
    more fully: The first is our food safety initiative to counter
    the threat of foodborne illnesses; the second, a sensible
    regulatory program to protect our youth from the diseases
    caused by the use of tobacco products; and third,
    reauthorization of two terribly important existing major user
    fee programs, the Prescription Drug User Fee Act [PDUFA] and
    the Mammography Quality Standards Act, both of which are set to
    expire in October 1997.
        There are of course a number of difficult budget issues to
    be addressed in this environment of deficit reduction. We
    recognize this. We want to work with you and others to help
    resolve these issues.
        Now, while time does not permit me to fully or properly
    convey the achievements of the various parts of our agency, I
    would like to highlight if I may some achievements from each of
    our centers, to set the framework for what sorts of successes
    we have had this past year which will justify and support our
    request for financial support for those activities this year.
        Let me begin with the Prescription Drug User Fee Act. In
    1992 this was designed by the appropriations and authorizing
    committees of both the House and the Senate, in conjunction
    with representatives of the drug industry and FDA, as an
    experiment. In this experiment, industry supplied additional
    resources to FDA in the form of user fees, which would be used
    specifically to improve application review for new drug and
    biologic products for humans.
        Four years later, we judge this to be nearly a universal
    success. Patients get new drugs sooner, with better quality and
    length of life. Companies are able to market their products
    sooner. And we have gained the resources necessary to better
    perform our job.
        The first chart demonstrates that since the initiation of
    this program we have consistently met and most often exceeded
    PDUFA's demanding and aggressive annual performance goals, and
    last year's were the best results so far. For example, drugs
    called new molecular entities are widely regarded as potential
    breakthrough products. The number of these approvals serves as
    an indicator of progress in medicine, and in this sense last
    year was outstanding.

        ----------------------------------------------------------------

                         PRESCRIPTION DRUG USER FEE ACT
            On-Time Review Performance--Fiscal Year 1995 Submissions
    ------------------------------------------------------------------------
                                                            Percent--
                                                   -------------------------
                                                        Goal        Actual
    ------------------------------------------------------------------------
    Original NDA's/PLA's/ELA's....................           70           95
    Efficacy supplements..........................           70           93
    Manufacturing supplements.....................           70           89
    Resubmissions.................................           70           96
    ------------------------------------------------------------------------

        ----------------------------------------------------------------

        Our Center for Drug Evaluation and Research approved 53
    NME's. Last year's median time to approval was 14.3 months.
    Basically what happened was we approved twice the number of
    products in one-half the time, a really outstanding achievement
    for this center.
        [Clerk's note.--The information appears as chart No. 1
    accompanying Dr. Friedman's prepared statement.]
        In the first year of PDUFA, we approved 70 drugs overall in
    a median time of about 24.1 months. Last year the agency
    approved 131 new drugs, including the NME's, in a median time
    of 15.4 months--a far larger number of products in a shorter
    period of time.
        Another outstanding achievement last year was the approval
    by our Drug Center of 118 efficacy supplements. These are very
    important reviews and approvals. This was an unprecedentedly
    large number.
        I fear that these will be seen as sterile statistics and
    they should not be viewed in that regard. These are issues of
    enormous personal importance to family members, to our friends,
    to everyone who needs new treatments.
        This record of achievement can only be maintained with
    adequate resources and consequently reauthorization of what we
    think is a spectacularly successful user fee program is a top
    priority for us.
        However, lest you think this sort of performance is an
    isolated exception, let me just briefly share with you
    representative data from some of our other centers. Our
    biologic center had a very, very productive year, approving
    some very important new products, including vaccines, blood
    products, diagnostic products, and therapeutic products.
        If one looks at our Device Center, the number of premarket
    approvals went up dramatically. As you can see, between 1993
    and 1996 the increase is really substantial.
        [Clerk's note.--The information appears as chart No. 5
    accompanying Dr. Friedman's prepared statement.]
        That is a small but important part of our Center for
    Devices. A much larger component of the activity of the Center
    for Devices are the so-called 510[k] products. Here you can see
    that our timeliness in dealing with these products has improved
    dramatically. Now, in excess of 90 percent of these products
    are reviewed within a statutory review cycle.
        This work represents roughly 98 percent of all the
    activities of the Center for Devices.
        [Clerk's note.--The information appears as chart No. 6
    accompanying Dr. Friedman's prepared statement.]
        A topic of importance to this committee is the entire
    reengineering process that is taking place in our Center for
    Veterinary Medicine. With last year's legislation, working very
    closely with Congress, working very closely with the involved
    industries, a major reinvention effort has been initiated so
    that we review these products in a more timely, more complete
    way, and we think in a more efficient way. This is a very
    important experiment that we are very committed to seeing
    succeed.
        [Clerk's note.--The information appears as chart No. 8
    accompanying Dr. Friedman's prepared statement.]
        Now, Mr. Chairman, I describe these highlights of last
    year's performance not as an exercise in self-congratulation,
    but rather I want to make the case, based I hope on what will
    be convincing evidence, that with your continued support, with
    a sufficient budget, and with our determination to improve
    ourselves, we are prepared to meet the public health challenges
    ahead.
        One of the most important and significant public health
    challenges ahead for us is to protect the public against
    foodborne illness by implementing the Presidential food safety
    initiative. Americans rightfully expect their food to be
    wholesome and safe and, with rare exception, it is. We do,
    however, know that problems exist.
        Millions of foodborne illnesses occur each year and perhaps
    as many as 9,000 Americans die as a result. The total estimated
    costs involved may be $5 billion, and these costs both in terms
    of lives and economic consequences are unacceptable.

        ----------------------------------------------------------------

                             Food Safety Initiative

      problem: increased incidence of foodborne illness, particularly of
                                microbial origin
      --Estimated 6.5 to 33 million illnesses and up to 9,000 deaths
            annually
      --Estimated total costs of foodborne illness are $5.6 billion
      --Food product recalls for life threatening bacteria (Class I)
            increased from 79 in 1988 to 378 in 1995
      --Microorganisms becoming resistant to traditional control measures
            and developing pathogenic characteristics
      --More retail establishments are processing foods on-site
      --Increase in imported foods
      --Vulnerable populations are growing in size (e.g., the elderly,
            immuno-compromised)

        ----------------------------------------------------------------

        When an outbreak of foodborne illness is recognized, we act
    quickly and vigorously. We act in cooperation with other
    Federal--such as USDA, CDC, NIH, and EPA--State, and local
    public health authorities, and with members of the industry. We
    need to recognize in a timely way the problem and then to have
    the scientific tools to ascertain the cause of the problem and
    to initiate the means to stop the problem from spreading.
        Last year, for example, thanks to such teamwork we were
    able to limit the public's exposure to apple juice contaminated
    with an E. coli 0157-H7. The manufacturer promptly recalled the
    unsold product, a national warning was issued, and many
    consumers did not drink it. Even so, 66 North Americans were
    made ill and, sadly, one little girl died of complications of
    this foodborne illness.
        A more recent example has been the hepatitis A outbreak
    associated with frozen strawberries, and this is another
    example of how Federal agencies working together can cooperate
    in a more effective way. Both USDA and the Food and Drug
    Administration were notified in March by the State of Michigan
    of a possible link between hepatitis A and frozen strawberries
    from a processor in California. We began working in cooperation
    with the State of California Health Department and we inspected
    the processor's facility, conducted a full inspection, and
    began an investigation of the product's distribution.
        CDC was integrally involved in working up the epidemiology
    of this outbreak. Working together, we identified that 13
    specific lots were of concern. A decision was reached to
    administer gamma globulin to schoolchildren who had consumed
    the strawberries within 14 days from those lots, and we
    proceeded to recall the product with the cooperation of those
    industrial processors.
        So far during the course of the outbreak investigation, the
    source of the contamination has not yet been determined.
    Contamination could have occurred anywhere from harvest to
    consumption. Despite the complexity of this situation,
    cooperation among FDA, CDC, and USDA, State and local
    authorities helped greatly to contain the outbreak.
        It may not be possible to identify the specific cause of
    the outbreak of hepatitis A in these strawberries. To date we
    are pleased that there are no confirmed cases of hepatitis A
    occurring outside of Michigan associated with the consumption
    of these particular berries.
        These outbreaks underline for all of us the need for a
    strengthened interagency cooperation in surveillance,
    inspection, consumer and foodworker, from field to retail
    education, risk assessment, and the supporting research, as we
    request in our budget.

        ----------------------------------------------------------------

                             Food Safety Initiative

      --Surveillance--Enhance the early warning system
      --Inspections
      --Risk Assessment
      --Research
      --Education
      --Coordination--USDA, CDC, EPA, NIH and State/local officials

        ----------------------------------------------------------------

        Now, sir, another major task we face in the coming year is
    to begin implementing our tobacco rule, which is designed to
    better protect our most precious resource, the youth of the
    country, against the devastating effects of tobacco. The
    President announced the rule last August and, as the members of
    the committee are aware, last Friday the U.S. District Court in
    North Carolina upheld the agency's jurisdiction to regulate
    cigarettes and smokeless tobacco as combination drug-device
    products, although the court limited the agency's authority to
    regulate advertising.
        While both sides will appeal aspects of the ruling, the
    court has permitted the agency to continue to implement the
    requirement that retailers not sell to persons under the age of
    18.
        This regulation we believe is critical to protection of the
    public health because every year smoking causes the premature
    death of more than 400,000 Americans, a number of people which
    is greater than those who die each year from AIDS, from
    alcohol, car accidents, murders, suicides, illegal drugs, and
    fires combined.
        The agency's rule is premised on the fact that most tobacco
    users begin use during childhood and that the most effective
    public health strategy is to prevent children from starting to
    use tobacco products. In fact, at present 3 million American
    youngsters use tobacco products. An additional 3,000 children
    and young people start smoking every day. We know that one-
    third of these individuals will die prematurely as a result of
    smoking.

        ----------------------------------------------------------------

                      Youth Tobacco Prevention Initiative

      --3,000 Young People Become Regular Smokers Each Day
      --Average Teenage Smoker Starts at 14\1/2\ Years Old and Becomes a
            Daily Smoker by 18
      --Every Year 1,000,000 Young People Become Regular Smokers
      --One-Third of These Children and Adolescents Will Die Early from
            Their Use of Tobacco
      --5,000,000 Children Alive Today Will Die Prematurely from Smoking
      --Tobacco Kills More than 400,000 Americans Each Year
      --Smoking Rates of 8th Graders Increased 50 Percent in 6 Years

        ----------------------------------------------------------------

        We have begun implementing the access provisions upheld by
    the court in cooperation with State and local authorities as
    the first step in a program that is aimed at reducing tobacco
    use by minors by a total of, we hope, 50 percent in 7 years.
        Our budget request will focus on outreach to educate
    retailers and others about these new rules, and on contracts
    with State officials to begin enforcing this new program.

        ----------------------------------------------------------------

                      Youth Tobacco Prevention Initiative

    Outreach
        --Retailers
        --Tobacco Manufacturers, Distributors and Other Affected Parties
        --State and Local Officials
        --Community and Public
    Enforcement and Evaluation
        --Cooperative Federal and State Enforcement
        --Possible Demonstration Projects with States
        --Evaluation--CDC Collaboration

        ----------------------------------------------------------------

        Mr. Chairman, in addition to these three priority tasks--
    the food safety initiative, the restriction of access to
    tobacco products by minors, and the reauthorization of two
    existing user fee programs--we face many longer term challenges
    to which we will have to find solutions in order to continue to
    protect the consumer and to promote the public health.

        ----------------------------------------------------------------

                                 FDA Challenges

      --New Scientific Knowledge
          --Xenotransplantation
          --Genetic Revolution
          --Tissue/Biomaterial Engineering
          --Microsurgery
          --Cell Biology
      --Public Access to Useful Health Information
      --Partnership with the International Community

        ----------------------------------------------------------------

        These challenges include the need to appreciate and utilize
    the rapidly growing scientific information with which we are
    confronted, to make meaningful health facts more accessible to
    the public and to their health care providers, and to advance
    global efforts for harmonization and the sharing of public
    health standards in order to safeguard the quality of imported
    products regulated by FDA.
        FDA faces a number of challenges. The greatest challenge is
    to achieve these goals despite the fact that our workload will
    continue to increase and that it will outstrip our resources.
    Pragmatically, we recognize that it is not enough for us simply
    to work harder; we must also work smarter and we must work more
    effectively and cooperatively with others, especially our
    sister agencies USDA, CDC, NIH, and the State and local
    officials.
        We believe that we can meet these challenges in the very
    best tradition of our nine-decades-old agency, and more than
    anything else, sir, we want to do so.
        Again, we appreciate this opportunity to provide you with
    this information and we certainly are ready to answer
    questions.

                               Prepared Statement

        Senator Cochran. Thank you very much, Dr. Friedman. We have
    your complete statement and it will be made part of the record.
        [The statement follows:]
                   Prepared Statement of Michael A. Friedman
        Mr. Chairman, members of the Committee, I appreciate the
    opportunity to appear before you and present the 1998 Food and Drug
    Administration budget proposal.
        As a background for our 1998 budget request, I would like to begin
    with a description of the FDA's Congressional mandates and the
    expectations of the American public, and how we are accomplishing our
    mission.
                              fda's core missions
        The American people have come to expect and rely on the FDA for
    many services that contribute to their sense of security and enable
    them to lead productive lives--protection of the safety and
    wholesomeness of our food supply, maintenance of the high standards of
    effectiveness and safety of our drugs and medical devices, and
    assurance of the safety of our blood supply and vaccines, etc. We are
    committed to upholding those standards and meeting those expectations.
        The promotion and protection of the public health is our principal
    mission. FDA's responsibilities annually cover more than $1 trillion
    worth of products, many of which are vital for human health. Our
    diverse activities include--but are not limited to--licensing blood
    banks, monitoring clinical investigations, as well as reviewing and
    approving prescription drugs, generic drugs, animal drugs, vaccines,
    biologicals, medical devices, devices that emit X-rays, and food
    additives.
        Our mission, as the nation's oldest consumer protection agency, is
    to provide the basic public health protection for the foods we eat and
    the drugs we take. The assurance that FDA is present, everyday, doing
    its job, is so fundamental to what we know and expect as public health
    protection, that we almost take it for granted. Americans have the
    luxury of not needing to worry about thousands of products including
    breakfast cereal, pain relievers, contact lenses, vaccines, and cough
    medicine.
        When we inspect manufacturing establishments to make sure they use
    the materials and processes necessary to produce safe and effective
    products, and when we monitor imported products to make certain they
    meet the same high standards as domestic products, we help sustain the
    American public's confidence and peace of mind.
        We have been protecting consumers against an ever-growing number of
    potential public health risks for more than nine decades. As
    significant advances are steadily made in science and technology, FDA
    is continually presented with complex new questions, for which we are
    committed to seeking and finding new answers. At the same time, we are
    also committed to improving the FDA's many operations so that all of
    its work is done as efficiently and effectively as possible.
        In this testimony, I would like to summarize some of our recent
    achievements and actions that have enabled us to protect and promote
    the public health more effectively than ever before, and to describe
    some future opportunities and challenges.
                                 drug approvals
        Recently, no area of FDA's responsibility has been more closely
    scrutinized by Congress, industry, health professionals and the public
    than the approval process for new drugs--or, more specifically, the
    speed with which new therapies of proven effectiveness and safety are
    made available to those who need them.
        Let me therefore begin this report by citing our most recent
    achievements under the Prescription Drug User Fee Act of 1992. As you
    know, PDUFA has given us additional resources in exchange for our
    commitment to meet demanding review goal deadlines without sacrificing
    high public health standards. This important five-year authorization
    will expire later this year.
        After more than four years' experience with PDUFA, there is no
    doubt that this approach works. The Agency has consistently succeeded
    in meeting its annual performance goals--in fact, it has exceeded them
    in almost every category. When combined with our internal management
    initiatives, the additional resources provided by PDUFA bring important
    products to patients with unprecedented speed and assurance.
        Last year's record of drug approvals by the Center for Drug
    Evaluation and Research (CDER) illustrates why reauthorization of PDUFA
    is a top priority for FDA.
        All drugs approved by FDA are important, but perhaps none are as
    meaningful in bringing new hope to patients as new molecular entities
    (NME's). These are products that include active ingredients never
    before marketed in this country. The number of NME's approved each year
    is regarded as one indication of real and meaningful medical progress.
    Last year, that progress was exceptional: FDA approved 53 NME's
    submitted by the pharmaceutical industry, nearly twice as many as the
    year before.
        Let me put last year's figures into perspective by referring back
    to the passage of the Kefauver-Harris amendments. The average annual
    total of NME's in the decade of the 1960's was 13.7. In the 1970's, the
    corresponding figure went up to 17.3. In the 1980's, the average was
    21.7 NME's, and in the first half of this decade, the average was 25.6
    NME's. In 1996, the 53 NME approvals were a doubling.
        Last year's approvals also were much faster than in the past. In
    the late 1980's, the median times for NME approval approached 30
    months. The median time to approval for the 53 drugs approved in
    calendar year 1996 was 14.3 months, less than half the time it took as
    recently as the late 1980's. [Chart 1]
        New cancer drugs approved last year were notable for their
    effectiveness against a broad spectrum of cancers: Hycamtin is used for
    the treatment of patients with metastatic carcinoma of the ovary;
    Camptosar for those with colorectal cancer; Taxotere for women with
    advanced breast cancer; Gemzar for patients with cancer of the
    pancreas; and Nilutamide for men with cancer of the prostate.
        The NME category also included Accolate, the first of a new class
    of drugs for asthma sufferers; Aricept, the second treatment for
    patients with Alzheimer's disease; and Copaxone, a treatment for those
    with relapsing-remitting multiple sclerosis.
        Nine of the NME's approved last year, including two drugs for
    cancer and three for HIV, were approved in six months or less.
    Crixivan, a protease inhibitor for the treatment of HIV, was approved
    in just 1.4 months. Twelve of the NME's, including three protease
    inhibitors, were developed--from the first commercial Investigational
    New Drug submission to marketing approval--in less than six years.
        Moreover, the total number of new drugs and biological products--
    including NME's--approved in the last calendar year was 139, which is
    63 percent more than the total the year before. [Charts 2-3] New Drug
    Applications (NDA's) accounted for 131 of these products, and their
    median time to approval was 15.4 months, 7 percent faster than the 16.5
    months the year before.
                           biologics and blood safety
        Our Center for Biologics Evaluation and Research (CBER) last year
    made decisions that represent important contributions to the safety of
    the blood supply, including two new test kits for the detection of HIV
    infection. One of these kits is designed for screening of donated blood
    for HIV-1 antigen, a substance that in most cases is detected before
    the virus antibodies. By reducing the so-called ``window'' period, when
    donors may be HIV-infected but their tests are still negative for HIV
    antibodies, the antigen screening could prevent an estimated 5-10
    transfusions of HIV-infected blood a year.
        The other HIV test kit approved last year was the first system that
    includes collection of blood samples at home. It was developed to
    facilitate blood testing by the more than 60 percent of Americans who
    are at risk of HIV, but do not visit a medical facility to have their
    health status checked. In addition, FDA also approved the Amplicore
    HIV-1 monitor test, the first test approved for the quantification of
    the HIV-1 virus in human blood.
        In all, CBER last year completed 17 major biological approvals, as
    compared with 12 such approvals the year before. Last year's major
    biological approvals included Raspigam, the first medication to protect
    infants against respiratory syncytial virus, a potentially fatal
    disease; Avonex, the second interferon product for multiple sclerosis;
    and Verluma, a new diagnostic imaging agent that can determine the
    extent of small cell cancer in different parts of the body at one time.
    The median approval time for the 17 biological products was 14.9
    months, 15 percent faster than in 1995.
        The public health has also been well served by the approval of the
    acellular pertussis vaccine, which is safer than the traditional whole-
    cell pertussis vaccines. Another notable approval, issued earlier this
    year, was for a new recombinant Factor IX for treating people with
    Factor IX deficiency hemophilia. This product does not contain any
    pooled plasma derived proteins, and therefore presents no risk of
    transmitting viral infection.
                   comparison with foreign regulatory bodies
        There are many other ways to measure our performance in drug
    review. One of them--which is frequently used by the media and some
    critics of our Agency--is comparing our performance with that of our
    counterparts abroad.
        We have checked this performance gauge before, and last year we
    took another look, this time by comparing all new drugs that were
    approved last year by both the FDA and the new centralized drug
    approval process of the European Union. There were 15 of such drugs,
    and their median time for FDA review and marketing approval was 5.8
    months. The median time for review by the Committee for Proprietary
    Medicinal Products and final EU authorization for a company to sell
    those 15 common drugs in Europe was 12.2 months. In four instances, the
    EU authorization came first--in one case, just three days ahead of FDA.
    In 11 instances, the drugs were first approved in the U.S.
        These results are another illustration of FDA's commitment to
    improve the quality of life of citizens. Nonetheless, our goal is not
    to compete with any foreign regulatory authority, but rather with time
    itself. Our goal is to continue to challenge ourselves to constantly
    improve our own performance--patients, those that care for them,
    everyone expects no less.
        While these improvements could not have been made without the
    resources added by PDUFA, there has also been a concerted effort to
    streamline and optimize our entire management system. A substantial
    reorganization of parts of the Agency has been taking place in the last
    few years. As a result, all FDA Centers last year achieved notable
    results.
                                medical devices
        As a striking example, the Center for Devices and Radiological
    Health (CDRH) improved its premarket approval reviews (PMA's) while
    maintaining the review times for abbreviated application--510(k)s. This
    latter category of applications--which accounts for the vast majority
    of all submissions to CDRH--covers devices that are substantially
    equivalent to devices already on the market. In fiscal year 1996, CDRH
    approved 43 PMA's, a six year high, and 24 major new products, an all-
    time high. [Chart 4]
        One of the notable products approved in 1996 was the Thoratec
    Ventricular Assist Device System that serves as a bridge to cardiac
    transplantation. The Center also approved many first-of-a-kind products
    such as the Ultramark 9 High Definition Ultrasound System, an aid in
    differentiating benign from malignant breast lesions; the Seprafilm
    Bioresorbable Membrane, used for reduction of postsurgical adhesion;
    and the Reliance Urinary Control Insert, a device intended for the
    management of stress urinary incontinence in adult women. [Chart 5]
        Eight of the 15 PMA's submitted to the agency in the first half of
    fiscal year 1996, received a first action within the 180-day deadline.
    This was a significantly better performance than in 1994 or 1995.
        Even though we are approving more PMA's for increasingly complex
    devices, and we have improved the time to first action, the PMA
    approval time is coming down only slowly. It takes too long--more than
    two years--to complete the entire process. CDRH and the agency are
    focusing now on innovative ways of bringing down the PMA review times,
    just as we have done for NDA's. But, here again, much depends on the
    level of resources available to do the work.
        CDRH has also successfully managed the review times for 510(k)
    applications. In fiscal year 1996, the median review time for these
    devices that received a finding of substantial equivalence was 85 days.
    At their peak in 1993, the reviews were almost 70 percent longer--144
    days. Even accounting for applications that had to be returned to the
    manufacturer for more information, the average 510(k) review time in
    fiscal year 1996 was 110 days, down from the peak of 184 days in fiscal
    year 1994. Overall, CDRH has done a remarkable job in solving review
    problems that had plagued the Center for years. They have significantly
    shortened review times without sacrificing the increased scientific and
    medical rigor of the reviews. We are not satisfied with our
    performance, but we are steadily moving in the right direction. [Chart
    6]
        We also take real satisfaction in the high standards for
    mammography facilities achieved under the Mammography Quality Standards
    Act (MQSA) of 1992. Since the law was passed CDRH, working with the
    American College of Radiology and state authorities, has set standards,
    and inspected and certified more than 10,000 facilities. The first
    year's inspections after the program went into effect showed that 80
    percent of the facilities had only minor violations, if any at all. A
    recent report by the General Accounting Office found that second-year
    inspections revealed ``considerable reduction in the proportion of
    facilities'' with violations.
        The performance of our drug and device Centers deserves special
    attention because of the public health importance of their work, and
    high interest in their achievements. Other FDA Centers, however, also
    had results last year that reflected gains in efficiency and positive
    effects on the public health.
                          food and veterinary medicine
        The Center for Food Safety and Applied Nutrition (CFSAN) has
    implemented several initiatives to speed up the food additive petition
    review process and reduce the inventory of pending petitions. The
    Center brought in scientists from other program areas; allocated
    additional resources to modernize its electronic information processing
    infrastructure, and to contract the technical services of ``third
    party'' reviewers; instituted changes in its Office of Premarket
    Approval to better respond to legislative mandate and industry demands;
    and used various means--from one-on-one meetings to the World Wide
    Web--to provide guidance to petitioners on how to improve the quality
    of their submissions to the Agency.
        The effort has paid off in reduced petition inventory and faster
    reviews. In June, 1995, there were 295 petitions in the CFSAN
    inventory, including food and color additive petitions, GRAS
    affirmation petitions, and citizen petitions. By the end of last fiscal
    year, the Center had received an additional 82 petitions, but the
    inventory was 60 petitions below the total in June 1995. During
    calendar year 1996, CFSAN took final action on 88 petitions, 54 of
    which were approvals--the highest number in any year in a decade.
    [Chart 7] Moreover, the median time from receipt to approval of food
    and color additive petitions decreased from 37 months for petitions
    approved in fiscal year 1993 to 27 months for petitions approved in the
    last fiscal year. Again, we have not yet achieved the results we want,
    but we are continuing to advance toward them.
        CFSAN has also authorized health claims providing information on
    the relationship between food components and health. Last year, FDA
    issued a final rule covering health claims that associate adequate
    dietary intake of folic acid and the reduced risk of neural tube birth
    defects, which in this country affect approximately 2500 children each
    year. In August, 1996, a claim was authorized on the relationship
    between sugar alcohols and reduced risk of dental caries. In January,
    1997, the Agency authorized health claims stating that foods containing
    soluble fiber from whole oats may under certain circumstances reduce
    the risk of heart disease.
        Our Center for Veterinary Medicine has been working closely with
    animal drug manufacturers, producers, and veterinarians designing a new
    and more flexible animal drug approval process that reduces the time
    and cost necessary for meeting the requirements for a new animal drug
    approval. [Chart 8] Full implementation of the changes was made
    possible by the enactment of the Animal Drug Availability Act of 1996.
    Among other improvements, the ADAA eliminates the need for dose
    titration and optimization, and provides the Agency with the latitude
    to redefine the statutory term ``substantial evidence'' of drug
    effectiveness. The changes are evidence of the remarkable achievements
    that become possible when government and the private sector work
    together.
                achievements of the office of regulatory affairs
        One of the most demanding tasks of our Office of Regulatory
    Affairs, whose inspectors and investigators operate in offices
    throughout the United States and Puerto Rico, is surveillance of the
    rapidly mounting number of imports of FDA-regulated products. While the
    number of our port-of-entry personnel has increased by only 285, the
    number of shipments with products within FDA purview has increased from
    500,000 in 1970 to nearly 3.7 million last year.
        Last year, ORA began implementing a new automated system--called
    Operational and Administrative System for Import Support (OASIS)--that
    greatly speeds up FDA's handling and clearance of imported products by
    maintaining electronic communications between the agency and the
    brokers. With OASIS, the broker receives FDA's initial admissibility
    determination on every shipment within eight minutes after the broker
    submits the necessary data to the agency. For eight out of ten
    shipments, the initial FDA clearance is final. The paper-less system,
    whose implementation will be completed by the end of September, will
    cover every U.S. port of entry where FDA-regulated products arrive by
    sea, land and air.
        Another major responsibility of ORA's regional, district and field
    offices and laboratories is to maintain a round-the-clock vigilance
    against hazards to the public health. A typical example of this
    demanding duty is the recent action by FDA's field office in Los
    Angeles against several products that were supposed to be mildly
    intoxicating but instead were implicated in cases of nausea, vomiting
    and respiratory arrest among mostly young people who had ingested them
    at a New Year's Eve concert.
        FDA field office launched investigation within hours after the
    incident, and on January 1, we issued a public statement warning
    consumers against the so-called ``fX'' products--"CHERRY fX BOMBS,''
    ``LEMON fX DROPS'' and ``ORANGE fX RUSH''--which apparently had been
    distributed for free to the concert goers. Subsequently, FDA took
    possession of more than 9,000 vials with the fX potion and notified the
    distributor that the products present an unreasonable risk of illness
    or injury to those who consume them.
        Mr. Chairman, I have mentioned the highlights of FDA's performance
    last year as evidence that our agency is dedicated to its public health
    mission, competently staffed, and steadily advancing in its scientific
    skills while introducing flexible, less burdensome but no less valid
    regulatory procedures.
        We have taken important strides forward, and we are well positioned
    to make even more effective use of day-to-day operating resources as
    well as to strategically plan for managing new responsibilities.
        In addition to our important ongoing efforts, there are three major
    tasks that we perceive to be fundamental for the fulfillment of our
    public health mission in fiscal year 1998.
        First of all, we must implement--in cooperation with federal, state
    and local public health authorities--the Administration's food safety
    initiative.
                             food safety initiative
        Americans rightfully expect their food to be wholesome and safe,
    and with rare exceptions, it is. We know, however, that problems do
    exist. According to the Council for Agricultural Science and
    Technology, up to 33 million foodborne illnesses occur each year, and
    as many as 9,000 people--mostly the very young and the elderly--die as
    a result.
        Hospital stays associated with microbial foodborne illnesses are
    estimated to cost more than $3 billion a year, and the estimated total
    expenditures due to foodborne illnesses are at least $5.6 billion.
    These costs, both in lives and economic consequences, are unacceptable.
        Last year's outbreak of E. coli 0157:H7 contaminated apple juice on
    the West coast is another example of why we need to improve our system
    for protecting food. We were first alerted when one of our food
    scientists spotted on the Internet a reference to a previously
    unreported E. coli outbreak in the state of Washington. After a
    diligent inquiry he found the person associated with the Internet
    notice--a University of Washington physician who had uncovered a
    cluster of patients with Hemolytic Uremic Syndrome, an extremely
    serious illness caused by E. coli in which blood cells dissolve and the
    kidneys suffer severe damage.
        The first clue to the cause of the outbreak was provided by state
    and local officials in Seattle who had interviewed the patients and
    found that they all had consumed the same brand of apple juice. Samples
    of the suspected product were brought to FDA's Seattle laboratory,
    which began testing them for the presence of E. coli 0157:H7.
        Commissioner Kessler was notified and he initiated a conference
    call beginning at 9 o'clock that night with experts from FDA, CDC,
    state and local health authorities, and representatives of the
    manufacturer. After the call was concluded, at 4 a.m., the manufacturer
    of the apple juice recalled all of the already distributed contaminated
    products, and a press release was issued warning the public against
    consuming the juice they had already bought. As a result of this rapid
    intervention, the outbreak was limited to 66 Americans and Canadians.
    Tragically, one of them--a little girl in Colorado--died of
    complications of this foodborne disease.
        We were able to help contain this outbreak thanks to the fast
    reaction and cooperation from federal, state, and local public health
    officials as well as from the juice manufacturer, who instituted an
    immediate recall of the unsold products and warned the public against
    consuming the juice they had already bought.
        But we also were fortunate. First, Kings County in Washington has a
    disease surveillance system similar to the FoodNet system supported by
    CDC, FDA, and USDA. If the same outbreak had taken place in other areas
    of the country, we might not have made the connection until many more
    people had become ill.
        Second, Federal health officials took charge of the situation
    rapidly and received prompt cooperation from all the relevant federal,
    state, local and industry participants in the incident. But this was a
    fairly exceptional experience. For the emergencies that take place
    under less favorable circumstances, we need to have effective and
    consistent coordination in place before the outbreak takes place.
        Similarly, if we knew more precisely how this deadly form of E.
    coli grows and multiplies, how it infects the food and how it is
    transmitted to humans, we could act more quickly and decisively when
    events of this sort take place. Our research and risk assessment work
    will bring us closer to the knowledge we need to devise educational
    programs to teach consumers and food processors how to avoid and combat
    such contaminants. And we must have additional inspectors if we are to
    ensure that food safety standards are being met.
        In recent years, we have taken several significant steps to improve
    food safety. We are now implementing the Hazard Analysis and Critical
    Control Point (HACCP) system for seafood, and the U.S. Department of
    Agriculture is doing the same for meat and poultry. FDA and USDA have
    supported the efforts of the Centers for Disease Control and Prevention
    to create a system of FoodNet Sites for identifying disease outbreaks.
    And Congress enacted new legislation last year aimed at protecting the
    public--particularly children--from pesticides. But our system is still
    largely outmoded, and it is time to bring food safety into the
    contemporary world of automation and modern science.
        We are therefore asking your support for new resources to carry out
    FDA's share in the Administration's food safety initiative which is
    described in detail in the budget.
                      prevention of tobacco use by minors
        A second major task is our public health and legal obligation to
    protect our most vulnerable population--our youth--against the
    devastating effects of tobacco.
        For the past three years, our agency conducted an extensive
    investigation into public health aspects of the use of tobacco, which
    kills more than 400,000 Americans each year--more than acquired immune
    deficiency syndrome, alcohol, car accidents, murders, suicides, illegal
    drugs, and fires combined.
        We found evidence that nicotine is addictive; that it produces
    pharmacological effects which are the primary reason why people use
    tobacco; and that manufacturers know these facts.
        The most striking discovery, however, was the overwhelming evidence
    that the enormous public health burden linked with tobacco products
    originates when the users are young, a stage of life that's most
    carefree and susceptible to risk-taking. Eighty-two percent of adults
    with any history of smoking had their first cigarette before the age of
    18, and more than half of them had already become regular smokers by
    that age.
        Each year, one million youngsters in this country become regular
    smokers--and one-third of them will die prematurely of lung cancer,
    emphysema, and similar diseases linked to their addiction. About three
    million of our adolescents smoke, and another one million boys use
    smokeless tobacco. Tobacco use and nicotine addiction can be properly
    called a ``pediatric disease.''
        Based on these findings, FDA last year determined that it has
    jurisdiction over cigarettes and other tobacco products, and issued
    regulations restricting their sale and distribution to children and
    adolescents.
        This year, we--together with our sister public health agencies and
    state and local authorities--are embarking on an enforcement program
    designed to reduce young people's use of tobacco products by 50 percent
    in seven years. It is an enormous undertaking: despite the fact that it
    is against the law in all 50 states to sell cigarettes and smokeless
    tobacco to minors, our young people purchase an estimated 1.26 billion
    dollars' worth of tobacco products each year. Recent surveys have shown
    that adolescent smoking, after several years of decline, is again on
    the rise.
        As a public health agency we feel a deep obligation to see this
    program carried out. Earlier, I mentioned our implementation of the
    Mammography Quality Standards Act, the most important advance in the
    public health protection for the nation's women. Protecting their
    children--our youth--from nicotine and tobacco is an equally urgent and
    deserving task whose future benefits will far outweigh the current
    funding needs.
                         pdufa and mqsa reauthorization
        Our third important task is to achieve reauthorization of two user
    fee programs--PDUFA and MQSA, both of which expire on October 1 of this
    year. Both of these programs set demanding performance goals and
    provided the additional resources necessary to accomplish the agreed-
    upon objectives. As I have discussed earlier, the principle of linking
    higher productivity, through performance measures and goals, and the
    collection of user fees to finance specific program activities has been
    a success, and there are important oportuniites for these existing
    programs. The Administration has proposed expanding the use of that
    principle to other FDA activities which I will address in more detail
    shortly.
                          three long-range challenges
        Beyond these immediate tasks, FDA faces longer-term challenges for
    which we must find solutions if this country's public health is to
    continue to be as well served as Americans expect and merit.
        One of the most demanding problems--as well as the greatest
    opportunity--is the prodigious outpouring of new scientific knowledge
    that directly impacts on our responsibilities as a public health
    agency. Scientific information is growing far more rapidly than could
    be foreseen even a decade ago, and the sheer volume of new insights is
    nearly unimaginable.
        While our agency scientists, such as those at the National Center
    for Toxicological Research, are hard at work to keep abreast of these
    developments, we face a constantly expanding task. At any particular
    moment, we have to be thoroughly competent in understanding such
    disparate issues as the biology of genetically altered tomatoes, the
    safety and effectiveness of eye surgery with a laser beam, and the
    effectiveness and side effects of new unique classes of highly toxic
    drugs. Our mission involves therapeutics, restoratives, diagnostics,
    nutritionals, and many other scientific disciplines whose complexity is
    constantly growing. We must devise additional ways of making the best
    use of the cutting edge of new knowledge. In order to properly oversee
    the translation of basic science observations to applied practical
    application, we must have this facility.
        Another challenge we will have to meet is improving accessibility
    to meaningful health information. Accurate product information is
    absolutely vital to patients and health care professionals. In many
    ways, information is our new currency. Having a new drug or a new food
    or a new medical device, without having the information how to use it
    properly or safely, is to no one's advantage. We must struggle not just
    to get new products on the market, but to make sure that there is
    information about their benefits and risks, so that the health care
    provider and individual can make informed decision about proper use. We
    have learned from our experience with the new food label and with
    prescription drug information leaflets that well-presented and
    accessible information may be the most powerful tool we have to improve
    the public health. With the cooperation of the industry, we are about
    to institute major improvements in the labeling of non-prescription
    drugs, but more remains to be done.
        Finally, I must include one more important long-range challenge
    that FDA has to address in order to continue maintaining this country's
    traditional standards. With the globalization of manufacturing, trade,
    and consumption, members of the international community--including
    ourselves--recognize the value of harmonized regulatory standards and,
    possibly, shared compliance surveillance. It is our only realistic
    option for ensuring the standards of foreign-made regulated products,
    whose imports to this country have increased seven-fold in the last 25
    years.
        For FDA, this is an expanding mission that calls for the
    development of international contacts, knowhow and negotiating skills
    within a scientific framework. Moreover, we find that--as one of the
    world's oldest consumer protection agencies--we are expected to do our
    full share. To advance our country's national interests, we are doing
    our best to meet these expectations.
        A good example of our contribution is the International Conference
    on Harmonization of Technical Requirements for Registration of
    Pharmaceuticals for Human Use (ICH), the most important international
    effort in the regulatory field that seeks to harmonize submission data
    for drugs in the U.S., Europe and Japan. Less than five years' old, ICH
    is completing the adoption of more than 40 consensus guidelines, many
    of which are based on our standards. We also are providing leadership
    for similar international efforts to harmonize the standards for
    veterinary drugs, and for medical devices.
        All of these challenges are even more formidable because we realize
    that the growth of our work load will continue to exceed our resources.
    The prescription drug and medical device industries maintain a growth
    rate of more than 8 percent a year, as measured by the value of
    manufactured shipments. Research and development in the same industries
    increases by more than 12 percent each year, and imports of all FDA-
    regulated products are increasing at a rate greater than 7 percent a
    year. We are determined to meet this challenge by increasing our
    cooperation with others, whether in government, academia or industry;
    by not only working hard but also by employing novel solutions when old
    practices no longer meet the need.
                                 budget outline
        Turning to FDA's fiscal year 1998 budget, the Administration's
    request is a total of $1,064,388,000, including $820,116,000 in budget
    authority and $244,272,000 in user fees. A total program level of this
    amount will enable us to carry out the core activities of premarket
    review and postmarket surveillance as well as move forward with new
    initiatives to promote and protect the health of the American people.
    Food Safety Initiatives--$24 Million
        For FDA's portion of the collaborative effort with CDC, EPA, and
    USDA, we are requesting $24,000,000 to begin implementation of
    activities aimed at reducing the incidence of foodborne illnesses and
    resultant economic losses by enhancing the safety of the nation's food
    supply. This funding would provide the elements pivotal to food safety
    such as seafood inspection efforts, consumer and industry education
    (particularly at the retail level), surveillance, including in
    particular the establishment of a new national early warning system for
    outbreaks of foodborne disease, risk assessment and research. The
    activities would lay a foundation of cooperation and communication to
    rapidly deal with emerging public health hazards.
    Youth Tobacco Prevention Initiative--$34 Million
        On August 23, 1996, President Clinton approved FDA's final rule
    that limits the availability and appeal of tobacco products to
    adolescents. For our part of this effort, FDA's budget request includes
    $34,000,000 for the costs associated with implementing this regulation.
    The funding will be used for outreach to retailers, manufacturers,
    state and local officials and communities, and enforcement and program
    evaluation.
    Buildings and Facilities--$14.6 Million
        The budget request includes $14,550,000 for the second phase of
    construction of the Arkansas Regional Laboratory facility for FDA's
    field operation in Jefferson, Arkansas. Construction of this laboratory
    is a cornerstone of FDA's Field Lab Consolidation Plan, and will
    provide state-of-the-art analytical services that are currently carried
    out at four laboratory facilities.
    User Fees--$244.3 Million
        A total of $244,272,000 is proposed in the budget for user fees.
    The proposal includes $91,204,000 in connection with the
    reauthorization of the Prescription Drug User Fee Act of 1992 and
    $13,966,000 in connection with the reauthorization of the Mammography
    Quality Standards Act of 1992, both of which sunset on October 1, 1997.
    The request also includes $7,459,000 in already authorized user fees
    for export certification and the certification of insulin and color
    additives.
        In addition, the proposed budget includes new user fees of
    $131,643,000. These new fees would partially cover premarket and
    postmarket activities costs in most of FDA's major program areas--
    foods, human drugs, biologics, animal drugs, and medical devices. These
    industries derive great benefits from consumers' confidence in FDA's
    review processes and product surveillance.
        The Administration believes that FDA provides a vital public health
    service by protecting consumers from unsafe and impure regulated
    products, and that industry--which greatly benefits from FDA's
    assurance of the quality of such products--should help pay for a
    portion of the agency's costs. FDA will work with Congress and the
    agency's many constituencies, including the regulated industries, to
    implement the proposed fees in conjunction with agreed-upon performance
    measures and goals that are linked with the provided resource levels.
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                                     ______

                              Biographical Sketch
                           michael a. friedman, m.d.
        As Lead Deputy Commissioner, Michael A. Friedman, M.D. provides
    leadership and management of high-priority Agency initiatives aimed at
    addressing important public health issues. He oversees the work of the
    FDA Centers and the field offices. He works in concert with the
    Commissioner, the Center Directors, and the other Deputy Commissioners
    to maximize the efficiency and effectiveness of the FDA's efforts. He
    also represents the Agency in interaction with the public, other
    Federal agencies and the regulated industry, and foreign governments on
    issues related to the broad mission of the Food and Drug
    Administration.
        Dr. Friedman received a B.A. degree in English from Tulane
    University, New Orleans, Louisiana in 1965 and an M.D. degree from the
    University of Texas, Southwestern Medical School, Dallas, Texas in
    1969. His postgraduate medical training was at Stanford University,
    Stanford, California and the National Cancer Institute, Bethesda,
    Maryland, and he has Board Certification in Internal Medicine and
    Medical Oncology.
        Prior to his October 1995 FDA appointment, Dr. Friedman served as
    the Associate Director of the Cancer Therapy Evaluation Program from
    1988-1995 and as Chief of the Clinical Investigation Branch from 1985-
    1988 within the Division of Cancer Treatment at the National Cancer
    Institute and the National Institutes of Health. From 1975 to 1983, Dr.
    Friedman was a faculty member at the University of California San
    Francisco Medical Center serving as an Associate Professor in the
    Department of Medicine, and the Director of Clinical Affairs and the
    Interim Director of their Cancer Research Institute. Dr. Friedman's
    professional activities at the local and national level have included
    appointment to the various posts in the American Society for Clinical
    Oncology, as well as membership in the American Cancer Society,
    American Society for Cancer Research and the Western Society for
    Clinical Investigation. His scholarly activities include authorship of
    numerous scientific articles and book chapters as well as editorial
    board responsibilities for books and journals.
        Dr. Friedman has been a career Public Health Service Commissioned
    Corps member and currently holds the rank of an Assistant Surgeon
    General. He has received the PHS Commendation Award in 1992, the EEO
    Special Achievement Award in 1993, and the PHS Distinguished Service
    Medal in 1997. He is a member of Phi Beta Kappa and Alpha Omega Alpha
    honor societies.

                                   User Fees

        Senator Cochran. Dr. Friedman. I am going to ask a couple
    of questions and then yield to my friend from Arkansas.
        Let me ask you first of all about the user fees that are
    contemplated in the budget submission. We notice that the total
    is $131,643,000 for proposed user fees on subjects such as
    foods, human drugs, biologics, animal drugs, and devices--all
    new user fees. So your budget request is offset, in effect, to
    the extent of almost $132 million by the assumption that user
    fees will be authorized by Congress.
        We do not have the power in this committee to authorize
    those user fees. We are an appropriations committee and not a
    legislative committee. So unless the legislative committees in
    both Houses agree to recommend that and report legislation out
    to do this and it is passed by both Houses and signed by the
    President, we do not have the authority to direct that those
    user fees be paid into the Treasury.
        So what if the legislative committees do not approve this
    offset? What are you going to do when we approve a budget that
    is $132 million less than what you need because of the new user
    fees you have requested? What is going to happen to your
    functions and the contemplated things that you outline here
    that you are going to use all this money for?
        Dr. Friedman. It is a very important question, sir, and one
    that we are focusing on. You recognize that this budget is an
    attempt, along with other parts of Government, to deal with
    everyone's interest in reducing the deficit and at the same
    time providing a level of public health protection. We think
    the bottomline figure that we have identified is fully
    supportable and appropriate.
        But to answer your question, if those funds, if that $132
    million, is not available, the impact on the agency would be
    very, very serious. Our ability to act in a timely way and in a
    complete way on many of our activities would be seriously
    compromised.
        Senator Cochran. One thing that comes to our mind here is
    that such a level of funding would be 8 percent below this
    current year's level for FDA's ongoing activities.
        Dr. Friedman. Yes, sir.
        Senator Cochran. So to put it in perspective for everybody,
    with this amount contemplated in new user fees----
        Dr. Friedman. Sir, my understanding is it could be up to a
    17-percent reduction. But the point you are making is exactly
    the same, which is this is a large, serious impingement and
    would have very dire consequences on all of our activities.

                           Tobacco Regulation Funding

        Senator Cochran. Well, it will be an interesting set of
    choices that you will have to make if those user fees are not
    approved. For example, you are requesting increases for food
    safety and tobacco youth prevention programs. When you add that
    in, you get to about a 15- to 17-percent reduction below the
    current year's funding level.
        Well, my next question is on the tobacco regulation issue.
    You mention the North Carolina case and the new authorities
    that you have under the decision, and we know, as you suggest,
    that that will be appealed and we do not know how that appeal
    will be decided. But what is your view now about the impact
    that that decision and the new regulatory powers you are
    assuming for tobacco regulation, what the impact of that will
    be on your budget needs for the next fiscal year?
        Dr. Friedman. I believe, sir, that the budget needs for the
    next fiscal year that we have outlined are still entirely
    appropriate. I believe that the kind of program that we
    envision, one which involves activities largely delegated to
    States with a relatively small investment in activities within
    the FDA here, not only is a prudent policy from a fiscal point
    of view, but we think also is the most efficient way in which
    to do this.
        Senator Cochran. Well, if there will not be any impact on
    those regulations, then you are going to have to shift money
    from salaries and expenses or other parts of the budget to pay
    for it unless the new user fees are approved, will you not?
        Dr. Friedman. If we are able to achieve the bottomline
    figure by working with your committee and others, by working
    with industry, if we are able to achieve that total budgetary
    figure, then we believe that there is a great deal that can be
    accomplished for the public health. If it is a smaller number
    than that, for whatever reason, then you are quite right, sir.
    We will have to make some very difficult choices, not just with
    respect to those programs, but other very important programs
    that we are involved in.
        Senator Cochran. Senator Bumpers.

                             User Fee Authorization

        Senator Bumpers. Mr. Chairman, you certainly hit the nub of
    the problem here and I will not pursue it except to ask you
    this, Dr. Friedman. Have the authorizing committees approved
    these new user fees?
        Dr. Friedman. I will ask Mr. Byrd, if you would, please.
        Senator Bumpers. Is that just in the generic legislation
    that you have?
        Mr. Byrd. There is generic legislation, but the authorizing
    committees have not approved it as of this time.
        Senator Bumpers. They have not?
        Mr. Byrd. They are considering, but they have not approved
    it.
        Dr. Friedman. That is correct.
        Senator Bumpers. So you are going to have to get that
    authority before you can collect those fees, are you not?
        Mr. Byrd. That is correct.
        Dr. Friedman. That is correct, sir.
        Senator Bumpers. Have you testified before the appropriate
    committees on that issue?
        Mr. Byrd. Yes.
        Senator Bumpers. The authorizing committees?
        Mr. Byrd. We have appeared before those committees.
        Senator Bumpers. I am not sure I understand those user fees
    well enough to state that I favor them or do not favor them.
    But certainly I am really troubled, because I have been a
    strong supporter of FDA. I want to support your budget. But I
    just know the way things go around here. I mean, everything can
    come unraveled in a moment's notice.
        Dr. Friedman. It is a very difficult year in that regard,
    sir, and we recognize that. Our job here is really twofold, in
    a way. One is to show you that we are responsible and careful
    managers and that what we are doing has value, and I think we
    can certainly do that, and invite your questions in that
    regard.
        The second issue, the parallel issue, involves how the
    Government will pay for all the important functions. You have
    many competing interests that petition your attention and these
    are worthwhile, good interests, and we understand what a
    difficult job you have. This is not something that is unique to
    us. It is true for many parts of the Government--USDA,
    Transportation, Commerce, a number of parts of the Government.
    All are wrestling with this same thing.
        We recognize the difficulty of that and just want to work
    as productively as we can with you in that regard, sir.
        Senator Bumpers. Do you want to comment on that?
        Mr. Byrd. Just, if I may, clarify a statement. A moment ago
    I mentioned that in our appearances before the authorizing
    committees we had discussed user fees. We have discussed PDUFA
    with the authorizing committees, but we have not testified with
    regard to this generic user fee bill yet. That user fee bill
    has been submitted by the White House, but we have not
    testified about that user fee bill at this time.
        Senator Bumpers. What assurance, if any, do you have that
    those committees will authorize these new fees?
        Mr. Byrd. We have no assurance.
        Senator Bumpers. I hate to say this, use this word--we have
    ignored the authorizing committees sometimes on setting budgets
    around here when we probably should not have. But there is
    likely to be an outcry if we mark up this bill and we give you
    the billion something you are requesting and it includes those
    user fees, the chairmen of those authorizing committees may say
    nothing or they may say a lot, and that could create a real
    firestorm in the Senate, on the floor.
        Dr. Friedman. We have certainly heard, sir, from a variety
    of different groups their concerns or opposition to these fees,
    and we know that those interests have made their concerns known
    to various Members of Congress.

                          Arkansas Regional Laboratory

        Senator Bumpers. Needless to say, Dr. Friedman, I have a
    deep and abiding concern about NCTR, and you have asked for $14
    million some, I think with last year's $13 million something,
    to complete phase two.
        Dr. Friedman. Correct, sir.
        Senator Bumpers. Is that correct?
        Dr. Friedman. Phase one is initiated. This $14 million
    would be for phase two.
        Senator Bumpers. And you feel comfortable that that amount
    will be able to complete phase two?
        Dr. Friedman. I have asked that question and have been
    assured that that is very true, and that all of the scientific
    and regulatory activities that we hope to nest within that new
    facility are also moving to confluence on exactly the same
    timetable. This represents a very important scientific-
    regulatory fusion at that location. It is part of our field
    reorganization and downsizing and consolidation, and I think
    both the administrative, the scientific, and the physical, the
    building itself, are all flowing together in an appropriate
    way, sir.
        Senator Bumpers. Phase one is under construction, is it
    not?
        Mr. Byrd. That is right, phase one is under construction.
        Senator Bumpers. Do you have any idea what the phase three
    costs will be?
        Mr. Byrd. Phase three runs about $9.8 million. That is for
    the administrative and office areas.
        Senator Bumpers. Would you be asking for that money for
    1999 or not?
        Mr. Byrd. We probably will be asking for it in 1999.
        Dr. Friedman. Yes.
        Senator Bumpers. Have any field lab consolidations taken
    place yet?
        Mr. Byrd. Yes; we have started some field laboratory
    consolidations. As Dr. Friedman mentioned, the consolidation
    associated with the Arkansas regional laboratory will
    consolidate six laboratories down into Arkansas, and that is
    cost effective. We anticipate that that will save the agency
    about $56 million over a 20-year period.
        Senator Bumpers. You anticipated my next question.
        Dr. Friedman. Not only that, but I believe that the group
    that is most skilled at doing research and analyses for dioxin
    has already moved down to the Arkansas facility, I believe from
    Chicago. So there is real research, there is real collaboration
    going on now, sir.
        Senator Bumpers. I know that you have in the past 2 or 3
    years had to reduce the FTE's at all of these labs. I thought
    it was just NCTR, but I realize that is across the board now.
    But I notice you are holding steady this year now.
        Dr. Friedman. Yes.

                        Safety and Efficacy of Approvals

        Senator Bumpers. Now, let me just make a topical comment on
    that point, not just on that particular matter, but, for
    example, I applaud your obviously tremendous efforts to approve
    drugs and devices in a much more expeditious way than in the
    past.
        Let me just voice my concern. If you would care to comment
    on it, by all means do. My concern is there has been tremendous
    political pressure. I have sat in this committee year after
    year and I have heard some of my colleagues browbeat Dr.
    Kessler about speeding up the approval process. And while that
    is a highly desirable goal, that standing alone is not a
    justification.
        If you can speed up the process and be as certain as you
    would have otherwise if you had longer time, that is fine. But
    I just want to say that this is one Senator who would really be
    terribly disturbed to think that we were hastening the process
    just in order to be as competitive with Germany and Italy and
    some of the other countries who have a little faster approval
    time than we do, or have had in the past. I do not know that
    that exists any more.
        And I know you have done a great job, as you pointed out
    this morning and Dr. Kessler did last year, about approving new
    items and drugs in a much more expeditious manner. But as I
    say, I just want to be sure that these drugs are safe. I think
    the ordinary citizen has no idea how much illness there is in
    this country because of a misuse of drugs or because of side
    effects that had not been anticipated, because two drugs do not
    match with each other when you put them in your body. I think
    that, as I say, I know from talking to doctors that is a
    massive problem for them.
        Dr. Friedman. If I may, let me respond with just a couple
    of comments, sir. One is that the tension you describe is
    exactly right. We recognize that no product is ever totally
    safe and no product is ever totally effective, and so what we
    must do is try and see developed and then promulgated
    information about what risks and benefits a product offers to a
    particular individual.
        We want to provide excellent information, so that patients
    can make choices, so that doctors can help patients make
    choices, so that reimbursers and insurance companies can
    reimburse appropriately for those choices. To the extent that
    we are an information purveyor, that is a crucial role for us
    in the future. That is based on science, and what we must do is
    to try and integrate all the new science in the most effective
    way possible.
        We are balancing. We are dealing with this tension you
    describe. We want to have as much of the information as we can,
    but we do not want to be ponderous or delay getting an
    important product to the public. We want to be as right as we
    can be, but we cannot be perfect. We know that, and this is a
    balance.
        Please.
        Mr. Schultz. If I could just add something, in the new drug
    area it is important to distinguish between typical drugs that
    are maybe at most slight advances over what is available and
    truly breakthrough drugs for very sick people. In the first
    area, which is the largest number and is what those charts
    largely reflect, the theory of the Prescription Drug User Fee
    Act was that the agency could go faster with more resources.
    And I think we are very confident there has been no diminution
    of the standards or of safety and efficacy. There are a lot of
    difficult decisions and so on, but I think we are very
    confident there has been no change.
        The harder issue is where you have a drug for a disease
    where there is nothing else available and at what point in time
    do you give people access to that product? This does not tie
    into so much the desire to speed up the approval as trying to
    balance the issue of when do you have the right amount of
    information to allow a company to promote a drug. And it is one
    that has been debated and we worry about it, and I think we
    share your concerns. We feel like we have struck the right
    balance, but it needs to be continued to be discussed.
        The other point I want to make is, some of these issues are
    going to come up in terms of so-called FDA reform legislation
    both for drugs and devices, and we share your concerns there as
    well. We want to be very careful so that any legislation that
    is enacted does not undercut the agency's ability to assure
    safety and efficacy.

                               Medication Guides

        Senator Bumpers. One further point, Mr. Chairman, and I
    will conclude with this. Last year we had considerable debate
    and discussion about FDA's role in developing these--I forget
    what you call them. It is what they give you at the drugstore
    about the contraindications of the drug and so on.
        Dr. Friedman. Med guide, medication guide.
        Senator Bumpers. Yes; last year I think we gave you some
    authority, did we not, to elaborate and cooperate with the
    pharmaceutical companies in developing those?
        Dr. Friedman. That is right.
        Mr. Schultz. You basically set up a system where there
    would be a voluntary program until about the year 2000 with FDA
    doing surveys and setting standards. But the market will be
    allowed to work until 2000, and then at that point we are to
    come and do a survey and see if 75 percent of people who buy
    prescription drugs get adequate information. And then, if they
    do not, you gave us authority to take action.
        Senator Bumpers. OK.
        Dr. Friedman. We think it is a very satisfactory proposal.
        Senator Bumpers. You all are happy with that?
        Dr. Friedman. Yes, sir.
        Mr. Schultz. It is interesting. What happened is all the
    different groups got together as a result of the legislation
    and came up with a plan that then went to the Secretary, and
    the Secretary adopted. So our sense is there is now, as a
    result of the legislation, a much broader agreement on what the
    right steps are.
        Senator Bumpers. I am not critical of the pharmaceutical
    companies. When you buy a prescription drug now you get one of
    those things. They just peel them out of a computer. They are
    extremely helpful. They may not be as comprehensive as they
    ought to be. A layman has no earthly idea whether he is getting
    all the information he needs on that or not. So I think when
    FDA weighs in on it we will all feel just a tad safer on the
    information we are getting being accurate.
        Thank you very much, Mr. Chairman.

                              Blood Supply Safety

        Senator Cochran. Thank you, Senator.
        Last year, we provided direction to the Food and Drug
    Administration to move forward aggressively, in consultation
    with the Centers for Disease Control and Prevention, in taking
    measurable steps to prevent and respond rapidly and effectively
    to cases of viral and pathogenic contamination of blood
    products. The hemophilia community remains on the frontline in
    exposure to viruses contaminating our Nation's blood supply. We
    still think the FDA needs to pursue all measures required to
    assure safe blood products, including instituting a patient
    notification and product recall and withdrawal system.
        Last year, we discussed this in this budget hearing and we
    were assured that there would be cooperation and action by the
    FDA on this subject. There was a meeting held, but there has
    been no action that I know of taken by the FDA to institute a
    patient notification system. And a lot of questions that we
    raised at that hearing are still unanswered.
        It is my understanding that in November a meeting was held
    with the National Hemophilia Foundation and others who were
    interested to discuss these issues, but no further action to my
    knowledge has been taken to develop a process to respond to the
    concerns or to these cases.
        Many of the issues this subcommittee sought to address last
    year were identified in a 1995 report by the Institute of
    Medicine entitled ``HIV and the Blood Supply.'' Two years
    later, many of the concerns were cited in an extensive report
    on FDA oversight of the blood supply completed by the General
    Accounting Office. That report reinforces my concern that
    serious confusion continues to exist over the informal system
    of communication between FDA and manufacturers and
    manufacturers and their distributors of blood products.
        GAO recommended the publication of guidelines that clarify
    FDA's intentions when issuing memoranda and other
    communications to manufacturers and when recommending product
    recall and withdrawal. It seems to me we have an ongoing
    problem that is not being addressed in a vigorous and committed
    way.
        The question is, Can we expect the FDA to take any action
    to develop a document, a well-defined guidance document, that
    spells out the decisionmaking procedures for initiating a blood
    product recall or withdrawal following an adverse event, and
    when can we expect FDA to institute a patient notification
    system that fully protects people with hemophilia and other
    bleeding disorders, as well as the general public?
        Dr. Friedman. I appreciate the chance to respond to this
    really important question. We do take these very seriously and
    I am pleased to give you updates and what has occurred since
    last year.
        Deputy Commissioner Mary Pendergast has been very involved
    in this area and I would ask her to please begin.
        Ms. Pendergast. Thank you, Senator. I would agree that you
    raised a very important question. We have taken steps that
    perhaps you are not aware of. In the first instance, we have
    switched the organizational structure within the FDA as to how
    to respond to instances where there is bacterial or viral
    contamination of products. It is now handled by our field force
    and by our Division of Emergency Operations. So the same kind
    of emergency response team that we would have sent in because
    of E. coli in apple juice will be triggered in the blood
    industry as well. So we have a whole group of people, a
    decisionmaking tree, a rapid mobilization response.
        We have also given the lead authority for the initiation of
    recalls to our field force. That is the way we do it in the
    rest of the agency and we have moved the plasma fractionation
    and blood industry model into our normal model, which is where
    the field force has the responsibility for initiating recall
    recommendations and following through.
        We have met with industry. We have, shall we say, reminded
    them in a very stern way of their obligations under our
    longstanding rules that when there is a class 1 recall they
    have an obligation to work with their distributors to get
    information to the final consumer of the product. In the case
    of plasma fractionation products, that would mean the users of
    the product, the hemophiliacs.
        We have met with the hemophiliac organizations, with the
    national organization, the National Hemophilia Foundation and
    the Committee of 10,000. We have met with each of them. We have
    scheduled additional meetings to see what else we can do.
        We have put all FDA recalls of blood and plasma products on
    the Internet immediately, on a fax-on-demand system, and on
    another system where you can call in and get the information.
        We are also forcing the companies to take more seriously
    their obligation to immediately classify these situations as a
    recall. When you call it a recall, everyone knows, whether it
    is patient, doctor, or distributor, that there is something
    potentially wrong with the product. For too long the companies
    were calling these voluntary market withdrawals, giving people
    the false sense that there was nothing wrong with the product.
    We have gotten much stricter in terms of holding the companies'
    feet to the fire to make sure that at the first instance they
    correctly characterize these situations as a recall.
        So we are taking steps and we will continue to do so with
    the appropriate consumer and other groups.
        Senator Cochran. Thank you very much. I am encouraged by
    that report, and I hope that you have an opportunity to put
    that in a form that we can make available to those who have
    called us and written us complaining that they do not think
    enough has been done. This does seem to be an important step in
    the right direction and we appreciate that very much.
        Ms. Pendergast. Thank you.

                              Lou Gehrig's Disease

        Senator Cochran. There is also a continuing concern about
    amyotrophic lateral sclerosis [ALS], a fatal neurological
    disorder known as Lou Gehrig's disease. Approximately 20,000
    Americans, I am told, are affected. The NIH recently discovered
    that an inherited form of ALS involves a gene that produces
    aberrant forms of superoxide dismutase. I ought to check that
    out, how to say it.
        Dr. Friedman. You said it perfectly.
        Senator Cochran. It has come to my attention that the FDA's
    Peripheral and Central Nervous System Drugs Advisory Committee
    will conduct a hearing on May 8 on a new drug application for
    Amyotrophin which may be helpful to ALS patients.
        My reason for bringing this up is to try to bring this to
    the attention of the highest levels of the FDA and encourage
    you to look very carefully at any new drug applications and to
    tell us, if you can now, what your expectations are for the
    approval of drugs that are approaching the stage where they can
    be approved by FDA to deal with this very serious and
    debilitating disease.
        Dr. Friedman. You are quite right, Mr. Chairman, this is
    really a devastating disease and a disease that is not
    satisfactorily treated with current products. The agency did
    approve a product recently and that was an important first
    step, but this was not an entirely satisfactory product. It
    does not cure the disease. The patients still have an
    inexorable course that we are unsatisfied with.
        It would be inappropriate to predict how the advisory
    committee will act on that, and I know you are not asking for
    that at all. What I can tell you is that these are the sorts of
    diseases, sorts of situations, where the agency is most
    committed to working with patient groups and companies to
    generate the clinical data as rapidly and completely as
    possible, so that products can be approved for these
    situations.
        There has been a considerable amount of discussion about
    the testing of this product in the past and the data in the
    past have not been entirely consistent, sometimes looking
    favorable, sometimes not. I think that there is information
    that will be reviewed at this meeting that will be very
    important.

                           Accounting for PDUFA Funds

        Senator Cochran. I know that we have on the books a law
    that permits user fees to be collected for pharmaceutical
    applications, licensing, and other activities to, in effect,
    accelerate and avoid delays from occurring through FDA's
    system. That is up for reauthorization and we are encouraging
    our friends on the legislative committee to look at that and
    provide new authority to continue that program. The industry
    seems anxious to see that is continued as well.
        I would hate to get in a position to know that the FDA is
    taking money from that process and using it to check ID's of
    27-year-olds who are buying tobacco products. That is part of,
    as I understand, your tobacco regulatory procedure. I am
    hearing from people who own grocery stores, who own other
    businesses where tobacco products are sold, and they hear about
    this new regulation that you are going to enforce, requiring
    them to check the ID's of anybody who is 27 years old or
    younger?
        Dr. Friedman. You ask two important----
        Senator Cochran. Although the law applies to 18-year-olds.
    Is that what I understand?
        Dr. Friedman. You ask two important questions, sir. Let me
    respond to the first one, and then I would ask Mr. Schultz to
    please respond to the second.
        Your point that there has to be scrupulously careful and
    transparent accounting for funds is something that we
    absolutely agree with and believe in. So that the whole purpose
    of the user fee program was to have money allocated for review
    functions identified and trackable for certain products, and we
    have been very careful to make sure that those funds are used
    only for those activities.
        So one of the concerns you have--and it is a very
    appropriate concern--is, as more pressure is placed on the
    financial resources of the agency, can we continue to assure
    this committee that we will be as careful and as scrupulous and
    as transparent about our accounting as we have in the past? I
    absolutely commit to that, sir. That is required by the law.

                             Expenditure Priorities

        Senator Cochran. I do not want you to be that scrupulous,
    because you have not been very scrupulous at all in my view. I
    can show you where we have outlined in categories of importance
    and priorities where we think the FDA dollars ought to be
    spent, and then you come up and show us where you did spend
    them and they are totally different from what we have outlined
    in our bill and in our committee report.
        That is one of the hardest things to get the FDA to do, and
    that is to stick by its word on how it is going to use the
    funds when we appropriate them, and even to the point of, I
    think, callous disregard of the views of the Congress on where
    the funds are appropriated, as to how the funds are spent by
    FDA. We cannot find out how you are using the money. Until this
    year, we could not find out what you are spending on rent. We
    have a rental account and you also take money out of salaries
    and expenses and spend it on rent.
        I would like for you to tell us in the budget request, an
    amendment, submit an amendment and tell us how much you need
    next year for rental or office space expenses. We cannot find
    that clearly indicated in the budget, and every year we get a
    runaround when we try to find out these and other FDA costs.
        Dr. Friedman. Sir, I am very sorry that there seems to be a
    miscommunication on this. We very much want to be responsive to
    your requests in this regard.
        Each year we have submitted to Congress a formal accounting
    of our user fee activities, and I thought that was the initial
    thing that you were talking about. We very much would like to
    meet with you or your staff or any members of the committee to
    go through that in sufficient detail to be clear.
        With respect to your second point, which is providing to
    the committee in a format that you find useful and helpful the
    information that you need to help make these decisions, let me
    assure you, sir, that we very much want to do that.
        Mr. Byrd wanted to comment.
        Mr. Byrd. Yes, Senator Cochran; we have attempted to
    provide the information that the committee has requested. We
    have redesigned our submission to this committee for fiscal
    year 1998 to identify the total required for rent. This total
    is $69 million, $46 million provided by the General Services
    Administration, and the remaining $23 million from salaries and
    expenses. So we tried to provide the information that was
    requested.
        Dr. Friedman. But the point is, sir, this is not to say
    that what we did was as helpful to you as you would like. What
    is more important to convey is our willingness and interest. We
    cannot ask you to make really hard decisions, we cannot ask you
    to be as helpful to the agency and the public health as you can
    be, if you feel like you are not getting the kind of
    information that is most useful to you. So this is very
    important to me.
        Senator Cochran. I just have the impression that we are
    being intentionally misled by this agency on the issue of the
    budget. That is why last year we tried to spell out as clearly
    as we could what our views were about how the funds that we
    were appropriating should be spent in terms of emphasis,
    program area and office. That accompanied the appropriation.
    That has not seemed to work as well as we thought it might. So
    I think your invitation----
        Dr. Friedman. I am sorry.

                             Expenditure Priorities

        Senator Cochran. I think your invitation for us to get
    together, have staff meet and talk about this and go over in
    some more detail our concerns and why I am a little aggravated
    by it all--because I do not have this problem, I do not know of
    this problem in any other agency under the jurisdiction of this
    committee.
        But FDA every year seems to delight, seems to delight,
    frankly, in not cooperating in an open discussion of how funds
    are being used or how they will be used in the future that are
    appropriated by the committee.
        So let us work on it.
        Dr. Friedman. Thank you.
        Senator Cochran. We cannot settle it right now, but I
    appreciate your listening to me.
        Dr. Friedman. I appreciate the depth of feeling about this
    and the concerns that you are raising, and we take it very
    seriously.
        Senator Cochran. Well, I appreciate that. This is going to
    be a tough year if we cannot get the reauthorization in a
    timely manner of the prescription drug user fees, and if you
    continue to assume things that you know are not going to
    happen, like $132 million of new user fee authority. I do not
    think I am exaggerating when I am saying that is really a ``pie
    in the sky'' kind of assumption.
        So what you are doing is you are putting this committee in
    a position of having to reduce the funds that you say you have
    got to have by $132 million. We do not have the authority to
    grant you that request. And then you do not have any plan for
    dealing with that. Where is it going to come from?
        So we have got serious problems. This agency has got
    serious problems, and that is another reason why I am
    concerned. We want to be helpful. You have got immense
    responsibilities under the law and by regulations you are
    making some new ones. Interesting.
        Mr. Schultz. Do you want us to talk a minute about the
    tobacco, the 27-year-old requirement, that was the other part?
        Senator Cochran. Not really.

                              Submitted Questions

        There are others on the committee that may submit questions
    and we hope you will respond to them in a timely way, and we
    have additional questions as well that we will submit.
        But let me thank you for your attendance and your
    submission of your request to the committee and your response
    to our questions today. Thank you very much.
        Dr. Friedman. Thank you, sir.
        [The following questions were not asked at the hearing, but
    were submitted to the agency for response subsequent to the
    hearing:]
                     Questions Submitted by Senator Cochran
                             food safety initiative
        Question. The fiscal year 1998 request proposes a $24 million
    increase over the fiscal year 1997 enacted level for the
    Administration's Food Safety Initiative. Of this amount, $20 million is
    for the FDA's Foods program and $4 million is for the Animal Drugs and
    Feeds program. What specific activities will be undertaken with the
    additional funds proposed for the Foods program and for the Animal
    Drugs and Feeds program as part of the Administration's Food Safety
    Initiative?
        Answer. FDA is requesting $24 million in the fiscal year 1998
    budget to begin implementation of a series of initiatives to reduce, to
    the greatest extent possible, the annual incidence of foodborne illness
    and resultant economic losses to consumers and industry by enhancing
    the safety of the nation's food supply. Meeting this goal involves the
    collaborative efforts of several agencies, including the Food and Drug
    Administration, the Centers for Disease Control and Prevention, the
    Environmental Protection Agency, and the United States Department of
    Agriculture. The goal is in concert with the objectives of the HHS
    strategic goals, Healthy People 2000, the CDC emerging infectious
    diseases initiative, the Vice President's National Performance Review,
    and the Office of Science Technology Policy's, ``Meeting the
    Challenge,'' as well as other Presidential directives focused on
    enhancing the health and well-being of children and the elderly. This
    funding will provide for the initial steps toward achieving the long-
    term national goal of reducing the annual incidence of foodborne
    illness, and setting the groundwork for this multi-year, collaborative
    undertaking.
        The need for this initiative is constantly growing. Although the
    U.S. food supply is unmatched in quantity and quality, foodborne
    illnesses threaten public health and contribute significantly to the
    escalating cost of health care. Of all the hazards associated with
    foods, microbial hazards account for 90 percent of the confirmed
    foodborne outbreaks and cases. Among the various contaminants that may
    cause foodborne illness are E. coli 0157:H7, Salmonella enteritidis,
    Campylobacter jejuni, Toxoplasma gondii, Cryptosporidium parvum,
    Norwalk virus, and chemical hazards such as methyl mercury.
        The Council for Agricultural Science and Technology--a private,
    nonprofit scientific organization--estimated in its 1994 report
    entitled, ``Foodborne Pathogens: Risks and Consequences,'' that between
    6.5 and 33 million illnesses and up to 9,000 deaths occur every year in
    the United States, because of microbial contamination of food. Chemical
    hazards, on the other hand, more commonly cause chronic health effects,
    which are difficult to estimate. Hospital stays associated with
    microbial foodborne illnesses are estimated to cost society more than
    $3 billion a year. The estimated total costs of foodborne illness are
    at least $5.6 billion. Since foodborne chemical hazards often present
    chronic rather than acute health threats, specific estimates of their
    impact on health and the economy are not as readily available.
        The costs of foodborne illness are borne by those who become ill
    and their families, coworkers, and employers, as well as the food
    industries, and taxpayers. Costs to stricken individuals include
    medical bills, time lost from work, pain and inconvenience. Food
    industry costs include possible product recalls, establishment closings
    and cleanup, and higher premiums for product liability insurance.
    Perhaps most costly in the long term is the loss of product reputation
    and reduced demand when an outbreak occurs and is publicized. These and
    other ``defensive'' industry costs of foodborne disease run in the
    millions of dollars annually and are, for the most part, entirely
    avoidable. Taxpayer costs include medical treatment for those who
    cannot afford it and higher health insurance premiums.
        One indicator of the breadth of the problem posed by foodborne
    hazards is the increased number of FDA-regulated food product recalls
    because of life threatening bacteria--Class I recalls due to microbial
    contamination. The number of these recalls climbed from seventy-nine in
    1988 to 378 in 1995. These recalls also impose an economic burden on
    industry and consumers. FDA estimates that the total annual recall
    costs for FDA-regulated products to industry and indirectly to
    consumers are roughly $42 million.
        Further, the food supply, as well as consumer tendencies and
    preferences, is changing in many ways that could contribute to an
    increased risk of foodborne illness. A generation of consumers who have
    grown up with the freezer and a microwave, have neither the experience
    or knowledge to always recognize or correct potentially hazardous food
    handling and preparation behavior. Vulnerable populations, such as
    immuno-compromised persons and the elderly, are continuing to grow in
    size. By the year 2020, twenty-five percent of the U.S. population will
    be sixty-five or older. Adding to this number are infants, hospitalized
    people, individuals receiving immuno-suppressive treatments,
    chronically ill people with diseases such as cirrhosis, and people
    receiving antimicrobial therapies, such as antibiotics. Also, there are
    approximately fifty to sixty thousand new cases of HIV/AIDs every year,
    and the number of cancer patients has increased markedly in the last
    twenty years. As a result, today, more than thirty million people are
    likely to be at high risk from foodborne microorganisms. Microorganisms
    are adapting to their environments, developing pathogenic
    characteristics and resistances to conventional food preservation and
    disinfection techniques that contribute to the incidence of foodborne
    illness, and new pathogenic strains continue to emerge, such as S.
    enteritidis phagetype 4. The food industry has evolved into a
    relatively small number of large producers making it possible for a
    contaminated product to be distributed nationally or even
    internationally. Also, the number of retail establishments processing
    foods on-site is growing rapidly.
        In response to this growing problem, the Administration--through a
    coordinated FDA and CDC, USDA, and EPA effort--is planning a Food
    Safety Initiative to implement new, and bolster existing, food safety
    intervention measures. These efforts represent involvement by the key
    components of the Federal food safety system--Federal, State, and local
    public health agencies--and integrate elements pivotal to food safety
    such as surveillance, coordination, inspections, consumer and industry
    education, risk assessment, and research. The range of planned
    activities will lay a foundation of cooperation and communication to
    rapidly deal with emerging public health hazards. The overall benefit
    and outcome of this initial phase of the national Food Safety
    Initiative will be reduced incidences of foodborne illness and all of
    the benefits that carries with it, such as reduced health care costs
    for consumers and industry, reduced costs to industry in recalled
    product and loss of reputation, reduced productivity losses, and
    increased awareness and knowledge of appropriate behavior to combat
    foodborne illness.
        I will provide, for the record, a table which outlines the specific
    activities and amount of funding for each.
        [The information follows:]

                 Fiscal year 1998 budget--Food Safety Initiative

    Foods Program:
        Surveillance: Monitoring pathogen levels, support FoodNet
          foodborne illness surveillance sites....................$1,660,000
        Coordination of outbreak response.........................   550,000
        Risk assessment: Risk assessment consortium, exposure
          assessment.............................................. 3,950,000
        Research: Analytical methods, pathogen control and
          preventive techniques, food handling.................... 3,900,000
        Inspections: Implement seafood HACCP, State partnerships,
          Lab certification....................................... 7,870,000
        Education: Consumer/retail education...................... 2,070,000
                        --------------------------------------------------------------
                        ____________________________________________________

          Subtotal, Foods.........................................20,000,000
                        ==============================================================
                        ____________________________________________________
    Animal Drugs and Feeds Program:
        Surveillance.............................................. 1,500,000
        Research.................................................. 2,500,000
                        --------------------------------------------------------------
                        ____________________________________________________

          Subtotal, Animal Drugs and Feeds........................ 4,000,000
                        ==============================================================
                        ____________________________________________________
          Total, FDA..............................................24,000,000

        Surveillance ($3,160,000).--Surveillance and investigation of
    foodborne disease are powerful ways to detect new foodborne disease
    challenges, to determine what the specific food sources are, and to
    learn how best to prevent foods from becoming contaminated in the first
    place. The objectives of this funding are to: establish a new national
    early warning system for outbreaks of foodborne disease, enhance
    microbiologic monitoring and surveillance activities related to
    pathogen reduction, and improve the monitoring of layer hens and bulk
    liquid egg products for Salmonella contamination before pasteurization.
        The effect of these efforts to detect foodborne illness outbreaks
    in combination with intervention efforts, such as product recalls,
    reduces the number of illnesses in the outbreak and generates health
    benefits as shown for the 1993 outbreak of E. coli 0157:H7 in
    hamburger. An estimated additional 800 illnesses were prevented because
    an in-place surveillance system detected the outbreak, which quickly
    triggered a recall of the implicated food and reduced the potential of
    health care costs.
        FDA will expand the ongoing national surveillance of antimicrobial
    resistance from food producing animals to determine the impact of
    antibiotic drug use in animals.
      --FDA's Center for Veterinary Medicine (CVM) in coordination with
            CDC, and USDA/ARS has developed a National Antimicrobial
            Susceptibility Monitoring Program for Salmonella and E. coli
            0157:H7 isolates from both animals and humans. This monitoring
            program will be expanded with Food Safety Initiative, FSI,
            funds to include additional surveillance sites, new sources of
            isolates and Campylobacter isolates.
      --FDA in collaboration with CDC and USDA will develop a protocol for
            response activities and information dissemination as a result
            of findings from the surveillance system.
      --Immediate follow-up will include outbreak investigations and field
            studies in response to ``red-flag'' events.
      --FDA will develop a comprehensive education program to disseminate
            the findings from the monitoring program to all stakeholders.
      --FDA will initiate collaborative international technology exchange
            and assist in the development of relevant international
            databases.
        Coordination ($550,000).--The goal of improved coordination of
    foodborne illness response, particularly in emergencies, at federal,
    state and local levels of government, is to ensure that responses are
    rapid and effective, and ensure the best use of government resources,
    while avoiding unnecessary duplication of effort.
        The objective of this initial phase is to create, at the Federal
    level, an emergency response system which improves existing channels of
    communication and develops new lines of communication between the
    Federal agencies responsible for investigating foodborne illness. FDA's
    role in initiating control and prevention measures (e.g., working with
    industry to remove implicated products from the market) is critical to
    the success of any response system. As a result of the Federal-Level
    Interagency Coordination Group managing responses and improving
    communication of critical data and information, these efforts should
    result in a more rapid identification of foodborne illness outbreaks
    and implementation of control measures.
        Risk Assessment ($3,950,000).--The goal of risk assessment is
    improved health risk estimates associated with microbial and chemical
    foodborne hazards to facilitate the development and evaluation of
    surveillance plans, risk reduction strategies, regulations targeted to
    specific hazards, implementation of HACCP practices, and research
    programs to enhance food safety.
        This initial phase will: 1) establish a Risk Assessment Consortium
    to provide leadership, consistency, and transparency in risk
    assessment; 2) improve data and modeling techniques to assess exposure
    to microbial and chemical hazards, including animal drug residues, in
    the food supply; 3) begin development of improved and more standardized
    risk assessments to facilitate the ranking of food safety concerns to
    provide for better health protection and more efficient utilization of
    resources; and 4) provide a science-based level playing field in
    support of U.S. positions in international trade.
        Favorable outcomes would include providing a foundation for
    developing better risk assessments, which would result in more focused
    surveillance and research efforts, and regulatory initiatives. The
    ultimate result is identification of trends in causes and sources of
    foodborne illness, and development of methods to rapidly identify
    specific sources in an outbreak. These two factors will shorten the
    time to identify an outbreak and its source, speed control measures
    into place, and prevent growth of the outbreak, illnesses and possible
    deaths. Even modest improvements in the existing system can yield
    potential savings to both industry and consumers of thousands, and even
    millions of dollars.
        Research ($6,400,000).--The goal of research initiatives is new,
    improved tools, screening methods, and analytical methods to more
    rapidly and accurately identify and characterize foodborne hazards,
    evaluate the effectiveness of surveillance initiatives and control and
    prevention strategies, conduct risk assessments, and verify
    effectiveness of preventive techniques such as HACCP.
        This initial phase will make available new, rapid, sensitive, and
    accurate screening and analytical methods for microbial and chemical
    hazards to do the following: detect and identify the source of
    foodborne illness outbreaks in surveillance and monitoring activities;
    verify critical control points in HACCP programs; support development
    of educational materials; and provide scientific underpinning for the
    execution of FDA monitoring, regulatory, and enforcement activities to
    reduce the incidence of foodborne illness.
        These efforts should enhance capability for identifying and
    monitoring changes in microbial resistance to a wide range of factors
    (e.g., heat, cold, acid, high salt), and develop/evaluate preventive
    techniques for use during production, handling, distribution, and
    storage processes, and enhance capability to detect and identify
    microbial and chemical hazards in settings such as the processing
    environment and in distribution. (This capability can be a basis for
    formulating preventive strategies and verifying controls in HACCP
    programs.) Further, this capability would improve the ability to detect
    and identify resistant microorganisms and identify determinants that
    may affect susceptibility and around which analytical methods and
    preventive techniques, (such as new effective cleaning and disinfection
    methods for facilities and heat-sensitive foods and new feed and food
    processing parameters), may be designed. Finally, development of new or
    improved screening and analytical methods to detect, identify, and
    quantify microbial and chemical hazards will permit rapid execution of
    the intertwined coordination, surveillance, inspection, education, and
    risk assessment elements of an efficient, effective food safety
    program.
        Further, FDA will conduct research to better understand antibiotic
    animal drug resistance to limit the impact of antibiotic resistance on
    animal and human health:
      --Identify and characterize the factors that led to the development
            of multiple drug (antibiotic) resistance in foodborne pathogens
            in farm and aquaculture animals;
      --Investigate techniques for manipulating the microbial ecology of
            the intestinal tract of agricultural and aquaculture animals to
            prevent the development of antibiotic resistance or select for
            nonresistance.
        FDA will expand research in the areas of prevention, reduction, and
    elimination of pathogens in animals and animal feeds. For
    Campylobacter, Salmonella, Toxoplasma, E. coli 0157:H7, and other
    Shiga-like toxin-producing E. coli, and Cryptosporidium, FDA and USDA,
    often in partnership with universities and industry, will:
      --Expand research into the microbial ecology of foodborne pathogens
            and how initial colonization in animals can be prevented.
      --Expand research on new methods to reduce or eliminate pathogenic
            microorganisms and mycotoxins from agricultural and aquaculture
            animals before slaughter or harvest, including the use of
            probiotics.
      --Initiate research to develop new techniques for eliminating animal
            feeds as a source of foodborne pathogens.
        Inspections ($7,870,000).--The goal of inspections is more
    efficient and effective monitoring of the safety of the food supply.
        This initial phase will: 1) more quickly implement the seafood
    HACCP regulations, expand the use of HACCP systems to non-seafood
    establishments, and work to apply HACCP principles to retail food
    service operations, as well as to the slaughter of animals used for
    food; 2) enhance Federal/State partnerships to ensure consistency in
    inspection technique across Federal, State, and local levels, to better
    coordinate with the States, and eliminate duplication of efforts; and
    3) develop a laboratory certification program enabling private parties
    to test samples of food for adherence to food safety regulations.
        Education ($2,070,000).--The goal of education is to provide food
    safety education programs and materials to change unsafe food handling
    behavior used in the home and in retail and institutional food service
    operations.
        This initial phase will: 1) develop more effective methods for
    providing food safety education materials and services to consumers and
    to food service operations, especially those providing food to
    populations at high risk in hospitals, nursing homes, assisted living
    facilities, child day care, and senior day care; 2) develop and
    initiate implementation of a national food safety education program for
    all segments of the retail food industry using the concepts set forth
    in the Food Code; 3) form an alliance, joining expertise of Federal,
    State and local health agencies, industry, and professional and trade
    associations to develop improved education activities on food safety
    issues, promotion of the Food code and/or the food safety parameters;
    and 4) develop education/communication techniques targeted to specific
    groups to overcome current barriers to communicating appropriate food
    safety behaviors to food service workers.
        An estimated 50 million people are now reached with consumer
    information, only some of which is safe food handling information. It
    is anticipated that implementation of this phase of the initiative,
    along with the other elements of the initiative, will result in a
    significant increase in the number of consumers and food service
    workers being reached with food safety messages. But, more importantly,
    this initiative will target changed behavior as its goal rather than
    information dissemination as previous education initiatives have done.
        Question. What is the fiscal year 1997 level of funds for FDA's
    food safety activities? Please indicate how much is currently being
    spent by program.
        Answer. The $24 million requested in the fiscal year 1998 budget
    would provide increased funding to FDA's Foods and Animal Drugs and
    Feeds programs, and their related field activities. For fiscal year
    1997, the Foods program estimates expending nearly $194 million on
    activities directly and indirectly related to the proposed Food Safety
    Initiative in the areas of chemical and microbiological safety of
    foods, and nutrient quality and food labeling. In the Animal Drugs and
    Feeds program, $37.5 million is estimated to fund the traditional
    activities of preapproval evaluation and monitoring of marketed drugs
    and feeds which relate either directly or indirectly to the proposed
    Food Safety Initiative.
        Question. The President's Food Safety initiative is described to
    involve the collaborative efforts of several agencies, including the
    Environmental Protection Agency, the Center for Disease Control, and
    the USDA. Does the success of this initiative rely on each of these
    agencies receiving the funding increases requested in the President's
    fiscal year 1998 budget?
        Answer. The success of the initiative does depend upon each Agency
    receiving the funding increases requested in the President's fiscal
    year 1998 budget. The anticipated benefits and outcomes cannot be
    achieved by implementing only one or a few of the elements. There are
    many causes of foodborne illness, many points at which foods can become
    contaminated, and many factors that make some groups of people more
    susceptible than others. Therefore, no single measure alone could
    ensure as completely, the safety of all foods. While minimal
    improvements could be made with partial funding, the goals of reducing
    the incidence of deaths and illnesses associated with foodborne
    pathogens, as set forth in the Food Safety Initiative, could not be
    achieved.
        Question. The FDA justification indicates that ``The overall
    benefit and outcome of this initial phase of the national Food Safety
    Initiative is a reduced incidence of foodborne illness and all of the
    resulting benefits such as reduced health care costs for consumers and
    industry, lower costs to industry in recalled products and loss of
    reputation, reduced productivity losses, and increased awareness and
    knowledge of appropriate behavior to combat foodborne illness.'' How
    will this initial phase of the Food Safety Initiative achieve the
    benefits and outcomes you indicate and how will you measure your
    success in these areas?
        Answer. The goal of the Food Safety Initiative is to reduce the
    incidence of foodborne illness to the greatest extent feasible. The
    activities outlined in the initiative build on previous Administration
    steps to modernize our food-safety programs and respond to emerging
    challenges. Our understanding of many pathogens and how they
    contaminate food is limited. For some contaminants, we do not know how
    much must be present in food for there to be a risk of illness. For
    others, we do not have the ability to detect their presence in foods.
    The public health system in this country has had limited ability to
    identify and track the causes of foodborne illness. Federal, state, and
    local food safety agencies need to improve coordination for more
    efficient and effective response to outbreaks of illness.
        The fiscal year 1998 budget provides the first steps in achieving
    the overall benefits and outcomes. The Administration will initiate a
    strategic planning process to develop a plan for improving the food
    safety system over the long term. The process will facilitate the
    participation of all interested parties and provide extensive,
    structured discussions to develop strategies for achieving change and
    ways for measuring progress. We anticipate that over the long term
    improved surveillance is going to result in higher, but more accurate,
    outbreak numbers. Ultimately, progress and goal achievement can be
    measured based on declines in the number of foodborne illnesses and
    deaths, and declines in the number of outbreaks using the more accurate
    figures. In addition, more effective prevention and intervention
    programs, more rapid responses to outbreaks, increased inspection
    coverage, changes in behavior, and better detection and quantification
    methodologies, could all be measured as a means of determining the
    effectiveness of our efforts.
        Through this Food Safety Initiative, as well as other
    Administration activities, the groundwork for planning future
    activities will be available to tackle some of the more difficult
    public health, resource, and management questions facing federal food
    safety agencies. The Administration recognizes that these initial phase
    actions will significantly improve the safety of the nation's food
    supply, but that a longer term strategy is also needed. The President
    has requested further information regarding longer term goals of the
    multi-Agency initiative which will be available soon.
        Question. If this is the initial phase, what additional phases are
    planned and what additional funding will FDA require to carry out each
    phase of the President's Food Safety Initiative?
        Answer. Beyond fiscal year 1998, at minimum, a constant level of
    funding would be required to assure whatever progress was achieved with
    the initial phases of the Food Safety Initiative are not lost. However,
    we have not determined exact long-term budgetary requirements, but
    would operate under the fact that the federal food safety agencies are
    committed to continuing to meet with stakeholders and ultimately
    developing a strategic plan for continuing to improve the food safety
    system. At the President's request, each agency is participating in an
    interagency group to develop longer-term strategies which should be
    completed soon.
                        fda food safety responsibilities
        Question. How many food processing plants does the FDA inspect
    annually? How does this compare to ten years ago? to five years ago?
    How many FDA-regulated plants are there?
        Answer. FDA uses a variety of establishment types to categorize the
    business activity of firms of regulatory interest in its Official
    Establishment Inventory. Since the term food processor is not one of
    these categories, we are defining food processors as plants categorized
    as manufacturers and repackers. In fiscal year 1987, FDA inspected
    7,235 food processors, in fiscal year 1991 7,625, and in fiscal year
    1996, 6,543.
        There are almost 25,000 food and seafood manufacturers and
    repackers in FDA's Official Establishment inventory. Let me provide for
    the record, a table showing the historical numbers of repackers
    included in our inventory.
        [The information follows:]

        OFFICIAL ESTABLISHMENT INVENTORY--FOOD AND SEAFOOD MANUFACTURERS/
                            REPACKERS NATIONAL TOTALS
    ------------------------------------------------------------------------
                                          Food and seafood       Seafood
                                            manufacturers     manufacturers
                 Fiscal year                and repackers     and repackers
                                                count             count
    ------------------------------------------------------------------------
    1987................................            24,761             3,076
    1991................................            24,059             3,286
    1996................................            24,770             3,342
    ------------------------------------------------------------------------

        Question. Please describe FDA's inspection coverage of imported
    foods. Has the FDA enhanced its inspection coverage of imported foods
    over the past ten years? Is there increased concern over the safety of
    imported foods?
        Answer. Commercial food products coming into the United States must
    be declared through Customs which automatically notifies FDA. FDA then
    takes one of several possible actions. First, the product may be
    released without examination, or second, FDA may physically examine the
    product at the dock, take samples for analysis in one of the agency's
    laboratories, or detain the product without physical examination.
    Products are detained without physical examination if we have
    previously had a specific problem with a product offered for import or
    with products from a specific firm in a foreign country.
        In fiscal year 1996, FDA conducted approximately 55,142 wharf
    examinations and import sample collections, analyzed 19,515 samples,
    and detained approximately 6,872 products without physical examination.
        The number of imported food products entering the United States has
    doubled over the last five years to approximately 2.2 million import
    entries per year. Meanwhile, wharf examinations and sampling of foods
    being offered for import into the United States have dropped by 50
    percent in just the past four years. Given these changes, and the
    increased frequency of outbreaks such as hepatitis in frozen
    strawberries, there is increased concern over the safety of imported
    foods. The inter-agency Food Safety Initiative is the Administration's
    attempt to respond to this heightened concern.
        Question. FDA is in the process of implementing a Hazardous and
    Critical Control Point (HACCP) system for the inspection of seafood.
    Would you please give us a status report on the implementation of this
    system. What level of funding is being allocated for this activity for
    fiscal year 1997? How much is included in the fiscal year 1998 budget
    request for implementation of seafood HACCP?
        Answer. FDA's Seafood Hazard Analysis and Critical Control Point,
    or HACCP, regulations were published in December 1995 and become
    effective in December 1997. HACCP is a system of preventive controls
    for safety that is implemented by the industry. Each processor's HACCP
    system must follow several basic principles but otherwise may be
    tailored to the circumstances of that processor. FDA's role in this
    system is to issue minimum ground rules in the form of its seafood
    HACCP regulations, provide the industry and the public with information
    about the program, and technical assistance on how to develop and
    operate effective HACCP systems, verify through inspections that the
    industry is meeting its responsibilities as of the effective date,
    obtain corrections when those responsibilities are not being met, and
    evaluate the national program and fine tune it as necessary. I will
    provide, for the record, the status for each component of FDA's role in
    implementing Seafood HACCP.
        [The information follows:]
        The regulations.--The regulations were developed through a process
    involving extensive public input and comment. FDA's philosophy in
    developing the regulations was that (1) every commercial processor
    should be responsible for understanding the potential safety hazards
    associated with its products and maintaining reasonable controls to
    eliminate or minimize those hazards; and (2) FDA's regulations should
    not be so burdensome as to make the achievement of (1) impossible. FDA
    will be monitoring the program closely to determine whether this is the
    case.
        Public information.--The Agency has engaged in an aggressive public
    information program to help the industry and the public generally
    understand HACCP and what will be expected as of the effective date of
    the program. FDA held public meetings in Boston, Baltimore, Tampa, New
    Orleans, Oakland, and Seattle, and also in individual FDA district
    offices. The regulations and explanatory materials have also been
    placed on FDA's home page on the Internet (http://www.fda.gov).
        FDA has also been active internationally. Over 50 percent of
    seafood consumed in the U.S. is imported. Both imported and domestic
    seafood are subject to the regulations. FDA has attended conferences
    and made presentations at such venues as the World Aquaculture Society
    Meeting and Seafood Show in Bangkok, at Bombay and Cochin, India, in
    the Philippines, Singapore, Indonesia, and elsewhere. The Agency made a
    presentation for the staffs of 37 embassies in Washington, D.C. Several
    workshops for importers are scheduled in the near future at various
    sites around the country.
        Technical Assistance.--FDA has provided technical assistance to the
    industry through written guidelines and training.
        Written guidelines.--The seafood HACCP regulations are relatively
    short and general to allow for flexibility in the design of HACCP
    systems. Alone, however, the regulations provide processors with little
    detail on how to actually develop, install, and implement a HACCP
    system. Consequently, FDA developed the ``Fish and Fishery Products
    Hazards and Controls Guide,'' which provides the Agency's best advice
    on safety hazards that are likely to occur on a product-by-product
    basis and on controls that are available for those hazards. The Guide
    was first issued in draft form with a public comment period and has now
    been published as a ``First Edition.'' Additional public comments are
    being received and FDA will update the Guide to reflect changes as a
    result of these comments prior to the effective date of the program.
    The Guide will be revised as needed to reflect future comments
    received.
        Training.--The regulations require that, within each processing
    operation, certain HACCP functions be performed by a trained individual
    or by someone with equivalent knowledge obtained through on-the-job
    training. The ``Seafood HACCP Alliance'' consisting of Federal
    agencies, State regulatory officials, the Association of Food and Drug
    Officials, academia, and industry trade associations, was formed for
    the purpose of developing a uniform, core curriculum for seafood HACCP
    training and to develop a cadre of trainers to deliver this course. The
    Alliance developed a 2\1/2\ day training course in basic seafood HACCP,
    including how to write a HACCP plan. The course was first offered to
    prospective trainers (``train the trainers'') and is now being provided
    by those trainers to the industry for nominal cost (not exceeding
    $150). It has also been taught to FDA's seafood inspectors. FDA
    estimates that about 2,000 individuals have now taken this course.
        FDA then developed a follow-up course, solely for regulators, on
    how to audit a processor's seafood HACCP system. It was initially
    presented on March 26 and March 27, 1997 by satellite down link to
    sites around the country. About 800 Federal and State inspectors and
    other personnel participated in this initial offering. The course was
    repeated recently in Maryland, primarily for state personnel in that
    region. It is an interactive course with facilitators at each site.
        Verification and Evaluation.--Once the program becomes effective,
    FDA will be responsible for verifying compliance, obtaining
    corrections, and evaluating the program as a whole. Internal
    preparations are underway on these matters. One way that FDA is
    preparing is by inviting processors with HACCP systems in place before
    the effective date to have these systems reviewed by FDA as a non-
    regulatory aspect of an otherwise regulatory inspection. Processors
    will receive helpful feedback and FDA inspectors will obtain valuable
    experience.
        Leveraging.--To the extent that HACCP becomes a ``common language''
    for both seafood processing and for inspections, it provides an
    opportunity for the leveraging of inspection resources, both
    domestically and internationally.
        Domestic.--FDA is in the process of developing a model partnership
    agreement for seafood HACCP inspection and beginning negotiations with
    states toward entering into partnerships. HACCP provides a new
    opportunity for inspection partnerships with states through which FDA
    and the state regulatory agency could divide the inspection workload
    between them and then combine the results in a common database. Such
    partnerships would help avoid duplication of effort and, by pooling
    results into a national database, greatly enhance the credibility of
    the U.S. seafood inspection system both domestically and
    internationally.
        International.--Several countries have requested that FDA determine
    that their HACCP-based regulatory systems for seafood are equivalent to
    the U.S. system based on the FDA seafood HACCP regulations. FDA is now
    reviewing whether equivalency does in fact exist for those countries.
    To the extent that HACCP becomes an international norm, it facilitates
    equivalency agreements between nations that trade in seafood. In
    essence, an equivalency agreement acknowledges that the regulatory
    systems of two countries provide the same level of protection to
    consumers, although the measures for achieving that level of protection
    may vary. Where equivalency has been determined to exist, consumers in
    an importing country have a better assurance of safety than would be
    realistically possible solely through sampling at ports of entry. Trade
    is also promoted because equivalent countries do not need to engage in
    rigorous sampling of each other's products. Finally, equivalency
    agreements allow countries to focus their limited regulatory resources
    toward countries where equivalency does not exist.
        Molluscan shellfish.--Last year, the Interstate Shellfish
    Sanitation Conference adopted virtually the entire FDA seafood HACCP
    regulation for the purpose of applying it to the processing of raw
    molluscan shellfish. This year, the Conference is expected to complete
    that effort by revising its Manual of Operations to make it compatible
    with HACCP and HACCP-based inspection.
        FDA estimates that during fiscal year 1997, approximately $4.7
    million will be spent on preparation activities for the implementation
    of Seafood HACCP. Actual implementation of Seafood HACCP will begin
    during fiscal year 1998. If the Food Safety Initiative is funded, FDA
    anticipates spending a total of $26.8 million through this new source
    of funding plus a redirection of existing funds. With Food Safety
    Initiative funds, and the addition of new inspectors for Seafood HACCP,
    FDA estimates that approximately 1,000 high risk firms will be
    inspected in fiscal year 1998. The Food Safety Initiative will allow
    FDA to annually inspect the entire inventory of 3,300 firms by the year
    2000. Significant results of the additional resources will not be seen
    during the first year of implementation, during which time, the new
    inspectors will be hired and trained.
        Question. How often are seafood plants inspected by the FDA?
        Answer. In fiscal year 1995 FDA inspected about 45 percent of the
    seafood inventory. In fiscal year 1996 FDA inspected about 46 percent
    or 1,546 facilities. This is a dramatic increase from the 28 percent of
    the 936 manufacturers or processors inventory that was inspected in
    fiscal year 1987.
        Question. I understand that the FDA is considering the
    implementation of HACCP for other food commodities. Is this true? Has
    the industry been involved in FDA's plans?
        Answer. FDA has published an Advance Notice of Proposed
    Rulemaking--ANPR--asking for public comment about whether and how the
    Agency should develop regulations that would establish requirements for
    a new comprehensive food safety assurance program based on a HACCP
    approach for both domestically produced and imported foods other than
    seafood. Our goals in establishing additional food safety regulations
    would be to make the food supply safer through prevention of food
    safety problems, enable FDA and its State and Local counterparts to
    make more efficient use of the existing resources devoted to ensuring
    food safety, and enhance the ability of the Federal Government to
    provide consumers with the assurance they seek that the U.S. food
    supply is safe. The comments received have been compiled and
    summarized, and are being considered by the Agency in determining the
    next steps in FDA's food HACCP program.
        FDA invited the food manufacturing industry, through an
    announcement in the Federal Register, to participate in a voluntary
    HACCP Pilot Program. Seven volunteer firms met the stated criteria and
    were accepted into the pilot. The pilot program has been completed with
    five of the original participants. Several of these firms have advised
    FDA that they are adopting HACCP corporate-wide and have invited FDA to
    periodically review operations at the additional sites in conjunction
    with corporate audits. FDA is recruiting additional participants to
    ensure the pilot program will include a broad spectrum of food types,
    geographic locations, firm sizes, and types of food safety hazards.
        In addition, FDA held a public meeting in December, 1996, to review
    the current science, including technological and safety factors,
    relating to fresh juices and to consider any other measures necessary
    to provide safe fruit and vegetable juices. Public testimony was
    provided and interested persons were given an opportunity to submit
    additional written comments. FDA intends to initiate rules providing
    procedures for the safe and sanitary processing in the manufacture of
    fruit and vegetable juice through the application of HACCP principles
    and to require firms to use HACCP systems in the manufacture of fruit
    and vegetable juices. A system of preventive controls is widely
    recognized as the most effective and efficient way to ensure that food
    products are safe.
                      youth tobacco prevention initiative
        Question. Of the $34 million proposed for fiscal year 1998 to
    implement FDA's final rule for the regulation of nicotine-containing
    tobacco products, how much is for outreach and how much is for
    enforcement?
        Answer. Of the total $34 million proposed for fiscal year 1998 to
    implement FDA's final rule for tobacco products, $10 million will be
    used for outreach activities. The remaining $24 million will be used
    for enforcement, the bulk of which will be provided to the states via
    contracts with state and local agencies.
        Question. What specific outreach activities will be carried out and
    what is the cost of each?
        Answer. In fiscal year 1998, we plan to intensify our outreach
    efforts to educate the retail community and the public about the age
    and photo ID provisions and to encourage retailers to comply with these
    measures. We plan to do a mailing to hundreds of thousands of retailers
    each quarter informing and reminding them of their responsibilities
    under the regulation. Further, in response to retailers' requests, we
    plan to print color posters for retailers to place in their stores
    explaining to customers the new requirements and urging customers under
    27 to have their ID ready when buying cigarettes or smokeless tobacco.
    These posters will be printed in English and in Spanish and will be
    made available for free to retailers and others calling the hotline.
    FDA also will print, promote, and disseminate brochures for retailers
    and the general public and will develop and place exhibits at events
    attended by retailers, public health officials, and others. At the
    point at which FDA signs a contract with a new state to conduct
    compliance checks, FDA plans to alert retailers to the checks and
    remind them to comply with the age and photo ID provisions. Also, in
    states with whom FDA has contracted, FDA plans to place billboard,
    print, and radio ads in English and in Spanish informing retailers and
    the public that retailers must not sell to anyone under 18 and must
    card anyone under 27. Further, FDA will update the public on the extent
    of compliance it is achieving in different states. FDA also will
    develop materials for young people informing them about the new
    regulation and the serious public health problem it seeks to address.
    We will work with schools to disseminate videos, posters, brochures,
    and other materials to help discourage young people from attempting to
    purchase cigarettes or smokeless tobacco.
        Approximately half of the outreach funding will be spent on
    educating retailers about their responsibilities via mailings to
    retailers, in-store posters, brochures, exhibits, videos and ads. The
    other half will be spent trying to discourage young people from buying
    cigarettes and smokeless tobacco and informing parents, teachers, state
    and local health officials about the new regulation.
        Question. What specific enforcement activities will be conducted
    and what is the cost of each?
        Answer. The bulk of the $24 million will be spent on contracts with
    state and local officials for the enforcement of the final tobacco
    regulation. Remaining enforcement activities will primarily consist of
    follow-up actions based upon the compliance checks conducted under
    contract by state and local officials.
        Question. What level of funding will be provided to State and local
    officials to enforce the rule? Will all State and local governments
    receive funds? If not, which State and local governments will receive
    funds? How will these be selected? What level of funding will each
    receive? What enforcement activities will these governments be required
    to carry out?
        Answer. FDA has identified 10 states that have been asked to submit
    proposals for contracts. Money for the contracts has been set aside
    from the $4.9 million allocated out of fiscal year 1997 funds. Other
    states will remain free to submit proposals and, if money is available
    after the first ten contracts are signed, additional contracts can be
    negotiated. With the money included in the fiscal year 1998 request,
    FDA expects to be able to contract with all states that submit
    proposals.
        Question. The appropriations justification indicates that seven
    years after implementation of the rule, FDA's goal is a 50 percent
    reduction in the use of tobacco products by children and adolescents.
    How will FDA measure its success in meeting this goal?
        Answer. In the preamble to the proposed rule, FDA indicated that it
    would measure smoking and smokeless tobacco rates by reference to the
    Monitoring the Future Project--MTFP--data, an annual survey performed
    by the University of Michigan, Institute for Social Research. The
    survey measures, among other things, cigarette and smokeless tobacco
    use by 8th, 10th and 12th graders. In addition, it looks at two
    measures: usage in the last 30 days, and regular usage. FDA intends to
    use some or an average of some of these data.
        Question. The fiscal year 1998 budget indicates that FDA will spend
    $4.9 million on tobacco in fiscal year 1997. How will this $4.9 million
    be spent?
        Answer. Of the $4.9 million, $2 million will be used to fund State
    Contracts, and $1.9 million will be used for FTE support. The balance
    will be used to fund Outreach and Education efforts.
        Question. Provide for the record an object class breakdown of FDA's
    $4.9 million fiscal year 1997 level for tobacco and the $34 million
    proposed for fiscal year 1998.
        Answer. I would be happy to provide the requested object class
    information for fiscal years 1997 and 1998 for the record.
        [The information follows:]

                       YOUTH TOBACCO PREVENTION INITIATIVE
                             [Dollars in thousands]
    ------------------------------------------------------------------------
                                               1997 estimate   1998 estimate
    ------------------------------------------------------------------------
    Personnel compensation and benefits.....          $1,713          $1,801
    Travel..................................              50              50
    Rent and utilities......................              60              40
    Printing................................             500             500
    Other services (contracts)..............           2,522          31,569
    Supplies and materials..................              35              30
    Equipment...............................              20              10
                                             -------------------------------
          Total.............................           4,900          34,000
    ------------------------------------------------------------------------

        Question. What additional funding and staffing will be required to
    implement FDA's tobacco regulation in subsequent fiscal years? Please
    provide funding and staff year requirements by fiscal year.
        Answer. FDA has not yet fully developed projections beyond fiscal
    year 1998.
                          arkansas regional laboratory
        Question. What is the status of Phase I construction of the
    Arkansas Regional Laboratory which was funded for fiscal year 1997?
        Answer. Proposals for the construction of the Arkansas Regional
    Laboratory, or ARL, were received on April 30, 1997. It is anticipated
    that the Phase I construction contract will be awarded during the
    summer of 1997. Construction of the ARL Phase I would then begin in
    fall 1997. The fiscal year 1997 appropriation included $13,000,000 for
    Phase I construction of the ARL. Phase I begins construction and
    provides the ARL building, foundation, substructure, superstructure,
    exterior enclosure, and roofing. Major building systems, such as fire
    protection, HVAC, electrical, and some site work, are also included.
        Question. The fiscal year 1998 request includes $14.550 million for
    Phase II construction of the Arkansas Regional Laboratory. What is the
    schedule for Phase II construction of this project? Will the funds
    requested be sufficient to complete Phase II of the project?
        Answer. It is anticipated that the construction contractor will
    receive a Notice to Proceed on construction of Phase II of the ARL in
    the fall of 1997, with the completion scheduled in the fall of 1999.
    Occupancy is projected for early 2000. The fiscal year 1998 request for
    $14,550,000 will complete the laboratory portion or Phase II of the
    construction of the ARL, by completing building systems and providing
    laboratory fit-out. The fiscal year 1997 appropriation of $13,000,000
    for Phase I of ARL will support construction of the building,
    foundation, substructure, superstructure, exterior enclosure and
    roofing as well as major building systems such as fire protection,
    HVAC, electrical and some site work. The construction bid process for
    Phase I is underway and will determine the exact amount needed to
    complete the ARL fit-out.
        Question. How many additional phases of this project are planned?
    What is the cost of each phase and what funding will be required in
    each subsequent fiscal year to complete the project?
        Answer. Phase III, initially estimated at $9,800,000, will provide
    the renovation of the existing Building 50 in its entirety and
    completes the common ORA/NCTR administrative and support area. The
    complete ORA/NCTR project consists of a joint animal quarantine
    facility, renovated space located in NCTR Building 14 to accommodate
    ORA's dioxin analytical program prior to ARL construction, and
    construction of Phases I, II, and Phase III to complete ARL, building
    50 renovation and common area for ORA/NCTR administration and support.
        The current cost projections are based on the Architect/Engineer
    estimate. The construction bid process is underway and when complete
    will provide an exact amount for the project. Additionally, FDA will
    fund an estimated $2.43 million for ARL and Building 50 furniture as
    well as installing telecommunications, computers and security systems.
                         salaries and expenses request
        Question. The fiscal year 1998 appropriations request for FDA's
    salaries and expenses account is $820 million, $67.5 million below the
    enacted fiscal year 1997 appropriations level. This net reduction does
    not include other offsetting reductions to accommodate the $24 million
    increase proposed for the food safety initiative and the $29.4 million
    increase proposed for tobacco. If these are considered, the reduction
    in appropriations for FDA's ongoing activities funded as part of the
    salaries and expenses account totals $122.4 million--nearly a 15
    percent decrease below the fiscal year 1997 level. This fiscal year
    1998 salaries and expenses appropriations request will require the FDA
    to reduce staff by 1,120 full-time equivalent positions below the
    fiscal year 1997 level.
        While the President's budget proposes that this reduction in the
    appropriation be offset by new user fees generating $132 million in
    collections in fiscal year 1998, these new fees rely on the approval of
    the President's legislative proposals. In short, if the House and
    Senate authorizing committees do not recommend legislation establishing
    these fees, the FDA is going to be $132 million short of the amount it
    proposes to need for fiscal year 1998. Those additional resources
    cannot be assumed by this Committee. In addition, collections assumed
    in the President's budget from two existing fees--the Prescription Drug
    User Fee Act and the Mammography Quality Standards Act--require
    reauthorization for fiscal year 1998. If the House and Senate
    authorizing committees fail to reauthorize these fees, an additional
    $105,179,000 in collections assumed in the fiscal year 1998 budget
    request will not be available to the FDA.
        What will be the impact on FDA's ongoing activities if this
    Committee approves the President's appropriations request for fiscal
    year 1998, which is 8 percent below the fiscal year 1997 enacted level
    and nearly 15 percent below the fiscal year 1997 level if the requested
    increases for food safety and tobacco youth prevention are approved?
        Answer. The President's Budget assumes $244 million in user fees,
    of which $237 million would be new or re-authorized. The Budget was
    prepared on the reasonable assumption that those fees could be
    authorized, consequently allowing some budget authority savings to
    occur.
        The Administration's budget for FDA should be viewed in total,
    keeping in mind that it fits in with the President's overall balanced
    budget plan by fiscal year 2002.
        Question. If new user fees are not approved and the FDA's direct
    appropriation for its salaries and expenses account is frozen at the
    fiscal year 1997 enacted level, would FDA still propose that funding be
    shifted from its other activities to provide the increases requested
    for fiscal year 1998 for the food safety and youth tobacco prevention
    initiatives? If so, from which activities funded through the salaries
    and expenses appropriation would you suggest this funding be taken to
    accommodate these increases?
        Answer. I am unable, at this time, to prioritize among the new
    funding included in the budget versus our traditional areas of concern.
    On the one hand, improving the safety of the food supply and keeping
    tobacco out of the hands of children are both initiatives of the utmost
    importance, and are very high priorities of the Administration. On the
    other hand, FDA's traditional activities of promoting and protecting
    the public health through premarket review and postmarket assurance are
    also of vital importance.
        Question. Assuming an overall freeze on the salaries and expenses
    appropriation at the fiscal year 1997 level, please provide a breakdown
    of FDA's fiscal year 1998 spending requirements using the breakdowns
    contained in the Senate report on the fiscal year 1997 appropriations
    bill and adopted by the conference committee.
        Answer. Because of the importance of the new funding requests and
    the need for continuing funding of our traditional programs, I am
    unable, at this time, to provide a breakdown of fiscal year 1998
    spending requirements. We are now considering different possible
    scenarios involving the new initiatives included in the budget as well
    as our traditional areas of concern. The proposed new initiatives are
    of the utmost importance, and are very high priorities of the
    Administration, as are FDA's traditional activities of promoting and
    protecting the public health.
        Question. The fiscal year 1998 request assumes the reauthorization
    of the Prescription Drug User Fee Act, assuming collections from these
    fees of $91.204 million for fiscal year 1998, as compared with fiscal
    year 1997 fee collections of $87.528 million. Is this estimate of
    Prescription Drug User Fee Act collections for fiscal year 1998 based
    on an extension of current law or does it assume changes in the current
    law authorizing these fees?
        Answer. Since the present statute sunsets on September 30, 1997,
    the current law authorizing fees will expire. A new statute, either an
    extension of PDUFA or another statute, would be required for FDA to
    collect fees in 1998. That said, the estimate included in the fiscal
    year 1998 budget is based on the legislation as currently authorized.
        Question. What is the current fiscal year 1997 base appropriations
    level for drug review and approval activities which are enhanced by
    collections from Prescription Drug Act user fees? What is the base
    level assumed in the fiscal year 1998 budget?
        Answer. PDUFA, as currently authorized, provides that fees shall
    only be collected and available for increases in the costs for the
    process to review new human drug applications, defined in the Act,
    above the level of costs for the process in fiscal year 1992 multiplied
    by an adjustment factor. Using data from the fiscal year 1998
    President's Budget historical tables for domestic discretionary budget
    authority, we have calculated the fiscal year 1992 base obligations
    multiplied by the appropriate adjustment factor to arrive at the base
    funding estimate necessary to collect fees. The base funding estimate
    necessary to collect fees is $125,794,000 for fiscal year 1997, and
    $128,833,500 for fiscal year 1998.
        Question. What would be the consequences of not reauthorizing the
    Prescription Drug User Fee Act?
        Answer. The consequences of not reauthorizing this program would
    include a serious erosion in the timeliness that safe and effective new
    therapies become available to the public. PDUFA has been a very
    successful program primarily benefiting the public. The Agency and
    industry have benefited substantially also from a commitment to
    excellence in the review of applications, and the predictability of
    improved Agency performance. Without reauthorization, FDA would be
    forced into a rapid downsizing of the program, would likely lose many
    of its most talented employees, and the morale of those remaining would
    be very low. Both would increase review times and backlogs
    substantially.
        Question. What would be the consequences of not reauthorizing the
    Mammography Quality Standards Review Act?
        Answer. FDA is charged with administering the provisions of the
    Mammography Quality Standards Act of 1992, or MQSA, which was passed
    with the primary objective of ensuring that all women have access to
    safe and effective mammography services. The MQSA requires uniform
    national quality standards for mammography facilities, and that these
    facilities be accredited by an approved accreditation body and
    certified by the Secretary of Health and Human Services--and carried
    out by delegation to FDA--as meeting quality standards. Under MQSA,
    facilities must be inspected at least annually by specifically trained
    and credentialed Federal or state inspectors. Inspections include
    assessments of image quality, beam quality, average glandular dose, and
    other measurements. MQSA also requires a National Mammography Quality
    Assurance Advisory Committee to advise FDA about mandatory minimum
    quality standards, standards for federally-supervised state or private
    non-profit accreditation programs, and certification and enforcement
    programs.
        If MQSA is not reauthorized, the quality improvements made by FDA
    under MQSA to mammography will be lost. Mammography is the only proven
    means to detect breast cancer early and save a woman's life. Prior to
    MQSA, many states did not have standards for quality, nor did they
    inspect mammography facilities to ensure quality. Fourteen percent of
    facilities studied in 1992 did not pass image quality tests when
    surveyed jointly by FDA and the States. Under MQSA today, 99 percent of
    mammography facilities meet the requirements of this important test. In
    addition, all facilities now must meet baseline standards and are
    inspected by FDA trained inspectors. Accordingly, without
    reauthorization, the gains of mammography quality for American women
    may be lost and the effectiveness of mammography for early detection of
    breast cancer, in all likelihood, would substantially decrease.
    Moreover, the benefits to be gained from the new regulations to be
    published at the end of fiscal year 1997 would not be realized.
        Since enactment, FDA has conducted numerous activities to implement
    MQSA. For the record, I would be happy to provide a list of activities
    undertaken during fiscal year 1996.
        [The information follows:]
    Trained and certified inspectors to bring the total number to 250.
    Conducted 8,864 facility inspections.
    Issued more than 5,000 facility certificates.
    Fully implemented the inspection fee filing process to recover costs of
            MQSA non-governmental entity inspections.
    Conducted three meetings of the National Mammography Quality Assurance
            Advisory Committee to share comments, revise the proposed final
            regulations, and pursue subcommittee goals.
    Received and summarized over 8,000 comments by the end of the year.
    Proposed final regulations which were published on April 3, 1996.
    Implemented an Inspector Audit program developed as part of Inspector
            Quality Assurance.
    Audited 65 percent of the inspectors by year's end.
        To continue, in fiscal year 1997, FDA will analyze and consider all
    public comments received regarding the proposed final regulations
    published in the Federal Register and develop appropriate final
    regulations. FDA expects to publish the final regulations by the end of
    fiscal year 1997. If MQSA is reauthorized, fiscal year 1998 would be
    devoted to transitioning to implementation of the new regulations. For
    example, FDA would revise the facility inspection procedure to be in
    accordance with the final regulations and would train the inspectors on
    these changes. An outreach effort would also be developed to ensure
    that facilities are aware of the changes resulting from the
    implementation of the final MQSA regulations.
        The General Accounting Office, or GAO, issued a report, in January
    1997, concluding that FDA's inspection program is having a positive
    effect on the nation's more that 9,000 mammography facilities and that
    the facilities show a growing compliance with mammography standards.
    The first year's inspections showed that 80 percent of facilities had
    either no violations or minor ones, and that only two percent had
    violations serious enough to warrant a warning letter from the FDA.
    Second year inspections have shown further improvement. In particular,
    the serious violations identified during the first year have not
    recurred in the vast majority of facilities where they were initially
    found.
        Mammography training workshops for mammography facilities organized
    by a team from FDA, the American College of Radiology, and program
    directors of the Conference on Radiation Control, were selected for
    Vice President Al Gore's Hammer Award on October 30, 1996. The award
    winning workshops, whose organization required exceptional effort and
    teamwork, were designed to improve the technical skills of mammography
    facilities' personnel, and thereby advance the goal of MQSA to make all
    mammograms taken in this country of the highest possible quality, in
    order to enhance breast cancer detection and treatment.
        Question. Please provide for the record details on the specific new
    user fees proposed for each of the following areas: food additive
    petitions, generic drugs, over-the-counter drugs, animal drugs, medical
    devices, import inspection, and postmarket surveillance activities
    (foods and cosmetics, human drugs, biologics, animal drugs and feeds,
    and medical devices).
        Answer. I would be happy to provide a summary of the new user fees
    proposed in the President's fiscal year 1998 budget request, plus some
    additional information regarding specifics on each of the user fees,
    where applicable. The information provided serves as a useful starting
    point for any upcoming negotiations on the proposed user fees among
    FDA, Congress, and the affected industries. These points are subject to
    change based on the direction of any discussions regarding these user
    fees.
        [The information follows:]

             Summary of proposed user fees--Fiscal year 1998 budget

    Food additive petitions.................................    $12,543,000
    Generic drugs........................................... \1\ 18,000,000
    Animal drugs............................................     10,100,000
    Medical devices.........................................     25,000,000
    Import inspection.......................................     15,000,000
    Establishment postmarket surveillance activities........     51,000,000
        Foods and cosmetics.................................    (19,024,000)
        Human drugs.........................................     (7,508,000)
        Biologics...........................................     (2,233,000)
        Animal drugs and feeds..............................     (2,493,000)
        Medical devices.....................................    (19,742,000)
                        --------------------------------------------------------
                        ____________________________________________________
          Total fees........................................    131,643,000

    \1\ In the fiscal year 1998 budget request, the estimate for Generic
    Drug user fees was $13 million, and a separate $5 million user fee for
    Over-the-Counter (OTC) drugs was included. However, because fees are
    already charged for NDA's for OTC switches under PDUFA, this $5 million
    was moved to Generic Drugs in the Administration's proposed legislation
    for a new total of $18 million.

        The industries regulated by FDA derive valuable benefits from some
    FDA activities, including increased customer confidence in their
    products and significant protection from liability. FDA's reputation
    also improves the competitive position of American firms in overseas
    markets. The President's budget proposes that the regulated industries
    contribute a share of FDA's cost of ensuring the safety and
    effectiveness of their products. The following are the types of user
    fees, by program area, being proposed by the Administration. We intend
    to work with Congress, industry and other affected parties to develop
    these or other proposals to achieve informed consideration of proposed
    user fees, with appropriate performance measures and goals, and to
    ensure necessary funding for important FDA public health activities in
    fiscal year 1998.
    Foods--$46.6 million
        Proposals include: premarket approval activities for food and color
    additive petitions submitted pursuant to sections 409, 721, 201(s), and
    701(a) of the FD&C Act ($12,543), to support FDA import monitoring
    activities ($15,000), and to partially fund postmarketing regulatory
    activities ($19,024), as covered by section 704 of the FD&C Act.

    Premarket: Petitions filed pursuant to section 704 of the FD&C Act.
    Imports: Support of FDA Import Monitoring Activities.
    Drugs--$25.5 million
        Proposals include: review of original generic drug product
    applications ($18,000), submitted pursuant to section 505(j) of the
    FD&C Act, and to partially fund FDA's Human Drug postmarketing
    regulatory activities ($7,508), as covered by section 510 of the FD&C
    Act.

    Generic Drugs: A one-time, comprehensive user fee for each original
            generic drug product application, for those applications
            submitted pursuant section 505(j) of the FD&C Act.
    Biologics--$2.2 million
        Proposals include: partially funding postmarketing regulatory
    activities ($2,233).
    Animal Drugs--$12.6 million
        Proposals include: review of premarket applications ($4,000), FDA
    activities which substantiate that industry's clinical and non-clinical
    investigations are properly conducted ($6,100), as covered by section
    512 of the FD&C Act, and to partially fund other postmarketing
    regulatory activities ($2,493).

    Premarket Approval of Animal Drugs and Feed Additives: Ensure new
            animal drugs and feed additives are safe, effective, properly
            formulated and manufactured. Fees would be charged to
            applications submitted pursuant to section 512 of the FD&C Act.
    Drug Experience Report Evaluations: Used to substantiate that
            industry's clinical and nonclinical investigations are properly
            conducted under section 512 of the FD&C Act.
    Medical Devices--$44.7 million
        Proposals include: activities related to review and evaluation of
    premarket approval applications, premarket notification (510(k)'s), and
    investigational device exemptions (IDE's) for all medical and
    radiological devices to ensure that new devices meet the statutory
    requirements prior to commercial marketing ($25,000), submitted
    pursuant to sections 510 and 515 of the FD&C Act, and to partially fund
    postmarketing regulatory activities ($19,742), as covered by section
    510 of the FD&C Act.

    Premarket Approval of Applications and Notifications
    Review and Evaluation of Premarket Approval Applications, Premarket
            Notification (510(k)'s) and Investigational Device Exemptions
            (IDE's) for all medical and radiological devices.
    Ensure that new devices meet the statutory requirements prior to
            commercial marketing.
    Postmarket Regulatory Activities--Across Programs
        Based on the Agency's Official Establishment Inventory (OEI).
        Used to Offset a Portion of FDA's Postmarket Activity Expenses.
        For Postmarket Regulatory Activity Fees we have determined a fee of
    about $550 per establishment, which would be applied as follows:
            35,369 Food and Cosmetics Establishments
            13,958 Human Drug Establishments
             4,151 Biologics Establishments
             4,635 Animal Drug and Feed Establishments
            36,703 Medical Device Establishments
        The amount of the fee to be collected in most cases will need to be
    determined in negotiation with FDA's many constituents, as well as the
    Congress. It would be premature for those negotiations to presuppose
    specific fee amounts at this time. However, where possible, we have
    made every effort to provide some of the information requested.
        The fiscal year 1998 budget request includes a total amount of fees
    for medical devices of $25 million. The split by application type, as
    contained in the Administration's legislation is: $56,522 for premarket
    applications, $7,717 for supplements with data required, $4,891 for
    supplements without data required, and $3,478 for 510(k) applications.
        Consistent with current practices under PDUFA and MQSA, we would
    initially recommend similar timing of fee collections. For instance,
    any application fees would be collected at the time of submission, any
    import fees would be collected at the point of entry, and any
    establishment fees would be collected at the beginning of the fiscal
    year.
        For postmarket activities, based on the Agency's Official
    Establishment Inventory (OEI), FDA determined the number of
    establishments by program area, excluding warehouses, and calculated
    that $550 per establishment would be needed to reach the $51 million
    figure estimated in the fiscal year 1998 budget request.
        Below is a table reflecting the estimated fee amount from fiscal
    year 1998, including the approximate percentage of the existing program
    that the proposed user fee would cover divided into our core activities
    of premarket review and postmarket assurance:

    ------------------------------------------------------------------------
                                                            Estimated budget
                                          Estimated amount  amount in fiscal
                                            of fee (from        year 1997
       Activity area for proposed fee     fiscal year 1998     (rounded to
                                               budget)           nearest
                                                                $100,000)
    ------------------------------------------------------------------------
    Premarket:
        Food additive petitions.........       $12,543,000       $12,600,000
        Generic drug applications.......        18,000,000        36,000,000
        Animal drug applications........         4,000,000        16,000,000
        Medical device applications.....        25,000,000        50,000,000
    Postmarket:
        Animal drug activities..........         6,100,000        18,300,000
        Food imports....................        15,000,000        45,000,000
        Establishments..................        51,000,000       153,000,000
    ------------------------------------------------------------------------

        Question. What performance goals will be established for each of
    the proposed new user fees listed above? For each, please describe how
    these performance standards differ from those FDA is now achieving and
    provide the fiscal year 1997 level of funding for each activity.
        Answer. Many of the specifics for each of the new user fees will be
    determined as the result of negotiations among FDA, Congress, and the
    affected industries. To speculate on exact performance goals for these
    user fees would be premature at this point. FDA is, however, developing
    performance measures for its activities in total--as mandated by the
    Government Performance Results Act--for inclusion in the fiscal year
    1999 budget.
        Question. For each of FDA's existing user fees, please provide user
    fee collections and related obligations for each of the last five
    fiscal years.
        Answer. I would be happy to provide that information.
        [The information follows:]

                                      USER FEE COLLECTIONS FOR FISCAL YEARS 1992-96
                                                [In thousands of dollars]
    ----------------------------------------------------------------------------------------------------------------
                                                                                   Fiscal year--
                                                              ------------------------------------------------------
                                                                  1992       1993       1994       1995       1996
    ----------------------------------------------------------------------------------------------------------------
    Prescription Drug User Fee Act of 1992 (PDUFA) \1\.......  .........    $28,532    $53,730    $70,954    $82,318
    Mammography Quality Standards Act of 1992 (MQSA).........        N/A  .........  .........         20     12,745
    Certification Fund.......................................      4,320      4,075      3,867      4,875      4,490
    ----------------------------------------------------------------------------------------------------------------
    \1\ Reflects fees collected in fiscal year, including fees collected for applications received in previous
      years.

                                      USER FEE OBLIGATIONS FOR FISCAL YEARS 1992-96
                                                [In thousands of dollars]
    ----------------------------------------------------------------------------------------------------------------
                                                                                   Fiscal year--
                                                              ------------------------------------------------------
                                                                  1992       1993       1994       1995       1996
    ----------------------------------------------------------------------------------------------------------------
    Prescription Drug User Fee Act of 1992 (PDUFA)...........  .........     $8,949    $39,951    $74,064    $85,053
    Mammography Quality Standards Act of 1992 (MQSA).........        N/A        N/A        N/A        N/A      8,577
    Certification Fund.......................................      3,681      3,392      3,513      3,978      3,964
    ----------------------------------------------------------------------------------------------------------------

                                rental of space
        Question. The fiscal year 1998 request proposes the fiscal year
    1997 level of $46.294 million for FDA's payment to the General Services
    Administration for space rental and related costs. Why is no increase
    proposed?
        Answer. Competition for increases in scarce Federal funding dollars
    has provided higher priority to public health program improvements.
    Again this year, the President's budget request is for an amount less
    than the actual GSA rent bill. If FDA's rent payments to GSA are not
    limited as they have been in recent years, FDA would have to divert
    further critical program resources to pay the rental charges unless
    Congress raises our Rental Payments appropriation level to meet our
    actual charges.
        For your information we are providing a four-year chart of the
    bills associated with the Rental Payments, the FDA Appropriation, and
    the allowance for FDA's Building Delegation. These bills reflect the
    total amount the General Services Administration bills FDA for the
    buildings which fall under the Rental Payments FDA Appropriation. The
    chart further illustrates the importance of the limitation placed on
    the amount of annual rent paid by FDA to GSA.
        [The information follows:]

                                       AMOUNTS OF BILLS FOR RENTAL PAYMENTS TO GSA
                                                  [Dollars in millions]
    ----------------------------------------------------------------------------------------------------------------
                                                                                        Fiscal year--
                                  Location                              --------------------------------------------
                                                                            1995       1996      1997 *   1998 * \7\
    ----------------------------------------------------------------------------------------------------------------
    GSA Rent Bills:
        FDA direct.....................................................      $55.0      $60.5      $71.5       $74.9
        Parklawn Area \1\..............................................        7.5        7.6        8.7         8.9
        Southwest Complex \2\..........................................        0.7        0.7        0.7         0.7
                                                                        --------------------------------------------
          Total GSA rent billed to FDA.................................       63.2       68.8       80.9        84.5
    Rental payments to GSA, FDA--Appropriations Account--and total paid
     to GSA \3\........................................................       46.3       46.3       46.3        46.3
    Building delegation allowance included in Appropriations Account
     for buildings maintained by FDA...................................  \4\ [4.0]  \5\ [4.0]  \6\ ** [4
                                                                                                     .6]  \7\ ** [4.
                                                                                                                  8]
    ----------------------------------------------------------------------------------------------------------------
    * Estimated Total GSA Rent.
    ** Includes MODULE II
    \1\ A separate GSA rent bill which currently includes 5600 Fishers Lane (Parklawn), 12420 Parklawn (Park), and
      370 WHSE (Tech Center) which is billed to FDA on a pro rata share by HHS/Program Support Center (PSC).
    \2\ A separate GSA rent bill which Includes 330 C Street (Switzer) and 11400 Rockville Pike (Rockwall) which is
      billed to FDA on a pro rata share by HHS/PSC.
    \3\ GSA Rental Payments, FDA, appropriations account.
    \4\ Authorized allowance for reduction in GSA rent under Treasury, Postal Service, Executive Office of the
      President and Independent Agencies Appropriation Act, Public Law 103-329, Section 611.
    \5\ Authorized allowance for reduction in GSA rent under Treasury, Postal Service and General Government
      Appropriation Act, 1996, Public Law 104-52, Section 611.
    \6\ Authorized allowance for reduction in GSA rent under Omnibus Appropriation Act of 1997. Public Law 104-208,
      Section 611.
    \7\ Note the 1998 estimate for the total GSA Rent bill includes a three percent inflation plus an allowance for
      adjustments in projected space assignments. In addition, the estimate for the 1998 Building Delegation account
      includes 2.7 percent inflation based on a memo received from GSA/PBS, June Huber, Assistant Commissioner for
      Portfolio Management.

        Question. Does this reflect the actual cost to the GSA for space
    rental and related costs for programs and activities of the FDA
    pursuant to Public Law 92-313? What does Public Law 92-313 provide?
        Answer. The requested amount of $46.3 million reflects the amount
    to be paid to GSA, but does not reflect the actual amount billed by
    GSA. Public Law 92-313, ``The Public Buildings Amendments of 1972,'' as
    amended, provides for the financing acquisition, construction,
    alteration, maintenance, operation, and protection of public buildings
    and for other purposes. For the record, I would be happy to provide a
    quote from the funding section:
        [The information follows:]
        ``The financing mechanism for Public Building Service (PBS)
    activities is the Federal Buildings Fund, which began operations at the
    start of fiscal year 1975. The Public Buildings Amendments of 1972
    (Public Law 92-313) authorized GSA to finance government real property
    management activities through user charges set at commercially-
    comparable rates and collected from agencies occupying space. This
    rental income is deposited into the Federal Buildings Fund, with income
    in excess of operating expenses used to finance new construction and
    repair and alteration projects. In recent years, construction funds
    have been supplemented by direct appropriations to the Federal
    Buildings Fund and by increases in GSA's borrowing authority.''
        ``The fund is subject to Congressionally-imposed limitations on the
    amount of its revenue that can be spent on any of its authorized
    activities. Of the approximately $5 billion in rent revenue that PBS
    receives, almost one-half is for payments to the commercial real estate
    market for leased space, which comprises 48 percent of the inventory.''
        One example of the operation of this fund for buildings which GSA
    leases is the Parklawn Building in Rockville. GSA has leased this
    building for approximately 25 years from a commercial lessor, for
    occupancy by several agencies of the Public Health Service. In this
    case, the agencies each pay GSA their share of GSA's rental rates,
    which for FDA is currently about $8 million, and the majority of these
    funds are then paid by GSA to the building owner.
        A different example is Federal Building 8 at 200 C Street in South
    West Washington. Originally envisioned as housing all of FDA, this
    building was constructed with Federal funds and occupied in 1962. It
    now houses the majority of the Center for Food Safety and Applied
    Nutrition. Under the principles of Public Law 92-313, FDA pays about
    $14.6 million a year for this building, even though it was long ago
    paid for as part of FDA's contribution to the Public Buildings Fund to
    enable GSA to construct or lease new facilities.
        Question. The justification indicates that ``as authorized by the
    annual Treasury, Postal Service and General Government Appropriations
    Act, payments under the fiscal year 1996 appropriation were reduced by
    $3,957,000; payments for fiscal years 1997 and 1998 are expected to be
    reduced by an estimated $4,075,000 and $4,832,000 respectively.'' What
    is the specific provision of the Treasury, Postal Service and General
    Government Appropriations Act cited which requires these reductions?
        Answer. These reductions referred to the amount paid to GSA from
    the rental appropriation and retained by the FDA to cover operations,
    maintenance and repairs of GSA facilities which GSA has delegated to
    FDA to operate and maintain. The specific provision of the Treasury,
    Postal Service and General Government Appropriations Act, 1996, that
    requires these reductions is Public Law 104-52, Section 611. For the
    record, I would be happy to provide a quote from the section.
        [The information follows:]
        ``Any department or agency to which the Administrator of General
    Services has delegated the authority to operate and maintain or repair
    any building or facility pursuant to section 205(d) of the Federal
    Property and Administrative Services Act of 1949, as amended shall
    retain that portion of the GSA rental payment available for operation,
    maintenance or repair of the building or facility as determined by the
    Administrator, and expend such funds directly for the operation,
    maintenance or repair of the building or facility. Any funds retained
    under this section shall remain available until expended for such
    purpose.''
        The amount determined in fiscal year 1996 was $3,957,000. The funds
    provided by GSA were used to cover only the recurring services within a
    normal eight hour day for our delegated buildings which include the
    Crawford Building in Atlanta, Georgia, and Federal Building 8 at 200 C
    Street, SW, Washington, D.C., plus four other facilities in the
    National Capital Area.
        For the record let me provide the specific provision from fiscal
    year 1997 which is in accordance with the Omnibus Appropriations Act,
    1997, Public Law 104-208, section 611.
        [The information follows:]
        ``For fiscal year ending September 30, 1997, and thereafter, any
    department or agency to which the Administrator of General Services has
    delegated authority to operate, maintain or repair any building or
    facility pursuant to section 205(d) or the Federal Property and
    Administrative Services Act of 1949, as amended, shall retain that
    portion of the GSA rental payment available for operation, maintenance
    or repair of the building or facility as determined by the
    Administrator, and expend such funds directly for the operation,
    maintenance or repair of the building or facility. Any funds retained
    under this section shall remain available until expended for such
    purpose.''
        To date the total estimated amount for fiscal year 1997 is revised
    to $4,561,834, which includes the buildings previously discussed and an
    estimated amount of $956,924 for MODULE II which is being added to
    FDA's inventory of delegated facilities in fiscal year 1997.
        Question. How is a fiscal year 1998 reduction required by this Act?
        Answer. For the record, let me provide a citation from the Act.
        [The information follows:]
        The Omnibus Appropriations Act, 1997, Public Law 104-208, section
    611 states, ``For fiscal year ending September 30, 1997, and
    thereafter, any department or agency to which the Administrator of
    General Services has delegated authority to operate, maintain or repair
    any building or facility pursuant to section 205(d) or the Federal
    Property and Administrative Services Act of 1949, as amended, shall
    retain that portion of the GSA rental payment available for operation,
    maintenance or repair of the building or facility as determined by the
    Administrator, and expend such funds directly for the operation,
    maintenance or repair of the building or facility. Any funds retained
    under this section shall remain available until expended for such
    purpose''.
        Question. Is the $4,832,000 fiscal year 1998 reduction included in
    FDA's fiscal year 1998 ``rental of space'' request?
        Answer. Yes, the $4,832,000 is included in the $46,294,000 request
    as found in the Rental Payments, FDA Appropriation.
        Question. The justification indicates that any recurring
    reimbursable services provided by GSA over and above the normal eight
    hour day are paid by FDA out of the Salaries and Expenses
    appropriation. How much was paid out of the Salaries and Expenses
    appropriation in each of the last five fiscal years for these services
    provided by GSA? What is the current fiscal year 1997 estimate?
        Answer. We will be happy to provide you with a chart which sets out
    the dollar amounts paid out of FDA's Salaries and Expenses
    appropriation for recurring reimbursable services provided by GSA over
    and above the normal eight hour day. Included in the chart is the
    current fiscal year 1997 estimate of $7,019,000. The increase from
    fiscal year 1996 to fiscal year 1997 is primarily due to increased
    guard services and security system services mandated by the Department
    of Justice following the Oklahoma City bombing.
        [The information follows:]

                    GSA Above Standard Reimbursable Services

            Fiscal year
    1997..........................................................$7,019,000
    1996.......................................................... 6,719,000
    1995.......................................................... 6,866,000
    1994.......................................................... 4,925,000
    1993.......................................................... 3,857,000
    1992.......................................................... 3,599,000

        Question. The Agriculture Appropriations Act provides that in the
    event the FDA should require modification of space needs, a share of
    the ``salaries and expenses'' appropriation may be transferred to the
    ``rental of space'' appropriation or a share of the ``rental of space''
    appropriation may be transferred to the ``salaries and expenses''
    appropriation, but such transfers shall not exceed 5 percent of the
    funds made available for rental payments to or from FDA's ``rental of
    space'' account. Please indicate what transfers, if any, have been made
    to or from the rental of space account in each of the last five fiscal
    years pursuant to this authority, and indicate the amount and purpose
    of each funds transfer. What transfers have been made in fiscal year
    1997 to date, in what amount, and for what purpose?
        Answer. The only time GSA requested such a transfer was in fiscal
    year 1993. FDA requested and was approved a reapportionment from its
    ``salaries and expense'' appropriation to the ``rental of space''
    appropriation for $453,879. The $453,879 was for FDA's increase in GSA
    space of 47,496 square feet in fiscal year 1993 from September 15, 1992
    through March 15, 1993. To date, no GSA requests nor FDA transfers have
    been made for fiscal year 1997.
        Question. While the fiscal year 1998 budget identifies the amount
    requested for rent and related services in the ``salaries and
    expenses'' account, it ignores the Committee directive to consolidate
    these costs into the FDA ``Rental of space'' account. Why?
        Answer. FDA included a separate line item in the budget titled
    ``S&E Rent and Related'' in response to the Committee's concern
    regarding FDA's facilities costs.
        FDA is concerned that combining these expenses with GSA Rent in a
    separate appropriation would greatly limit FDA's flexibility in meeting
    its obligations for building-related expenses that cannot always be
    predicted precisely during the budget process. Only about $6.5 million
    of the ``Rent and Related'' line item is for rent for commercially-
    leased buildings--the rest is for building-related costs such as
    additional utilities for laboratory facilities, and additional guard
    services, where FDA's needs may vary from time to time. Another
    complicating factor is that the timing of facility moves cannot be
    controlled precisely. There are often delays in occupying new
    facilities, which may cause FDA to incur greater costs than anticipated
    for the facility to be vacated. If all of these costs were in a
    separate appropriation, FDA would have to seek an appropriation
    transfer when such variations occurred, rather than having the ability
    to absorb them within the Salaries and Expenses Appropriation.
                            medical device approvals
        Question. Dr. Friedman, you indicate in your prepared statement the
    Center for Devices and Radiological Health (CDRH) and the agency are
    focusing now on innovative ways of bringing down the premarket approval
    reviews (PMA) review times, but this depends on the level of resources
    available to do the work. What ways are you exploring to bring time PMA
    review times?
        Answer. FDA is examining and implementing various ways that will
    help reduce PMA review times. I would be happy to provide, for the
    record, information describing our activities in this area.
        [The information follows:]
    PMA's
        Expedited Review: FDA believes it is in the interest of the public
    health to review PMA's and 510(k)'s for certain medical devices in an
    expedited manner. Initially established in October 1989 and expanded in
    May 1994, expedited review is generally available when a device offers
    a potential for clinically meaningful benefit as compared to the
    existing alternatives (preventative, diagnostic, or therapeutic) or
    when the new medical device promises to provide a revolutionary advance
    (not incremental advantage) over currently available alternative
    modalities.
        Project Management: Formal scheduling of PMA events such as filing
    and panel meetings when the application is received.
        Label and Interactive Review: Meetings face-to-face to quickly
    resolve labeling and other PMA issues.
        Electronic Submissions: Allow for alternate ways of submitting and
    reviewing applications.
        Internet: Provide greater access to FDA resource materials and
    reports which decreases reviewer time used to support Freedom of
    Information Act (FOIA) requests from the public.
        Reengineering: FDA is establishing a PMA reengineering team to
    review all aspects of the PMA review process and implement needed
    improvements and enhancements.
        Product Development Protocol (PDP): Through reengineering, FDA's
    CDRH is also seeking to shift certain PMA's into the Product
    Development Protocol (PDP) review model. Although this provision has
    been in the statute since 1976, PDP has not been used effectively. FDA
    is currently reengineering the PDP program. This new approach will
    incorporate PMA, IDE, and post-market requirements and will be designed
    to include a variety of tools to facilitate review and approval: a
    criteria-based segmented review; built-in procedures for product
    change; resources focused on safety and effectiveness issues; and panel
    review at the protocol phase only. This reengineering effort should
    allow ``real-time'' reviews during the product development protocol
    process and should eliminate obstacles that prevented effective use of
    the PDP approach in the past.
        Reclassification: Reclassify, as appropriate, preamendments class
    III devices to class I or II.
        Preamendment PMA's: When PMA's will be required, the Agency is
    working interactively, with preamendment class III submitters prior to
    the 515(b) call for the PMA's to discuss the studies and data that will
    be required for the PMA's.
    PMA Supplements
        ``Real-Time'' PMA Supplement Review Program: The purpose of this
    program is to conduct document reviews for certain PMA supplements in
    ``Real-Time'', with a face-to-face meeting, video conference, or
    telephone conference format and provide a decision letter to the
    company within five days after the meeting.
        GMP Pilot: A new method of handling certain PMA supplements for
    manufacturing and sterilization site changes that speeds up agency
    review.
        Triage: A new look at prioritizing the workload.
        Question. What level of resources is included in the agency's
    fiscal year 1998 appropriations request to be able to do this work?
        Answer. FDA is requesting the addition of $5,207,000 to the Medical
    Devices budget to improve the quality and timeliness of its review
    process for Class III applications, PMA's, and PMA supplements. FDA
    expects a 15 percent increase in PMA workload from fiscal year 1997 to
    fiscal year 1998 due to requests for reclassifications and submissions
    of required preamendment PMA's for class III devices. While FDA has
    made great strides in reducing its review times and backlogs for
    medical device applications, continued improvement is needed to meet
    mandated goals with the increased workload. Additional resources will
    allow FDA to allocate more resources toward the PMA process and to
    limit the increase in pending PMA's without jeopardizing the recent
    performance gains made in the 510(k) program.
        FDA knows that resources will continue to be scarce, and is
    beginning to re-engineer the medical device program to obtain maximum
    public health impact from the resources that will be available. The
    goal behind this effort will be to focus resources on high-risk, high-
    impact products while at the same time de-emphasizing areas that pose
    lower risk to the public, or where FDA involvement is not essential.
    The improvements and changes that arise from the re-engineering process
    will ensure that the medical device program is as effective and
    efficient as possible, and may increase productivity in the future.
        We are providing a table that shows FDA's fiscal year 1998
    performance goals for PMA workload at Base Resource levels and with
    additional resources.
        [The information follows:]

              ESTIMATED FISCAL YEAR 1998 PERFORMANCE GOALS FOR FDA
    ------------------------------------------------------------------------
                                                    Performance goals--
                                             -------------------------------
                                                                 With $5.2
                                                Base level        million
                                                 resources      additional
                                                 (percent)       resources
                                                                 (percent)
    ------------------------------------------------------------------------
    PMA originals:
        Complete first actions on Standard
         PMA's within 180 days..............              35              50
        Complete expedited first actions
         within 180 days....................              85              90
    PMA supplements:
        Complete first actions within 180
         days...............................              55              80
        Complete expedited first actions
         within 180 days....................              85              90
    ------------------------------------------------------------------------

        Question. Please provide an update on the third party pilot program
    for Class I and Class II devices. How many 510(k) products are eligible
    to be reviewed under the pilot program? What kind of products are
    these?
        Answer. FDA's pilot program for third-party review of pre-market
    notifications, or 510(k)'s, for selected low and moderate risk devices
    was announced in the Federal Register on April 3, 1996 and began August
    1, 1996. FDA has identified 251 types of devices for inclusion in the
    pilot. This consists of all Class I devices that are not exempt from
    510(k)--a total of 221 device types--plus 30 Class II devices.
    Historically, FDA has received up to 1,500 510(k)'s per year for these
    251 device types. All of the Class I devices and 6 of the Class II
    devices were immediately eligible for third-party review upon
    commencement of the pilot. Eight additional Class II devices were
    phased into the pilot in November 1996. The remaining 16 Class II
    devices will be eligible for review before the end of the first year of
    the pilot as FDA completes guidance documents for these devices.
        Class I devices generally present low risk and their safety and
    effectiveness can be assured through general controls, such as good
    manufacturing practices requirements and pre-market notification. More
    than 70 percent of the 221 Class I devices that are eligible for third-
    party review are in vitro diagnostic devices--such as, for example,
    cholesterol test systems. Review of such devices focuses on the
    accuracy and precision of the test. Class II devices generally present
    moderate risk and require special controls--such as guidance documents
    or post-market surveillance--in addition to general controls. The 30
    Class II devices that are in the pilot include a broad variety of
    devices, such as dental alloys, syringes, blood pressure measurement
    devices, and diagnostic ultrasound systems.
        Question. What are your average review times for these products?
        Answer. To date, FDA has issued substantial equivalence decisions
    for five 510(k)'s that were reviewed by third parties under the pilot
    program. I would be happy to provide a table showing review times for
    these submissions.
        [The information follows:]

                                         510(K) REVIEWS UNDER THE PILOT PROGRAM
    ----------------------------------------------------------------------------------------------------------------
                                                                                      Cumulative review time (days)
                                                                            Total                  \2\
                          Type of device                         Class     elapsed  --------------------------------
                                                                           time \1\  3rd party
                                                                                        \3\        FDA      Combined
    ----------------------------------------------------------------------------------------------------------------
    Low density lipo-protein reagent.........................          I         51          8         16         24
    Low density lipo-protein reagent.........................          I         51          8         16         24
    Operating table (electrohydraul).........................          I        126         12          9         21
    Transcutaneous electrical nerve stimulator (TENS)........         II        103         40          8         48
    hCG test strip...........................................         II         22          8          2         10
    ----------------------------------------------------------------------------------------------------------------
    \1\ Total days from third party's receipt to FDA's final action.
    \2\ Includes third party and FDA review time only, i.e., excludes days when both FDA and third party review were
      suspended pending receipt of additional information from the submitter and days between mailing and receipt of
      correspondence.
    \3\ Based on preliminary information reported by the third party.

        During the first seven months of the pilot program, from August
    1996 through February 1997, FDA received more than 600 510(k)'s for
    third party-eligible devices which were not submitted to third parties.
    During this period, FDA's final actions on 510(k)'s for these types of
    devices were taken in an average of 79 cumulative FDA review days, with
    an average total elapsed time from FDA's receipt to final action of 113
    days, including time ``on hold'' awaiting additional information from
    the submitter.
        Question. Are you planning to add more eligible products to this
    program?
        Answer. Yes. Based on public comments FDA has received about the
    pilot, we intend to make substantially more Class II devices eligible
    for third-party review. We are currently preparing a list of at least
    60 additional Class II devices for the pilot.
        Question. How long will this take?
        Answer. We expect to announce the list of additional Class II
    devices by early June 1997. These devices will be made eligible for
    third-party review as we complete guidance documents for these devices,
    which we intend to do as rapidly as possible. We expect that at least
    20 of the additional devices will be eligible for third-party review by
    the end of fiscal year 1997, bringing the total number of eligible
    Class II devices at that time to approximately 50. The remaining 40
    additional Class II devices will be phased-in as soon thereafter as
    possible.
        Question. What are your success measures for this pilot, and when
    were they established?
        Answer. FDA's April 3, 1996 Federal Register notice stated that the
    purpose of the pilot is to test the feasibility of using third-party
    reviews to improve the efficiency of the agency's review of 510(k)'s
    for low and moderate risk devices. The notice further specified that
    this includes determining a number of factors which I will provide for
    the record.
        [The information follows:]
      --the willingness of qualified third parties to participate;
      --the willingness of device manufacturers to participate;
      --the quality of third-party reviews, including the extent to which
            third parties are free of conflicts of interest;
      --the impact upon FDA workload, decisions, and 510(k) processing
            times; and
      --the impact on the total time necessary for manufacturers to obtain
            marketing clearance decisions.
        The notice elaborated that if the piloted approach is successful,
    it will provide manufacturers with an alternate, potentially more rapid
    means of obtaining pre-market reviews and enable FDA to target its
    scientific review resources at higher risk devices while maintaining
    confidence in the review by third parties of low and moderate risk
    devices.
        Question. How many applications have been reviewed under this
    program so far?
        Answer. As of May 1, 1997, FDA has received eight 510(k)'s under
    the pilot program, although additional 510(k)'s may currently be under
    review by the recognized third parties. FDA has issued substantial
    equivalence decisions for five of the eight submissions, and has
    requested additional information from the third parties for the
    remaining three submissions.
        Question. Is this sufficient to gauge the success of the program?
        Answer. No. The number of submissions indicates that most
    manufacturers of the eligible devices have elected not to participate
    in the pilot. Therefore, the pilot has not provided a sufficient basis
    to assess the quality or timeliness of third-party reviews.
        Question. Why do you think more manufacturers are not taking
    advantage of this program? Is it because you are doing a better job of
    reviewing 510(k) applications and there is no incentive for
    manufacturers to try this path to market?
        Answer. FDA's success in eliminating the backlog of overdue 510(k)
    reviews certainly limits manufacturers' incentive to try a different
    approach. Based on industry comments, this is most true for Class I
    devices, which generally have lower FDA review times than other device
    types. Industry comments have suggested adding more Class II devices to
    the pilot to encourage increased participation, and FDA is currently
    working to do so. Other factors which may contribute to manufacturers'
    lack of participation include: manufacturers are accustomed to
    interacting with FDA; manufacturers are uncertain about the costs and
    benefits of the third party approach; third parties assess
    manufacturers a fee-for-service whereas FDA does not charge for 510(k)
    reviews; and manufacturers do not know whether FDA will accept the
    results of a third party's review, given that by law FDA must issue
    substantial equivalence orders.
        Question. What have you done to encourage participation from device
    manufacturers?
        Answer. Before initiating the pilot program, FDA solicited public
    comments on the proposed approach for the pilot through a June 1995
    Federal Register notice and a public workshop. FDA attempted to address
    the resulting comments in its final plans for the pilot. For example,
    FDA significantly expanded the number of eligible devices beyond what
    was originally proposed, and established a 30-day performance goal for
    its issuance of final decisions based on third-party reviews. After
    announcing the pilot in the Federal Register, FDA promoted the pilot
    through a July 1996 mass-mailing to approximately 13,000 registered
    device firms. FDA also assisted the recognized third parties in
    promoting the pilot by providing them with non-proprietary mailing list
    information for device firms that have registered and listed with FDA
    for the device types that are included in the pilot. FDA has also
    provided frequent information about the pilot to the trade press and at
    numerous professional and trade association meetings.
        Question. Does this program offer a cost benefit to the Agency?
        Answer. At the current level of participation, any efficiencies
    which may be provided by third-party review are outweighed by the
    start-up and operating costs of the program. Given that the start-up
    costs of a pilot program such as this are relatively high, however, FDA
    had anticipated that third-party reviews may not yield a cost benefit
    to the agency during the pilot phase. We believe it is premature to
    draw any final conclusions about the pilot given that participation may
    increase as additional devices become eligible for third-party review
    and as manufacturers obtain more information about the outcomes of
    third-party reviews. FDA intends to complete an evaluation of the pilot
    before the end of its planned 2-year duration.
        Question. The ``Report on Medical Device Review Performance 2nd and
    3rd quarters fiscal year 1996'' submitted to the Appropriations
    Committee indicates that some of the offices within the Office of
    Device Evaluation are piloting the use of electronic transmission of
    applications to help ease the burden of the current paper-intensive
    submission process. The document states that electronic access will
    also provide significant savings on the storage and retrieval of
    applications for both industry and the agency. How many sponsors of
    applications have taken advantage of this system?
        Answer. Through the first half of fiscal year 1997, there were 34
    applications submitted electronically, by seven different sponsors.
    These applications included 510(k)'s, PMA's, PMA Supplements, IDE's,
    and IDE supplements.
        Question. Could you give me some idea of what you mean by
    ``significant savings''? Do you have any information on full-time
    equivalent's (FTE's) or FTE staff hours that are saved by the
    utilization of electronic submissions?
        Answer. Significant savings will be realized when the majority of
    medical device applications arrive in electronic form. We will then be
    able to eliminate our costly process of scanning paper to make document
    images available to reviewers. That contract effort costs FDA about
    $1,000,000 per year of which 75 percent goes toward the scanning of
    pre-market applications. In addition, savings are foreseen in the
    preparation of the reviewers notes, the resolution of questions asked
    of the sponsor and the final review document. We do not yet have
    sufficient statistics to project actual savings. However, based on our
    limited sample, an overall savings of one week in total elapsed time of
    the application review process for each pre-market application is a
    reasonable projection. The quality of the review will also be improved
    by having access to more information in a shorter time period.
        Question. How do review times for ``paper less'' applications
    compare to the current method?
        Answer. Reduced review times are difficult to estimate based on our
    small sample of experience with electronic submissions. Anecdotal
    experiences have shown a reduction of reviewer time of several hours
    for a single electronic search which otherwise would have to have been
    accomplished manually. One company has estimated that they experienced
    a savings of 20 percent in the time required to prepare a submission to
    the Agency. It is anticipated that additional savings in review time
    will be gained from the use of electronic conferencing between reviewer
    and sponsor.
        Question. What is your projection on when FDA will have moved into
    a ``thoroughly paper less program''?
        Answer. FDA's Center for Devices and Radiological Health could be
    prepared for all applications to be submitted electronically within the
    next twelve months. It will then be up to the medical device industry
    to take advantage of the technologies available. This could happen to a
    significant extent in the next two to three years.
        Question. What is the estimated cost of moving to a ``paper less''
    system''?
        Answer. Beyond what has already been invested in our moving towards
    a ``paper less'' system, another $1,000,000 will be used to complete
    the upgrades of desktop equipment, storage devices, and software, and
    to provide training, and personal video conferencing and group video
    conferencing capabilities for all reviewers. Another $500,000 per year
    will be utilized to maintain pace with the technology.
        Question. Can all FDA's systems ``talk'' or link up with one
    another--for example, those systems that you use to track reports? For
    example, is the MAUDE system designed to process the MEDWATCH forms
    compatible with all FDA's other reporting systems? Is there any
    duplication in FDA's reporting systems?
        Answer. The Agency is now implementing a common Information Systems
    Architecture, or ISA, which will provide a consistent technology
    infrastructure across the FDA to ensure that systems developed
    throughout the Agency will be compatible with each other. Legacy
    systems are being evaluated to determine if they should be modified to
    conform to the new ISA standards. Initiatives are underway to guide the
    submittal and dissemination of information to and from the Agency via
    Internet and other communication mechanisms to assure compatibility
    across the FDA. One such example is the development of an Agency
    ``Gateway'' designed to provide a single receipt point for the
    electronic submission of adverse event reports from industry.
        Recently developed FDA reporting systems were designed for
    compatibility where appropriate and are not duplicative. These systems
    were designed to support specific legislative mandates and regulatory
    processes which differ from one FDA Center to another and even from
    program to program within a Center. For example, MAUDE was designed to
    fully integrate with other medical device databases and was designed
    for data element compatibility with other Agency systems collecting
    MedWatch data. However, the design of MAUDE also had to support unique
    requirements for reporting medical device adverse events, from the Safe
    Medical Devices Act of 1990, including specific data elements,
    reporting time frames, and report flows which differ significantly from
    other Centers' MedWatch reporting requirements.
        Question. What does the FDA fiscal year 1998 salaries and expenses
    appropriations request mean in real terms for the device industry? What
    can be expected in terms of review times for 510(k)'s and PMA's?
        Answer. FDA is requesting a total program level of $166,072,000
    which includes a $5.2 million proposed increase for user fees for
    medical device review of PMA applications and PMA supplements and 1,623
    FTE for the Medical Device program. Without this increase, the total
    base level for the program would be $160,872,000. Medical device review
    is the Center for Devices and Radiological Health's, or CDRH's, highest
    resource priority and the number of FTE spent on device review has been
    steadily increasing between fiscal year 1993 and fiscal year 1996. FDA
    has undertaken several management initiatives to reinvent its medical
    device program in an effort to minimize industry workload and better
    use its own resources. I would be happy to provide a list for the
    record.
        [The information follows:]
        Exempting nearly three-fourths of all Class I device categories
    from the 510(k) pre-market clearance requirement;
        Undertaking a pilot program to test third-party review of low and
    moderate risk-medical devices by outside organizations;
        Conducting a project management initiative for PMA's in two device
    review divisions;
        Developing a ``real time'' review pilot for some types of PMA
    supplements where the supplement will be reviewed by FDA during a
    meeting or tele-conference with the industry;
        Initiating a one-year pilot project to test a new way to handle PMA
    supplements pertaining to changes in product manufacturing and/or
    sterilization sites; and
        Implementing new strategies to aid in IDE development and review.
        FDA will also continue its efforts to streamline and support a more
    stable and predictable review process. FDA expects a 15 percent
    increase in PMA workload from fiscal year 1997 to fiscal year 1998 due
    to requests for reclassifications and submissions or required
    preamendments PMA's. In addition, efforts will be made to limit the
    increase in the number of pending PMA's in fiscal years 1997 and 1998.
        The following chart shows projected fiscal year 1998 product
    performance at Base Resource levels:

    ------------------------------------------------------------------------
             Fiscal year 1998 performance              510(k)        PMA
    ------------------------------------------------------------------------
    Pending from fiscal year 1997.................        1,929           86
    Received in fiscal year 1998 (est.)...........        4,800           70
    Completed in fiscal year 1998 (est.)..........        5,000           55
    Pending from fiscal year 1998 (est.)..........        1,729          101
    Reduction in percent pending fiscal years 1997-
     98...........................................          -10          +17
    ------------------------------------------------------------------------

        Question. Will FDA be able to keep up with its current performance
    goals for 510(k)'s and PMA's with the resources requested for fiscal
    year 1998?
        Answer. FDA will not be able to maintain current performance goals
    for 510(k)'s and PMA's with base level resources requested for fiscal
    year 1998. FDA is requesting the addition of $5,207,000 to the Medical
    Devices budget to improve the quality and timeliness of its review
    process for Class III pre-market approval applications, or PMA's, and
    PMA supplements. Since PMA devices by definition are essentially
    ``new'' and medically important products, they represent the highest
    potential risk to patients. Given this, our goal is to focus our
    resources on high-risk, high-impact products, or work areas to maximize
    public health impact. In addition, FDA expects a 15 percent increase in
    PMA workload from fiscal year 1997 to fiscal year 1998 due to requests
    for reclassifications and submissions of required preamendment PMA's.
        While FDA has made great strides in reducing its review times and
    backlogs for medical device applications, continued improvement is
    needed to meet mandated goals. Additional resources will allow FDA to
    allocate more resources toward the PMA process and to limit the
    increase in pending PMA's without jeopardizing the recent performance
    gains made in the 510(k) program.
        FDA knows that resources will continue to be scarce, and is
    beginning to re-engineer the medical device program to obtain maximum
    public health impact from the resources that will be available. The
    goal behind this effort will be to focus resources on high-risk, high-
    impact products while at the same time de-emphasizing areas that pose
    lower risk to the public, or where FDA involvement is not essential.
    The improvements and changes that arise from the re-engineering process
    will ensure that the medical device program is as effective and
    efficient as possible, and may increase productivity in the future.
        We are providing a table that shows FDA's fiscal year 1998
    performance goals for PMA workload at base resource levels and with
    additional resources.
        [The information follows:]

              ESTIMATED FISCAL YEAR 1998 PERFORMANCE GOALS FOR FDA
    ------------------------------------------------------------------------
                                                       Performance goals--
                                                   -------------------------
                                                                     $5.2
                                                     Base level    million
                                                     resources    additional
                                                     (percent)    resources
                                                                  (percent)
    ------------------------------------------------------------------------
    PMA originals:
        Complete first actions on Standard PMA's
         originals within 180 days................           35           50
        Complete expedited first actions within
         180 days.................................           85           90
    PMA supplements:
        Complete first actions on standard PMA
         supplements within 180 days..............           35           80
        Complete expedited first actions within
         180 days.................................           85           90
    ------------------------------------------------------------------------

        FDA is committed to achieving the following review times at base
    level resources:

                     FISCAL YEAR 1998 PERFORMANCE GOALS WITH BASE RESOURCES--INCREASED PMA WORKLOAD
    ----------------------------------------------------------------------------------------------------------------
                      510(k)'s                                                   PMA's
    ----------------------------------------------------------------------------------------------------------------
    Complete 80 percent first actions within 90   Complete 35 percent of first actions on standard PMA originals
     FDA days, compared to 94 percent in fiscal    within 180 days, compared with 53 percent in fiscal year 1996.
     year 1996.
    Complete 40 percent final actions within 90   Complete 55 percent of first actions on standard PMA supplements
     FDA days. FDA completed 59 percent for the    within 180 days, compared with 77 percent in fiscal year 1996.
     first nine months of fiscal year 1996.
                                                  Complete 85 percent of expedited first actions within 180 days.
                                                   (FDA completed three out of four expedited applications filed in
                                                   fiscal year 1996 that have been under review at least 180 days).
    ----------------------------------------------------------------------------------------------------------------

        Question. In the 2nd and 3rd Quarter Fiscal year 1996 Performance
    Reports submitted to this Committee, FDA reported that CDRH utilized
    approximately 565 FTE in premarket review activities. The fiscal year
    1998 budget justification indicates that out of more than 1,600 FTE
    designated for the medical and radiological devices program,
    approximately 643 FTE will be utilized on premarket review activities.
    What is meant by ``premarket review activities''? Does this include
    more than simply reviewing applications?
        Answer. Yes, premarket review activities include more than simply
    reviewing applications. Premarket review activities are conducted by
    CDRH and the Office of Regulatory Affairs, or ORA. For the record, I
    would be happy to provide a list of activities included under pre-
    market review activities.
        [The information follows:]
            510(k)'s (including Supplements)
            IDE's (including Amendments)
            IDE Supplements
            PMA's (includes Amendments)
            PMA Supplements
            Petitions
            Bioresearch Monitoring
            Regulation/Policy Development
            Pre-market Manufacturers' Assistance
            Pre-market Liaison/Support Activities
        Pre-market Activities for ORA include:
            Preapproval Inspections
            Data Integrity Audits
            ``For Cause'' Investigations
        For fiscal year 1996, time reporting data shows FDA's CDRH used 565
    FTE's in pre-market activities out of a program total of 643 FTE's. FDA
    employs time reporting surveys to estimate actual resource use during
    the year and to guide future formulation of resource requirements.
        Question. Are all of the 643 FTE's devoted solely to premarket
    review functions?
        Answer. Yes, the 643 FTE represent total estimated FDA pre-market
    resources for the Medical Device program for fiscal year 1998. The
    fiscal year 1998 FDA distribution of resources for CDRH is 577 FTE and
    for ORA is 66 FTE.
        Question. Provide a breakdown of how these 643 FTE's are assigned,
    i.e., how many work on: 510(k)'s, PMA's, PMA supplements, IDE's, and
    IDE supplements.
        Answer. The 643 FDA FTE's are assigned to CDRH and ORA. I would be
    happy to provide the breakdown of how the 577 CDRH FTE are projected to
    be used for pre-market evaluation activities in fiscal year 1998.
        [The information follows:]

            Pre-market Evaluation Activity                               FTE
    510(k)'s (including Supplements)..................................   196
    IDE's (including Amendments)......................................    52
    IDE Supplements...................................................    35
    PMA's (includes Amendments).......................................   150
    PMA Supplements...................................................    52
    Petitions.........................................................     7
    Bioresearch Monitoring............................................    23
    Regulation/Policy Development.....................................    17
    Pre-market Manufacturers' Assistance..............................    22
    Pre-market Liaison/Support Activities.............................    23
                            -----------------------------------------------------------------
                            ________________________________________________
          Total, CDRH FTE.............................................   577

        The breakdown of pre-market activities for the Office of Regulatory
    Affairs include:

            Pre-market Evaluation Activity                               FTE
    Preapproval Inspections...........................................    63
    Followup to Preapproval Inspections...............................     3
                            -----------------------------------------------------------------
                            ________________________________________________
          Total, ORA FTE..............................................    66

        Question. In the quarterly reports to this Committee, the FDA
    stated that in order to help PMA review, it has shifted FTE's to PMA
    review during the year. Where did these FTE's come from?
        Answer. The FTE that were shifted to PMA review during fiscal year
    1996 came from the science base area. For fiscal year 1997 to 1998, we
    plan to significantly increase the effort devoted to PMA reviews. This
    will be done by transferring people from other work areas, primarily
    the review of lower-risk devices under 510(k)'s. The additional staff
    assigned to work on PMA's will be used to bolster the present work on
    reviewing new and medically important PMA's as well as reviewing
    preamendment PMA's and/or preparing reclassification actions. The
    result should be timelier reviews while maintaining appropriate
    scientific rigor.
        Question. In the first quarterly report, FDA stated specifically:
    ``In addition, exempting more of the easiest-to-review Tier One
    510(k)'s and shifting resources from 510(k)'s to PMA reviews may
    increase 510(k) review times for the remaining 510(k) applications.
    However, the 2nd and 3rd Quarterly reports indicate that FDA has ``been
    able to continue improving 510(k) performance.'' How have you done
    this?
        Answer. We were able to continue improving 510(k) performance in
    fiscal year 1996 because we increased the FTE in the 510(k) area and
    the PMA area while reducing resources from the science base area.
        Question. How many resources have you shifted from 510(k)'s to
    PMA's?
        Answer. We are projecting a shift of up to 15 FTE from the 510(k)
    area to the PMA area in fiscal year 1997 and possibly an additional 15
    FTE will be shifted in fiscal year 1998. Sufficient FTE, however, will
    be retained for adequate review of complex 510(k)'s. We want to
    continue to improve the timely review of higher impact and medically
    important devices. To accomplish this, FDA's CDRH is in the process of
    re-engineering the pre-market work processes to make them as efficient
    and effective as possible. The re-engineering effort involves a risk-
    based approach to increase the direct attention paid to reviewing those
    medical devices that present an important clinical benefit or
    significant risk to patients. FDA will also identify simplified,
    alternative methods for reviewing routine, lower risk products in ways
    that continue to provide adequate consumer protection, and also
    continue reviewing devices that can be exempted from the 510(k)
    process.
        Question. Did FDA ever shift PMA resources to 510(k)'s in order to
    reduce the backlog and review times? If so, what impact did this have
    on the PMA review process?
        Answer. FDA did not shift PMA resources to reduce the 510(k)
    backlog. We temporarily shifted some FTE from outside the program area
    to assist in decreasing the backlog. Approximately 18 FTE from the
    Office of Science and Technology, or OST, within FDA's, CDRH, were used
    to conduct direct review of pre-market submissions. In fiscal years
    1994 and 1995, CDRH also received a substantial amount of new resources
    for medical device review and most of the new staff were assigned to
    work on 510(k)'s. The additional review staff, coupled with several
    management initiatives for the 510(k) process, enabled FDA to
    substantially reduce the backlog of overdue and pending applications.
        Question. The reports, along with the fiscal year 1998 budget
    justification, indicate that a 33 percent increase in PMA workload is
    expected from fiscal year 1996 to 1997, and another 15 percent increase
    is projected in fiscal year 1998. Do you plan to continue to shift
    resources from 510(k) reviews and, if so, how do you plan to continue
    to maintain or improve 510(k) review times?
        Answer. In fiscal year 1997, we project shifting up to 15 FTE from
    review of lower-risk devices under 510(k)'s to the PMA area. In fiscal
    year 1998, an additional 15 FTE possibly will be shifted to the PMA
    area.
        The 510(k) devices encompass a broad variety of devices whose risk
    potential varies widely. We plan to focus our resources on the 510(k)'s
    with the greatest technological complexity and uncertainty as to safety
    and effectiveness. Because of the potential public health impact for
    these types of devices, we plan to increase the personnel assigned to
    reviewing them. Again, these people will be reassigned from the review
    of lower risk 510(k)'s. We will identify alternative mechanisms for
    providing adequate public health protection for the lower risk 510(k)'s
    by redirecting or reducing FDA's direct involvement. In fact, by fiscal
    year 1999, we anticipate developing alternative regulatory mechanisms
    for 33 percent more lower risk devices. Further, improving upon the
    current high level of 510(k) review time would be difficult because the
    remaining 510(k)'s will be the more complex applications involving more
    scientific issues and data.
                          office of regulatory affairs
        Question. Dr. Friedman, you indicate in your testimony that the
    Office of Regulatory Affairs began implementing a new automated
    system--called Operational and Administrative System for Import Support
    (OASIS)--that greatly speeds up FDA's handling and clearance of
    imported products. How is this new paperless processing system helping
    the agency to maintain its surveillance of the rapidly mounting number
    of imports of FDA-regulated products?
        Answer. The OASIS computerized electronic entry review system is
    the cornerstone of FDA's strategy which aims to be responsive to the
    need of the importer/broker for speedy access to domestic commerce
    while maintaining adequate watch on imported goods.
        OASIS greatly speeds up FDA's handling and clearance of imported
    products, and operates in a largely paperless environment. Data FDA
    needs to make its admissibility determinations are transmitted
    electronically, and FDA's decisions are communicated electronically
    back to the brokers.
        With OASIS, the initial FDA admissibility determination on every
    shipment is provided to the broker within eight minutes after the
    broker submits the entry data. Eighty percent of all shipments get
    their final FDA clearance within those eight minutes, and over 85
    percent are given clearance within three hours, all completely without
    paper.
        The nationwide roll out of OASIS, FDA's new automated system for
    processing shipments of foreign-origin products seeking to enter the
    U.S., is underway. On December 2, 1996, OASIS was implemented at FDA's
    Seattle, Philadelphia, Baltimore, and New Orleans districts. On January
    23, 1997, OASIS was implemented at FDA's Atlanta and San Juan
    districts, and at San Francisco and Kansas City districts on February
    19. The rest of the OASIS roll out will be to Detroit and Minneapolis
    districts in March; Florida and Nashville in April; Dallas and Denver
    in May; Cincinnati and Chicago in June; New York in July; and Los
    Angeles, Buffalo and New England districts in September. By the end of
    September, 1997, OASIS will be operational at every FDA district,
    covering every U.S. port of entry where FDA-regulated products come in
    by sea, land, and air.
        OASIS will enhance FDA's ability to identify problem shipments by
    improving our capability to target products with a history of non-
    compliance and those products which constitute a high risk for a
    potential public health hazard. Further, it will help assure that
    problem products and manufacturers are recognized as such in whatever
    port they are entered, thereby limiting the problem of ``port
    shopping.''
        OASIS operates in conjunction with the U.S. Customs Service's
    Automated Commercial System, or ACS. A line is a unique item on an
    import entry differentiated by country of origin, manufacturer,
    container size, or product. For lines regulated by FDA, the filers send
    information required by both Customs and FDA when offering the shipment
    for entry. For electronically filed entries, ACS assembles a set of
    data for FDA by combining Customs and FDA data. The lines are then
    electronically screened against a set of criteria developed and
    maintained by FDA using OASIS.
        The screening determines if the lines match any of the established
    criteria based on product, manufacturer, shipper, country of origin, or
    any combinations of these four screening elements. The results of the
    screening are summarized at the entry level and passed as an electronic
    message back to the filer.
        The purpose of this initial electronic screening is to forward to
    FDA for further review those products with which, based on the product
    itself, the country of origin, manufacturer or shipper, FDA may have
    further regulatory interest and to do this on a uniform nationwide
    basis. The screening criteria take into account such factors as FDA's
    previous experience with the product, for example a high compliance
    rate or low compliance rate, planned surveillance work in various
    program areas, emerging problems or trends, and the capacity of FDA
    field staff to collect and examine imported product. FDA is capable of
    changing the electronic screening criteria in OASIS within minutes as
    the need arises to respond to emerging problems.
        For those products that are flagged as ``FDA Review'' during the
    initial electronic screening, the entry data is loaded into a different
    database and screened again using more sophisticated criteria. It is
    then made available for review by the initial OASIS user, the FDA entry
    reviewer. At this time, OASIS enables the entry reviewer to request
    possible actions and OASIS presents all applicable guidance, such as
    Import Alerts, Surveillance Programs, and Assignments, which may apply
    to the line to assure that all available information is evaluated when
    an entry decision is made. Based on this additional review, the FDA
    entry reviewer will make a decision to detain, sample, or release the
    entry. Once all lines of an entry have been processed, a decision
    message for each line is electronically sent to the filer. Further, for
    the first time, OASIS enables FDA to maintain a readily accessible
    database of FDA regulated products that have entered the U.S. This
    capability of accessing information on previous shipments of products,
    who shipped them and who received them, has proven to be a very
    valuable tool in responding to possible health hazards associated with
    imported products. We are now able, in a very short time, to identify
    who may have received products of concern and plan appropriate follow-
    up.
        Question. What level of funding is being provided for fiscal year
    1997 for the implementation of OASIS? What level of funding is included
    in the fiscal year 1998 appropriations request for this system?
        Answer. Development and maintenance of OASIS will require
    approximately $1,500,000 in fiscal year 1997. The estimate for fiscal
    year 1998 is $1,650,000.
        Question. Will additional investments in OASIS be required in
    future fiscal years? If yes, please identify the level of funding
    required by fiscal year.
        Answer. It will cost approximately $500,000 per year to maintain
    the OASIS system in the outyears.
                     blood supply and blood product safety
        Question. What are FDA's current procedures in dealing with adverse
    incidents in blood products when they occur?
        Answer. Under 21 CFR 600.80, licensed manufacturers of biological
    products, including blood derivatives, are required to report adverse
    experience information to FDA. Manufacturers are required to report
    serious and unexpected adverse experiences within 15 working days of
    initial receipt of the information. They are required to report other
    adverse experiences at periodic intervals. FDA has required that plasma
    derivative manufacturers file monthly reports on adverse reactions,
    including reports of potential transmission of infectious diseases,
    associated with their products to assure that incidents involving
    potential transmission of infectious agents are investigated
    expeditiously. In addition, manufacturers are required to investigate
    reports of adverse experiences. Whole blood and blood component
    manufacturers are not subject to the adverse experience reporting
    requirements in 21 CFR 600.80, but they are required to investigate
    such reports under 21 CFR 606.170(a). Blood and blood component
    manufacturers are required to report deaths under 21 CFR 606.170(b).
        The FDA may receive reports of incidents of Adverse Experience
    Reports, or AER's, from a number of different sources. The Centers for
    Disease Control and Prevention, or CDC, reports directly to FDA any
    adverse events associated with blood products that it receives. These
    reports generally come from the FDA's MedWatch system, manufacturers,
    or consumers. The Agency has evaluated its procedures for processing
    these AER's and implemented additional steps to have AER's relating to
    biological products provided directly to FDA's Center for Biologics
    Evaluation and Research, or CBER, in an expedited manner. FDA is
    currently developing a proposed rule to require unlicensed
    establishments to report errors and accidents to the Agency. This rule
    will provide FDA with a more accurate surveillance of the nation's
    blood supply and facilitate a rapid response where public health may be
    at risk. This is under review in the Agency and will be forwarded to
    OMB in the next few months.
        CBER also has a Standard Operating Procedure, or SOP, for emergency
    operations. This document provides guidance to CBER staff on the
    procedures to be used in situations that might constitute a threat to
    the public health. The SOP designates contacts in CBER's review
    offices, Office of Blood Research and Review, Office of Vaccine
    Research and Review, and Office of Therapeutics Research and Review,
    and compliance components. These individuals are the focal points for
    evaluating and ensuring rapid responses to significant and serious
    reports of AER's that present public health concerns and may represent
    emergency situations. These officers, in consultation with other
    appropriate experts, such as the Office of Regulatory Affairs, evaluate
    the information provided in the AER, determine if more information is
    needed to fully assess the impact of the incident, and initiate a
    response to the incident based on the threat or potential threat to the
    public health.
        AER's from plasma derivative manufacturers which are determined to
    be a public health threat, result in expedited actions which include,
    but are not limited to, initiating establishment inspections to conduct
    a complete assessment of manufacturing practices, determine the manner
    in which a manufacturer responds to AER's pursuant to Good
    Manufacturing Practices, or GMP's, and reporting requirements, and
    evaluating proposed corrective actions and planned responses and public
    notifications by the manufacturer.
        Question. How does the FDA coordinate with and respond to CDC when
    CDC reports a transmission of infectious disease related to the blood
    supply or blood products?
        Answer. The FDA has extensive interactions at all levels with its
    sister Public Health Service agencies, CDC and NIH, on blood safety
    issues.
        In October 1995, Secretary Shalala accepted the recommendations of
    a Department task force reviewing the July 1995 Institute of Medicine,
    or IOM, report on HIV and the blood supply. In response to these
    recommendations, the Secretary raised blood safety to the highest
    levels of Department concern. The Assistant Secretary for Health was
    designated to be the Blood Safety Director, with overall responsibility
    for coordination and oversight of the Public Health Service's blood
    safety programs.
        Working with the Blood Safety Director is the Blood Safety
    Committee which includes the Director, NIH; the Director, CDC; the
    Administrator, Health Care Financing Administration; and the
    Commissioner of Food and Drugs. The Blood Safety Committee has been
    meeting periodically since January 1996. The PHS Advisory Committee on
    Blood Safety and Availability further supports this effort. This
    Advisory Committee includes representatives of industry, consumers,
    scientific experts and ethicists. Its purpose is to provide a forum to
    examine broad public health and societal implications of blood safety
    issues.
        Since its inception in 1996, the Blood Safety Committee has been
    informed of adverse events or emergency situations whenever they are
    likely to have broad public health impact or require increased
    coordination between the public health agencies.
        The CDC has created a position of Assistant Director for Blood
    Safety in the Division of Viral and Rickettsial Diseases, to facilitate
    interactions with FDA on blood issues. FDA also receives input from CDC
    and NIH on issues of blood safety through other mechanisms. CDC and NIH
    representatives serve as members of the Blood Products Advisory
    Committee which provides scientific advice to FDA on a variety of
    issues including product approvals. NIH and CDC representatives also
    serve on the Transmissible Spongiform Encephalopathies, or TSE,
    Advisory Committee which advises FDA on TSE issues including their
    possible impact on blood and blood products. NIH and CDC participate in
    the interagency Advisory Committee on Blood Safety and Availability
    which holds monthly teleconferences to discuss issues affecting blood
    safety. Together, these efforts ensure that CDC and NIH have input at
    the highest levels of FDA and the Department concerning blood safety.
        The CDC has a number of different systems for surveillance of
    current or potential threats related to the transfusion of blood/blood
    products. These include disease-specific surveillance systems, donor-
    based systems for HIV, and recipient-based systems. Identification of
    previously unknown agents may occur through epidemiological
    investigations or emerging infection projects. CDC reports directly to
    FDA any adverse events associated with receipt of blood and blood
    products that are identified through its surveillance systems or
    epidemiologic investigations. The CDC routinely provides input to the
    FDA's Blood Products Advisory Committee, affording the Committee the
    benefit of this surveillance expertise.
        As described previously, the Agency procedures for evaluation and
    response to AER's includes consultation as necessary with appropriate
    experts. The expertise needed may require contact with the CDC. The
    purpose of the contact is to gather additional surveillance data that
    may be available and to coordinate investigational efforts at user
    sites where significant adverse events have occurred.
        The CDC also participates in product investigations by conducting
    epidemiological studies or assisting with scientific analysis. Recent
    examples include Centeon Albuminar in which CDC provided
    epidemiological assistance in investigating cases of individuals
    affected by bacterially contaminated product and Alpha Factor VIII and
    Factor IX in which the CDC provided epidemiological and laboratory
    assistance in investigating the transmission of Hepatitis A virus from
    clotting factors. NIH and CDC also share information from large scale
    surveillance studies on blood safety issues such as the retrovirus
    epidemiology in donors study, the transfusion transmitted virus study,
    and the transfusion safety study.
        FDA recognizes the sentinel role that CDC plays in safeguarding our
    nation's blood supply. CDC, in cooperation with FDA, has been
    conducting surveillance in this country for a rare strain of HIV-1,
    group O, through the CDC surveillance program. In 1996, the first two
    cases of HIV group O were reported because of these efforts. FDA has
    advised manufacturers to improve their test kits to detect these novel
    strains of HIV and is currently reviewing applications for HIV test
    kits to detect HIV group O. These issues were discussed at public
    sessions of FDA's Blood Products Advisory Committee held in September
    1996. In cooperation with CDC and NIH, FDA has established a working
    group to identify and obtain samples from individuals infected with
    novel HIV strains worldwide. These samples will be used to ensure that
    HIV tests used in this country can detect novel HIV strains before they
    reach our country. As a precautionary measure, FDA issued
    recommendations in December 1996 to defer from donating blood
    individuals who were in countries identified as endemic for HIV-1
    Group.
        In 1996, FDA approved tests to detect HIV antigen in blood donors.
    FDA issued recommendations to blood banks to implement HIV antigen
    tests when they were licensed. These HIV antigen tests are used in
    addition to tests to detect antibodies to HIV and serve to further
    close ``the window period'' for HIV by providing another level of
    assurance to prevent HIV transmission through blood and blood products.
    FDA worked with CDC in developing recommendations for the use of tests
    such as the HIV p24 antigen test in non-blood bank clinical care
    settings and these were published in the CDC's ``Morbidity and
    Mortality Weekly Report.''
        One example of FDA interactions with CDC and NIH involves the
    potential transmission of Creutzfeldt-Jakob Disease--CJD--through blood
    products. CJD is a transmissible spongiform encephalopathy possibly
    caused by a protein called a prion. FDA has been involved in national
    and international efforts focused on better understanding Transmissible
    Spongiform Encephalopathies, or TSE, including CJD. In this area, FDA
    has collaborated extensively with NIH and CDC, as well as the United
    States Department of Agriculture, and affected industries and consumer
    groups.
        FDA has formed an intra-agency working group composed of the FDA
    Deputy Commissioner for Operations and experts from each FDA Center to
    consider transmissible spongiform encephalopathies and their impact on
    FDA regulated products. A special CJD advisory committee was formed in
    1995, and was rechartered in June 1996 for two additional years as the
    TSE Advisory Committee. The TSE Advisory Committee has met periodically
    to provide advice to FDA, most recently, in April of this year. Issues
    related to blood safety and CJD have been discussed periodically with
    these committees.
        FDA has also taken other precautionary measures to safeguard the
    blood supply. In August 1995, FDA issued recommendations for the
    deferral of blood donors at risk for CJD. FDA issued revised
    recommendations in December 1996 to clarify familial risk following a
    discussion of this issue by the TSE Advisory Committee. CDC is
    conducting surveillance studies to look for CJD in this country in
    patients who have diseases associated with increased exposure to blood
    and blood products, such as persons with hemophilia. No association
    between hemophilia and CJD has been found to date. In addition, FDA,
    CDC, NIH and industry have been cooperating in scientific studies to
    assess the risk of transmission of CJD by blood and blood products.
    These studies are ongoing. The issue of CJD transmission by blood and
    blood products was discussed at the Advisory Committee on Blood Safety
    and Availability in April of this year.
        Question. What efforts have been taken to move forward in improving
    rapid patient and physician notification when an adverse incident
    occurs?
        Answer. The FDA is working with industry and consumer groups to
    identify more efficient and effective consumer notification methods.
    These notifications range from product alerts and quarantine notices to
    product recalls. The Agency has detailed guidelines at 21 CFR, Part 7
    which outline the responsibilities and expectations of manufacturers in
    conducting field corrections of marketed products that represent a
    potential threat to the health of consumers. In addition, FDA can order
    the recall of biological products that present an imminent or
    substantial hazard to the public health. Plasma derivative
    manufacturers are required to file monthly reports on adverse reactions
    associated with their products to assure that potential transmissions
    of infectious agents are investigated expeditiously. The FDA has also
    taken further steps to address the issue, which I would be happy to
    provide for the record.
        [The information follows:]
      --The Agency utilizes electronic communications including the CBER
            World Wide Web Home Page, fax-on-demand, press releases and
            talk papers, and a Blood and Plasma Products hotline to
            disseminate information concerning product recalls and market
            withdrawals.
      --FDA has instituted communication of withdrawals and/or recalls of
            plasma derivatives to consumer groups such as the National
            Hemophilia Foundation and the Committee of Ten Thousand, as
            appropriate.
      --A PHS meeting, including FDA, CDC, and the National Heart, Lung,
            and Blood Institute, or NHLBI, was convened in November 1996 to
            discuss and obtain public input on notification of the public
            on recalls and ongoing investigations. An interagency working
            group discussed proposals to track products by lot number to
            recipient at a March 1997 Blood Products Advisory Committee
            meeting. The industry representatives were encouraged to
            develop plans to more effectively notify blood product end-
            users of recalls and market withdrawals.
      --On September 9, 1996, FDA in cooperation with HCFA issued a final
            rule on, ``Current Good Manufacturing Practices for Blood and
            Blood Components: Notification of Consignees Receiving Blood
            and Blood Components at Increased Risk for Transmitting HIV
            Infection.'' This rule requires blood establishments to notify
            consignees of HIV lookback cases so that physicians or other
            health care workers can be notified and, where appropriate,
            recipient notification can occur.
      --In December 1996, FDA advised plasma derivative manufacturers to
            modify their labeling of plasma derivatives to include warnings
            about the potential of these products to transmit infectious
            diseases.
      --The Agency has continued efforts to make the public aware of FDA's
            decision-making process on evaluating AER's, initiating
            recalls, clarifying present operating procedures and
            encouraging the use of new technologies for notifying
            consumers.
        The FDA holds periodic meetings with consumer organizations such as
    the National Hemophilia Foundation and the Committee of Ten Thousand to
    discuss these issues.
                  fiscal year 1997 reprogramming notification
        Question. On April 10, 1997, I received a letter from Secretary
    Shalala notifying me of the agency's plan to reallocate funds
    identified in the fiscal year 1997 Committee Report and adopted by the
    Conference committee. While the letter identifies four specific changes
    in accordance with the established reprogramming thresholds, it does
    not adequately identify where these funds are being shifted to or taken
    from and for what reasons. Included is a copy of the April 10, 1997,
    letter and the backup summary table the agency provided to the
    Committee.
        [The information follows:]
                          Letter From Donna E. Shalala
                        Secretary of Health and Human Services,
                                       Washington, DC., April 10, 1997.
    Hon. Thad Cochran,
    Chairman, Subcommittee on Agriculture, Rural Development, and Related
            Agencies, Committee on Appropriations, U.S. Senate, Washington,
            DC.
        Dear Mr. Chairman: I am writing to inform you of our plan to
    reallocate funds which were identified in the fiscal year 1997 Senate
    Appropriations Committee Report, and adopted in the Conference Report,
    to more accurately reflect fiscal year 1997 costs of the National
    Center for Toxicological Research (NCTR). As described in the enclosed
    information, the estimate the Food and Drug Administration (FDA)
    provided to the Committee for inclusion in the fiscal year 1997 report,
    was substantially higher than the base funding level for NCTR. The
    resources resulting from this action have been reallocated to other
    program activities. These reallocations have been reflected in the
    fiscal year 1998 Congressional Justification. We regret any confusion
    that this has created.
        Also enclosed is information informing the Committee of FDA's plans
    to implement the regulations on nicotine-containing tobacco products,
    and to more appropriately allocate the funds remaining under ``Program
    Management,'' thus eliminating that as a separate budget activity. In
    addition, FDA plans to reduce the amount of funding for the Orphan
    Product Grants program to help defray the costs of pay increases and
    inflation absorbed by the agency. This reduction in funds may result in
    a decrease in the number of new grants awarded in fiscal year 1997.
        The specific impact of each funding reallocation on program
    activities is detailed in the enclosure to this letter. The enclosure
    summarizes these changes by program activity.
        I appreciate the Committee's continued interest in and support of
    the activities of the Food and Drug Administration.
                Sincerely,
                                                      Donna E. Shalala.
        Enclosure.
                                     ______

                        The Food and Drug Administration
                    proposed reallocations--fiscal year 1997
    National Center for Toxicological Research (NCTR)
    Senate Committee Report Funding Table: $37.0 million
    Fiscal Year 1997 Current Estimate: $31.3 million

        NCTR relies on a high level of contract support for managing its
    facilities, maintaining its animal colonies, and for many other
    research support services. In past years, FDA has redirected funds
    toward the end of the year from other programs to NCTR for its contract
    support. NCTR's operating budget is then reduced by the same amount at
    the beginning of the next year so that the base level of funding
    remains relatively constant. The agency is not able to provide these
    additional funds to the NCTR at a consistent level every year, but
    endeavors to keep the NCTR funded at a ``base'' level of funding
    necessary to sustain its current level of operations, including
    mandated contract labor increases. The amount FDA provided to the
    Committee for inclusion in the fiscal year 1997 Committee report was
    based on fiscal year 1995 actual obligations (when a substantial amount
    of funds were redirected to NCTR) and a fiscal year 1996 estimated
    obligation level that proved to be too high. The fiscal year 1997
    estimate in the fiscal year 1998 Congressional Justification reflects,
    the current planned level of funding for NCTR and for all other
    Centers.
                             additional information
    Regulation of Nicotine-Containing Tobacco Products
    Senate Committee Report Funding Table: Not separately identified
    Fiscal Year 1997 Current Estimate: $4.9 million

        The fiscal year 1998 Congressional Justification establishes
    Tobacco as a separate program activity to adequately reflect the
    resources planned for FDA activities related to the regulation of
    nicotine-containing tobacco products. FDA plans to devote approximately
    $4.9 million during fiscal year 1997 to implement the regulation of
    nicotine-containing tobacco products. In previous years, funding for
    the tobacco initiative came from funds allocated to the Office of the
    Commissioner. Funding for this effort in fiscal year 1997 will come
    from general reductions in funding for ``Other Activities.'' Although
    we intend to report our costs for this initiative separately, this
    effort will be housed, for administrative purposes, within the Office
    of Policy, at least through the initial implementation stage.
        As you know, on August 23, 1996, President Clinton approved FDA's
    final rule for the regulation of nicotine-containing tobacco products.
    The final rule limits the availability and appeal of tobacco products
    to young people. Our goal is to promote and protect the health of our
    nation's youth by reducing the easy access and strong appeal of these
    products to children, before they become addicted.
        Our efforts during fiscal year 1997 will focus on outreach and
    preliminary enforcement activities. The new rule requires certain
    actions to be implemented during fiscal year 1997. The requirement for
    vendors to check age/photo ID's before selling these products to young
    people by February 28, 1997, has been implemented. All other provisions
    of the regulation, except those related to sponsorship, are to be
    implemented by August 28, 1997. Approximately $2 million of the total
    fiscal year 1997 budget will be allocated to States to provide training
    for State and local officials who will help enforce FDA's rule. The
    remainder of the budget will be used for outreach activities to educate
    and mobilize state and local public health, law enforcement, and other
    officials and to raise awareness about the new rule with community
    organizations, parent groups, voluntary health groups and others.
    Program Management
    Senate Committee Report Funding Table: $6.1 million
    Fiscal Year 1997 Current Estimate: Not separately identified

        In its fiscal year 1997 report, the Committee requested a new
    presentation of Other Activities. A significant portion of what had
    been Program Management was moved to Other Activities. The only portion
    of Program Management remaining after this change, was related to
    Direct Field Management. Since funding for all other field activities
    are reflected in the appropriate program lines, we are doing the same
    for Direct Field Management, thus eliminating Program Management as a
    separate program activity.
    Orphan Products Grants
    Senate Committee Report Funding Table: $12.2 million (excludes
            extramural services)
    Fiscal Year 1997 Current Estimate: $11.3 million

        During fiscal year 1997, FDA plans to reduce the funding for Orphan
    Product (OP) grants. FDA's budget has been at a constant level for the
    past three years. In real terms, however, the agency's resources have
    been declining due to pay cost increases and inflation absorbed by the
    agency. Because of this, we have had to reduce many operating costs.
    During this same time, the OP grant program has not been reduced. In
    fiscal year 1997, however, we plan to reduce the funding for OP grants
    to $11.3 million. Please also note that, in the fiscal year 1998
    Congressional Justification, the cost of the OP grants program has been
    moved from ``Other Activities'' and included in the program activities
    directly related to these grants (Human Drugs and Medical Devices and
    Radiological Products). This is consistent with all other grant
    programs.

                                                                  FOOD AND DRUG ADMINISTRATION FISCAL YEAR 1997 APPROPRIATION ESTIMATES
                                                                                         [Dollars in thousands]
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                      Fiscal year 1997 Senate Committee                         Changes--                      Fiscal year 1998 congressional budget
                                                                              recommendations--           ----------------------------------------------------       request--Fiscal year 1997
                                                                   ---------------------------------------                                                                appropriations--
                                Program                                                                                   SBIR and     Program       Other    --------------------------------------
                                                                      Program     PDUFA/MQSA      S&E        Tobacco     OPD grants   management    changes      Program
                                                                       totals                                                                                     totals     PDUFA/MQSA      S&E
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    Foods.........................................................     $194,156  ...........     $194,156  ...........  ...........      $2,377       $3,702      $200,235  ...........     $200,235
    Human drugs...................................................      237,524    ($51,779)      185,745  ...........     $11,345        1,463        1,537       252,081    ($51,991)      200,090
    Biologics.....................................................      119,528     (27,992)       91,536  ...........  ...........         244         (659)      122,435     (31,314)       91,121
    Animal drugs..................................................       38,022  ...........       38,022  ...........  ...........         366         (857)       37,531  ...........       37,531
    Medical devices and radiological products.....................      152,735     (13,403)      139,332  ...........         665        1,645        5,257       160,302     (13,403)      146,899
    NCTR..........................................................       36,977  ...........       36,977  ...........  ...........  ...........      (5,670)       31,307  ...........       31,307
    Program management............................................        6,094  ...........        6,094  ...........  ...........      (6,094)  ...........  ...........  ...........  ...........
    Tobacco.......................................................  ...........  ...........  ...........      $4,914   ...........  ...........  ...........        4,914  ...........        4,914
                                                                   =================================================================================================================================
    Other activities:
        Office of the Commissioner................................       15,365        (175)       15,190      (1,422)  ...........  ...........      (2,446)       11,417         (95)       11,322
        Office of Policy..........................................        2,825  ...........        2,825      (1,164)  ...........  ...........         316         1,977  ...........        1,977
        Office of External Affairs................................       16,140  ...........       16,140        (518)  ...........  ...........      (1,317)       14,251  ...........       14,251
        Office of Management and Systems..........................       55,082      (7,582)       47,500        (905)  ...........  ...........      (1,666)       49,057      (4,128)       44,929
        Office of Operations/Orphans..............................       12,868  ...........       12,868        (905)     (12,010)  ...........       2,131         2,084  ...........        2,084
        Central Services..........................................       11,548  ...........       11,548  ...........  ...........  ...........      (1,001)       10,547  ...........       10,547
                                                                   ---------------------------------------------------------------------------------------------------------------------------------
          Subtotal, other activities..............................      113,838      (7,757)      106,071      (4,914)     (12,010)  ...........      (4,037)       89,333      (4,223)       85,110
                                                                   =================================================================================================================================
    Other rent and rent-related activities........................       22,039  ...........       22,039  ...........  ...........  ...........         726        22,765  ...........       22,765
                                                                   =================================================================================================================================
          Total...................................................      920,903    (100,931)      819,972  ...........  ...........  ...........  ...........      920,903    (100,931)      819,972
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

        Question. Why is the agency proposing to eliminate the program
    management line-item after the Committee sought to separately identify
    those costs in cooperation with the agency last year?
        Answer. The fiscal year 1997 Senate Committee report language
    directed FDA to make a number of changes to its budget structure,
    primarily to more clearly delineate funding among the various
    components of the Agency. In working on the requested changes, we
    recognized this as an opportunity to make other changes that would
    result in a more understandable and consistent budget presentation. One
    of the Committee's directions was to split the line for ``Program
    Management'', and to spread back funding directly attributable to each
    program and to `other activities' as appropriate. This would help
    provide the true costs of funding each program. Redirecting these costs
    left only $6,094,000 in the old program management line for funding of
    Direct Field Management. Since all other field costs had been
    appropriately spread to the programs, we believed that it was
    consistent to spread the field management costs to the programs as well
    in order to achieve an understanding of the full cost for each program.
    The roughly $6.1 million was spread back to each program to which
    funding was directly attributable. For Foods, the amount is $2,377,000,
    for Human Drugs, $1,463,000, for Biologics, $244,000, for Animal Drugs
    and Feeds, $366,000, and finally for Medical Devices, $1,645,000.
        Question. Please explain which line-items are being increased as a
    result of the $5.670 million reduction for National Center for
    Toxicological Research (NCTR) and the specific programs and activities
    receiving enhanced funding as a result and the reasons for each
    increase.
        Answer. The adjustment of $5.7 million in the amount planned for
    NCTR in fiscal year 1997 is not really a reallocation to other
    programs, but an adjustment to reflect the true continuing costs of
    FDA's major programs. The estimate for NCTR furnished to the Committee
    in mid-1996 was too high because it was based on an unusually-high
    level of funding for NCTR in fiscal year 1995.
        The reason that the obligations for NCTR were unusually high in
    fiscal year 1995 relates to the nature of NCTR's operating budget,
    which includes a number of support service contracts. NCTR relies on a
    high level of contract support for managing its facilities, maintaining
    its animal colonies, and for many other research support services. In
    past years, FDA has redirected funds toward the end of the year from
    other programs to NCTR for its contract support. NCTR's operating
    budget is then reduced by the same amount at the beginning of the next
    year so that the overall level of funding remains relatively constant.
    The Agency is not able to provide these additional funds to the NCTR at
    a consistent level every year, but endeavors to keep NCTR funding at a
    ``base'' level necessary to maintain its current level of operations.
    The Agency's current estimate for NCTR for fiscal year 1997 of $31.3
    million is very similar to NCTR's actual expenditures for fiscal year
    1996 of just under $31 million. The current fiscal year 1997 estimate
    reflects the current planned level of funding for NCTR and for all
    other programs.
        Again, all of these adjustments are not truly program increases or
    decreases, but adjustments to more accurately reflect the continuing
    cost in fiscal year 1997 of the level of program activities conducted
    in fiscal year 1996. However, since the fiscal year 1997 appropriation
    did not include inflationary allowances, all programs have had to
    absorb a reduction in their operating funds, and NCTR has had to absorb
    its proportionate share of this reduction. To partially compensate for
    this, the Agency did allocate an increase of $533,000 to NCTR early in
    fiscal year 1997 to absorb some of the inflation in NCTR's contract
    costs.
        Question. The agency indicates that the new line-item of $4.9
    million for the regulation of tobacco was created through a reduction
    in ``Other activities''. Please explain which line-items under ``Other
    activities'' were reduced, the impact of each reduction on the specific
    office or activity from which these funds were taken. Is the funding
    being moved from each of these ``Other activities'' that previously
    dedicated to tobacco? If not, what is the impact of the reduction being
    taken to provide increased funding for tobacco?
        Answer. Yes, the funding for fiscal year 1997 is indeed coming from
    the budgets of these same offices, and represents funding previously
    dedicated to tobacco activities. I would be happy to provide, for the
    record, a table showing the offices from where tobacco funding was
    taken in fiscal year 1997.
        [The information follows:]

                        Fiscal year 1997 current estimate

    Tobacco.................................................    +$4,914,000
    Other activities:
        Office of the Commissioner..........................     (1,422,000)
        Office of Policy....................................     (1,164,000)
        Office of External Affairs..........................       (518,000)
        Office of Operations................................       (905,000)
        Office of Management and Systems....................       (905,000)
                        --------------------------------------------------------
                        ____________________________________________________
          Total, tobacco funding............................     (4,914,000)

        Question. What is the reason for the increase in non-GSA rent and
    rent-related activities?
        Answer. The increase in the S&E Rent and Related as shown in the
    explanatory notes was based on the current estimated costs projected at
    the time the President's Budget was presented. FDA has since further
    refined its estimates, and to show the various elements of these costs
    we are providing a chart which shows actual obligations since fiscal
    year 1992 and a revised fiscal year 1997 estimate.
        [The information follows:]

                                  FIVE-YEAR HISTORY OF S&E RENT AND RELATED ACTIVITIES
                                                 [Dollars in thousands]
    ----------------------------------------------------------------------------------------------------------------
                                                                              Fiscal year--
                                                   -----------------------------------------------------------------
                                                       1992       1993       1994       1995       1996    1997 est.
    ----------------------------------------------------------------------------------------------------------------
    Commercial rent and related services..........     $5,917     $5,865     $6,544     $6,510     $6,558     $6,558
    Costs for FDA owned facilities................      3,254      3,997      4,332      4,711      5,205      5,205
    GSA rent-related services.....................      3,599      3,857      4,925      6,866      6,719      7,019
    GSA building delegation services \1\..........      5,341      5,306      3,630      3,580      3,976      5,418
                                                   -----------------------------------------------------------------
          Total, S&E rent and related.............     18,111     19,025     19,431     21,667     22,458     24,200
    ----------------------------------------------------------------------------------------------------------------
    \1\ The fiscal year 1997 estimate of $5.4 million for costs related to building delegated to FDA includes $1.4
      million for MODULE II, FDA's new Lab facility in Beltsville, MD.

        The new fiscal year 1997 estimate is based primarily on the costs
    associated with MOD II. MOD II is a state-of-the-art laboratory, built
    and owned by GSA on FDA land. FDA took occupancy of MOD II on October
    21, 1996. MOD II has recently been added by GSA to FDA's inventory of
    delegated buildings for operation and maintenance. Additional S&E
    appropriated funds are required to supplement the funds provided by GSA
    for the MOD II delegation. These funds will be used for the operation
    and maintenance of the facility above GSA's standard level 8 hour day.
    The estimated total costs associated with MOD II did not become
    apparent until after the first estimates, those used for the
    President's Budget Appendix and the explanatory notes, had been
    printed. The new estimate of $24.2 million includes $1.4 million to
    cover the costs of MOD II coming on line.
        Question. The reprogramming letter indicates that a reduction in
    the amount provided by the Committee for Orphan Product Grants, from
    $12.2 million to $11.3 million is being taken to accommodate pay cost
    increases and inflation absorbed by the agency. Why is this grant
    program being reduced to cover these costs? What other program
    reductions have been made from the fiscal year 1996 levels to cover
    pay, inflation and other mandatory cost increases in fiscal year 1997?
        Answer. FDA's budget has been at a constant level for the past
    three years. In real terms, however, the Agency's resources have
    declined as inflationary increases for pay and other operating costs
    have been absorbed by the Agency. Because of this, FDA has had to
    reduce many operating costs across most program areas. During this same
    time, the Orphan Product grant program has not been reduced. In fiscal
    year 1997, however, we have had to make the very difficult decision of
    reducing the funding for Orphan Product grants to $11.3 million, as we
    continue to absorb inflationary increases.
        Question. The agency indicated that the $12,868,000 provided by the
    Committee for Orphan Product Grants and extramurals is being reduced by
    $905,000 for tobacco, $12.010 million for SBIR and Orphan Product
    Grants, and that ``other changes'' are resulting in an increase of
    $2.131 million, for a net total of $2.084 million. Why is the Orphan
    Product Grants Program being shifted to Human Drugs?
        Answer. Grant programs that are specifically tied to certain
    program areas are generally reflected in that program area. Thus, for
    the fiscal year 1998 budget request we moved the Orphan Grants program,
    which is clearly a Human Drugs program, into that activity line. Thus,
    the total cost of the Human Drugs program is reflected under Human
    Drugs. This is consistent with the budget presentation of the
    President's budget that includes the Orphan Products program under
    Human Drugs. FDA would be happy to footnote separately in all future
    budget presentations the amount included for the Orphan Products
    program.
        Question. What specific ``other changes'' are being made resulting
    in an increase of $2.131 million for this line-item?
        Answer. Funding for the Office of Operations and administrative
    support for the Orphan Products program was moved from the Office of
    the Commissioner.
        Question. What remaining programs/activities are being funded by
    the new proposed level of $2.084 million for this line-item?
        Answer. The net $2.084 million will fund the staffs that support
    the Deputy Commissioner for Operations and administration of the Orphan
    Grants Program. This is slightly less than the $2.286 million provided
    for these activities in fiscal year 1996.
        Question. The agency has provided a table (inserted above) to the
    Committee showing the changes associated with the reprogramming letter.
    Please explain the specific changes being made to each of the line-
    items contained in the Committee report, the dollar amount of each
    increase or decrease resulting in this net change, and the reason for
    each.
        If not provided in answering the above question, please provide the
    specific reductions and/or increases producing the net change reflected
    in the ``other changes'' column for each line-item, the dollar amount,
    and the impact of each change.
        Answer. The numbers provided the Committee in the budget request
    when compared to the fiscal year 1997 Senate Report have changed due to
    a variety of factors--elimination of program management as a separate
    activity line, an unusually high fiscal year 1995 actual at the NCTR,
    the addition of tobacco as a separate program, changes in field
    workloads which caused the shifting of funds between activity areas, a
    new display for grants under the Orphan Products and Small Business
    Innovative Research programs, and a new line item under Other
    Activities for the costs of the Office of Operations and the
    administrative support for the Orphan Products program.
        The information initially provided, when the Committee
    recommendations directed the changes in mid-1996, was based on fiscal
    year 1995 actuals and any mid-year fiscal year 1996 estimates available
    at the time. We now realize that these were not good estimates of 1996
    breakouts. The differences between 1996 estimates and actuals are a
    significant part of the difference between the Committee's
    recommendation for fiscal year 1997 and our current resource estimates.
        Generally, at the start of each fiscal year, we look at how to
    manage our resources within the environment of having to absorb all
    inflationary costs associated with pay raises and other operational
    increases beyond our control, plus having to plan for unknown
    contingencies or events that may develop during the course of the year.
    We have not received funding to cover current services for the past
    three years. Because FDA is a very payroll intensive agency, we must
    first assure that our payroll costs will be met. As a result of
    inflation absorption and the need to plan for unknown circumstances, we
    reduce operating budgets through prorata agency-wide decreases--across
    the centers and the offices--at the start of the year. For fiscal year
    1997, we held back about $5 million, or one-half of one percent, for
    these potential exigencies. Throughout the course of the year, as
    events unfold, we allocate previously unallocated funds to FDA
    organizations based on priorities established by top management. This
    is the reason that we cannot provide a track of each and every dollar
    from one activity to another. The money is held back in a reserve at
    the start of the year, and is subsequently re-allocated, in many cases,
    back to the same activities.
        The resulting changes in the current fiscal year 1997 Appropriation
    column of the fiscal year 1998 Congressional Justification reflect the
    estimates at that time of the allocation of FDA resources.
        In addition, the Committee's direction for a new display of our
    resources provided us an opportunity to further streamline our budget
    presentation. We have traditionally combined funding by program which
    covered costs for the center itself, its field components, plus some
    portion of overhead. The Committee's direction required the overhead to
    be shown separately under the new Other Activities line. This greatly
    cleaned up the structure of our request, which was an advantage to us
    as well as the Committee.
        FDA seeks to provide the Committee with the best information on how
    the agency resources are and will be managed, consistent with
    congressional direction, and we will continue working with Committee
    staff to assure that our budget is understandable and consistent.
        It has been difficult to adjust to the Committee's program
    structure modifications, as directed in the Committee's Report on FDA's
    fiscal year 1997 Appropriations. The Agency regrets any confusion that
    may have been created by some of its preliminary estimates, and by the
    presentation changes made in the fiscal year 1998 President's budget
    and the subsequent reprogramming letter. The Agency has made several
    changes in its planning and budgeting systems to better manage
    according to the Committee's program structure, and we believe that
    improvement is reflected in the fact that the Agency's current
    estimates are not very different from the estimates included in the
    explanatory notes.
        Further, the Agency is planning the purchase and implementation
    during fiscal year 1997 of new software that will greatly enhance our
    ability to manage costs according to the Committee program structure,
    and the ability to plan and project future estimates. This software
    will be utilized by all components of the agency, and during the
    application design phase of the project, emphasis will be given to
    assuring that all agency costs will be reported and managed according
    to the Committee program structure.
        I would be happy to provide some additional detail for your
    information, including a detailed crosswalk table that attempts to
    bridge the gap from the fiscal year 1997 Senate Report language to the
    fiscal year 1997 column of the fiscal year 1998 President's budget,
    then to our current estimate, plus some descriptions of the reasons for
    the changes, wherever possible.
        [The information follows:]
        [GRAPHIC] [TIFF OMITTED] T01MY01.064

        Crosswalk Table Explanatory Notes:
        1. Fiscal year 1997 Committee Report.--Reflects the activity lines
    and dollars amounts found in the fiscal year 1997 Senate Subcommittee
    Report language, based on numbers from fiscal year 1995 actuals and
    mid-year fiscal year 1996 estimates.
        2. Fiscal year 1996 Actual Obligations.--Reflects actual
    obligations for fiscal year 1996 for comparison purposes. Note that
    costs for tobacco are included under Other Activities for this column,
    and that funding for the Office of Operations (and the administrative
    support for the Orphan Products Grants program) are included under the
    Office of the Commissioner. In several cases, these fiscal year 1996
    actuals were significantly different from the fiscal year 1996
    projections used by the Committee.
        Columns 3 and 4 represent corrections for changes between fiscal
    year 1996 mid-year estimates and fiscal year 1996 actuals, which
    includes field workload adjustments, as well as some forecasting and
    calculation errors we have uncovered.
        3. Restore NCTR Funding to Programs.--The reduction of $5,670,000
    in the amount planned for NCTR in fiscal year 1997 is an adjustment to
    reflect the true continuing costs of FDA's major programs. The estimate
    for NCTR furnished to the Committee in mid-1996 for inclusion in the
    report was too high because it was based on funding in fiscal year 1995
    that included significant one-time money.
        The reason for this relates to the nature of NCTR's operating
    budget, which includes a number of support service contracts. NCTR
    relies on a high level of contract support for managing its facilities,
    maintaining its animal colonies, and for many other research support
    services. In past years, toward the end of the year, FDA has redirected
    remaining funds from other programs to NCTR for its contract support.
    The Agency endeavors to keep NCTR funding at a ``base'' level necessary
    to maintain its current level of operations. The Agency's current
    estimate for NCTR for fiscal year 1997 of $31,307,000 is in line with
    NCTR's actual expenditures for fiscal year 1996 of just under
    $30,774,000, and incorporates a $533,000 increase over the fiscal year
    1996 funding level to cover increased contract costs.
        4. Changes for fiscal year 1996 Actuals with Field Adjustments.--
    This column reflects the differences between fiscal year 1996 actuals,
    including changes in field workloads, and some calculation/forecasting
    errors made in developing the budget display numbers used in the report
    language. Each year, unanticipated events and changes in workload
    affect estimates made for field activities as they relate to each
    program area. We have attempted to reflect these shifts among programs.
        The numbers developed for the Senate contained an inadvertent
    errors regarding field costs for MQSA. Funds for field activities for
    MQSA were reflected under S&E, not under user fees. For the purposes of
    this table and for consistency with previous displays, we have included
    the user fees with S&E, and plan to accurately reflect the split in
    future tables. For PDUFA under Other Activities, the $3,500,000
    reduction reflects a management decision to shift investment fund
    control for information resources back to the Centers for Drugs and
    Biologics.
        5. Fiscal year 1997 Estimated Adjustments.--Provides an adjusted
    fiscal year 1997 estimate to reflect the changes shown in columns 3 and
    4. This column is calculated by adding columns (1), (3), and (4).
    Column (5) serves as a more comparable starting point for cross-walking
    to the fiscal year 1997 column of the fiscal year 1998 Congressional
    justification.
        6. Separate funding for Office of Operations (and administrative
    support for the Orphan Product Grants program).--Reflects support costs
    for these offices, in conjunction with individual representation of
    each major office within FDA's structure.
        7. Delete Program Management.--The $6,094,000 is the remaining
    portion of field activity of what the agency formerly referred to as
    ``program management''. Since funding for all other field activities
    are reflected in the appropriate program lines, we are doing the same
    for Direct Field Management, thus eliminating Program Management as an
    activity. Costs included under direct field management consist of a
    portion of headquarters costs of the Office of Regulatory Affairs which
    manages FDA Field activities. In order to depict the total program
    costs (including all field costs), the $6,094,000 balance was
    distributed to all of the programs proportionately except NCTR and
    Other Activities, as these areas are not supported by the field.
        8. Add Tobacco Line.--The new display line for Tobacco shows a
    planned level of funding of $4,614,000 to be included in the fiscal
    year 1997 column of the fiscal year 1998 President's budget. This
    funding is derived from reductions for the various offices under
    ``Other Activities''.
        9. Move Grants to Programs (Orphan Product Grants and Extramural
    Funding).--The display in the Committee report included funding for the
    Orphan Product Grants and Small Business Innovative Research (SBIR)
    programs under Other Activities. Both of these programs are directly
    related to specific program areas, not the indirect nature of the
    funding included under Other Activities, which provides support across-
    the-board to each of the program areas. Thus, these grants are shifted
    back to the programs to which they relate: the drug-related activities
    undertaken by the Orphan Products Grants program is now under Human
    Drugs, and the device-related SBIR grants funding is now reflected in
    the Medical Devices program.
        10. Original fiscal year 1997 Column of fiscal year 1998 CJ.--This
    column represents the fiscal year 1997 column of the fiscal year 1998
    congressional justification.
        11. Adjustments from fiscal year 1997 CJ to fiscal year 1997
    Current Estimate.--Reflects adjustments made from the congressional
    justification through our current estimates for fiscal year 1997. The
    primary adjustments in this column are for increased funding for Food
    Safety in support of the President's Food Safety Initiative, and for
    Animal Drugs to implement the Animal Drug Availability Act. Also,
    increased funds are needed for Rent and Related Services for the costs
    of operating FDA's new Beltsville, MD, facility known as MODULE II.
    Funding for these initiatives was provided through pro-rated, across-
    the-board, operating reductions done at the beginning of the year.
        The adjustments reflected under Other Activities would constitute a
    reprogramming from the fiscal year 1997 Congressional Justification's
    explanatory notes. We plan to submit a reprogramming letter to the
    Committee very soon. In general, increases under Other Activities for
    the Office of the Commissioner and the Office of Policy will be offset
    by reductions in the Office of Management and Systems and Central
    Services, accommodated through continued streamlining of contract and
    other support costs, and by cost reductions paid to the DHHS Program
    Support Center and other central costs. Overall, the Other Activities
    line in our fiscal year 1997 current estimate column is slightly less
    than the amount included in the fiscal year 1998 Congressional
    Justification.
        12. Fiscal year 1997 Current Estimate.--Reflects FDA's current
    estimate for costs, by each activity line, for fiscal year 1997.
        Question. For each program area, please break down the fiscal year
    1997 and 1998 proposed levels reflected in the budget request by Center
    and related field activity.
        Answer. I would be happy to provide a table showing the splits
    between the centers and field. These dollars reflect fiscal years 1997
    and 1998 program areas as they appear in the Congressional
    Justification.
        [The information follows:]

                                              FDA S&E DIRECT APPROPRIATION
                                                 [Dollars in thousands]
    ----------------------------------------------------------------------------------------------------------------
                                                                                      Fiscal year 1998--
                                                               Current  --------------------------------------------
                            Activity                           fiscal                  Req'd      Req'd
                                                              year 1997    Freeze     tobacco      food      Total
                                                              estimate                increase   increase
    ----------------------------------------------------------------------------------------------------------------
              Centers and related field activities

    Foods..................................................   $202,639    $201,766   .........    $20,000   $221,766
        Center for Food Safety and Applied Nutrition
         (CFSAN)...........................................     83,164      82,514   .........     12,000     94,514
        Field activities...................................    119,475     119,252   .........      8,000    127,252
                                                            ========================================================
    Human drugs............................................    199,740     198,734   .........  .........    198,734
        Center for Drug Evaluation and Research (CDER) \1\.    142,186     141,487   .........  .........    141,487
        Field activities...................................     57,554      57,247   .........  .........     57,247
                                                            ========================================================
    Biologics..............................................     88,295      87,513   .........  .........     87,513
        Center for Biologics Evaluation and Research
         (CBER)............................................     75,061      74,267   .........  .........     74,267
        Field activities...................................     13,234      13,246   .........  .........     13,246
                                                            ========================================================
    Animal drugs...........................................     40,704      40,029   .........      4,000     44,029
        Center for Veterinary Medicine (CVM)...............     26,814      26,613   .........      4,000     30,613
        Field activities...................................     13,890      13,416   .........  .........     13,416
                                                            ========================================================
    Medical and radiological devices.......................    143,655     143,222   .........  .........    143,222
        Center for Devices and Radiological Health (CDRH)..    110,495     110,172   .........  .........    110,172
        Field activities...................................     33,160      33,050   .........  .........     33,050
                                                            ========================================================
    National Center for Toxicological Research (NCTR)......     31,307      31,307   .........  .........     31,307
                                                            ========================================================
                        Other activities

    Office of the Commissioner (OC)........................     12,394      12,799   .........  .........     12,799
    Tobacco................................................      4,914       4,914     $29,086  .........     34,000
    Office of Policy (OP)..................................      2,705       2,848   .........  .........      2,848
    Office of External Affairs (OEA).......................     14,659      15,079   .........  .........     15,079
    Office of Operations (OO)..............................      3,566       3,687   .........  .........      3,687
        Office of Orphan Products Development (OPD)........     (1,832)     (1,887)  .........  .........  .........
        Office of Science..................................       (675)       (696)  .........  .........  .........
    Office of Management and Systems (OMS).................     42,944      44,089   .........  .........     44,089
    FDA Central............................................      8,250       8,100   .........  .........      8,100
    Rent and related activities............................     24,200      25,885   .........  .........     25,885
                                                            ========================================================
          Total, S&E budget authority......................    819,972     819,972      29,086     24,000    873,058
    ----------------------------------------------------------------------------------------------------------------
    \1\ Amount included for orphan product grants (CDER): Current fiscal year 1997 estimate, $11,345,000; fiscal
      year 1998 freeze, $11,345,000.

        Question. What has FDA done to manage its budget within the amounts
    for each activity reflected in the Senate Committee report accompanying
    the fiscal year 1997 appropriations bill, and approved by the
    conference committee?
        Answer. Except for the items noted in the reprogramming letter
    dated April 10, 1997, we have attempted to manage within the amounts
    for each activity reflected in the fiscal year 1997 Senate Committee
    report. Generally, at the start of each fiscal year, we look at how to
    manage our resources within the environment of having to absorb all
    inflationary costs associated with pay raises and other operational
    increases beyond our control, plus having to plan for unknown
    contingencies or events that may develop during the course of the year.
    We have not received funding to cover current services for the past
    three years. Because FDA is a very payroll intensive agency, we must
    first assure that our payroll costs will be met. As a result of
    inflation absorption and the need to plan for unknown circumstances, we
    reduce operating budgets through prorata agency-wide decreases--across
    the centers and the offices--at the start of the year. For fiscal year
    1997, we held back about $5 million, or one-half of one percent, for
    these potential exigencies. Throughout the course of the year, as
    events unfold, we allocate previously unallocated funds to FDA
    organizations based on priorities established by top management. This
    is the reason that we cannot provide a track of each and every dollar
    from one activity to another. The money is held back in a reserve at
    the start of the year, and is subsequently re-allocated, in many cases,
    back to the same activities.
        The Committee's direction for a new display of our resources
    provided us an opportunity to further streamline our budget
    presentation. We have traditionally combined funding by program which
    covered costs for the center itself, its field components, plus some
    portion of overhead. The Committee's direction required the overhead to
    be shown separately under the new Other Activities line. This greatly
    clarified the structure of our request, which was an advantage to us as
    well as the Committee.
        It has been difficult to adjust to the Committee's program
    structure modifications, as directed in the Committee's Report on FDA's
    fiscal year 1997 Appropriations. The Agency regrets any confusion that
    may have been created by some of its preliminary estimates, and by the
    presentation changes made in the fiscal year 1998 President's budget
    and the subsequent reprogramming letter. The Agency has made several
    changes in its planning and budgeting systems to better manage
    according to the Committee's program structure, and we believe that
    improvement is reflected in the fact that the Agency's current
    estimates are not very different from the estimates included in the
    explanatory notes.
        Further, the Agency is planning the purchase and implementation
    during fiscal year 1997 of new software that will greatly enhance our
    ability to manage costs according to the Committee program structure,
    and the ability to plan and project future estimates. This software
    will be utilized by all components of the agency, and during the
    application design phase of the project, emphasis will be given to
    assuring that all agency costs will be reported and managed according
    to the Committee program structure.
        FDA seeks to provide the Committee with the best information on how
    the agency resources are and will be managed, consistent with
    congressional direction, and we will continue working with Committee
    staff to assure that our budget is understandable and consistent.
                             generic drug approvals
        Question. In the Conference Report that accompanied H.R. 3603
    (Report 104-726), the Appropriations Committees directed FDA to ``use
    available funds to ensure compliance with its 180 day statutory review
    period for generic drug applications.'' What steps has FDA taken to
    respond to this request? Please list the dates on which any remedial
    action was taken.
        Answer. FDA has taken a number of actions to enhance compliance
    with its 180 day statutory review period for generic drug applications.
    These actions have been taken to improve efficiencies in the
    application review process. At the end of fiscal year 1996, there was a
    backlog of 46 overdue applications, meaning abbreviated new drug
    applications, or ANDA's, pending greater than 180 days. In addition, 71
    chemistry supplements were overdue. As a reference, at the end of
    fiscal year 1995, there were 58 ANDA's and 104 supplemental
    applications overdue. Thus, FDA has substantially reduced the backlog
    of overdue applications and supplements.
        FDA has implemented new faxing and teleconference procedures, and
    has begun faxing the review/comments/deficiencies to applicants during
    this fiscal year. Additionally, for most ``minor'' issues, applicants
    will be able to submit responses via facsimile. If the fax response is
    received from an applicant within 30 days, the reviewer will then
    complete review of the application. If it is not received within 30
    days, then this would be classified as a minor amendment. Currently,
    responses to minor amendments are placed in a queue and reviewed within
    60 days.
        In fiscal year 1996, FDA also implemented a procedure for public
    release of bioequivalence protocols and protocol reviews. It is
    anticipated that by providing public access to this information, there
    will be fewer protocols submitted for review, thus decreasing the
    Division's protocol workload and allowing more time to be spent on
    application reviews. By releasing the first protocol for a drug, FDA no
    longer has to review duplicative protocols thereby freeing up more
    resources to conduct timely reviews.
        Also, FDA initiated a procedure to contact applicants that undergo
    two or more major deficiency cycles during the review process.
    Applicants are requested to contact FDA for discussion or clarification
    regarding the deficiencies. If FDA is not contacted, the Office will
    call the applicant within 30 days to see if any further discussion, or
    perhaps a meeting, is necessary. It is hoped that this interaction will
    prevent additional major deficiency cycles and shorten total time to
    approval.
        In 1996, FDA's Office of Generic Drugs, or OGD, hired a medical
    officer to improve timeliness of reviews of ANDA's with bioequivalence
    studies with clinical endpoints. In the past, these complicated studies
    were referred to the Office of Review Management for review, and then
    returned to the OGD for final processing after completion of the
    scientific review.
        The Office of Generic Drugs has implemented its program for
    electronic submission of bioequivalence data. The program was developed
    under contract with the University of Maryland. Under the program,
    applicants that choose to may prepare electronic submissions on
    diskette with the aid of a user-friendly program call Entry and
    Validation Program. The program is expected to have a very positive
    impact on the efficiency of reviews, ultimately reducing review times.
        Question. In your opinion, why is FDA exceeding the statutory
    requirement that Abbreviated New Drug Application (ANDA) be reviewed in
    180 days?
        Answer. Staffing reductions coupled with an increased number of
    submissions of original applications have had a significant detrimental
    impact on review times.
        Question. Since 1990, what have been the mean and median review
    times for New Drug Applications, ANDA's and ANDA supplements?
        Answer. I will be happy to provide this information for the record.
        [The information follows:]

    ----------------------------------------------------------------------------------------------------------------
                                                            NDA's                ANDA's           ANDA supplements
                      Fiscal year                  -----------------------------------------------------------------
                                                       Mean      Median      Mean      Median      Mean      Median
    ----------------------------------------------------------------------------------------------------------------
    1990..........................................       31.7       23.8       25.0       23.0        N/A        N/A
    1991..........................................       29.2       24.2       36.3       32.7        N/A        N/A
    1992..........................................       30.0       24.2       35.4       34.5        N/A        N/A
    1993..........................................       34.3       26.8       40.4       39.7        N/A        N/A
    1994..........................................       27.3       20.8       29.4       24.4        N/A        N/A
    1995..........................................       25.7       18.7       35.3       28.2        N/A        N/A
    1996..........................................       19.6       15.0       33.2       24.7        N/A        N/A
    ----------------------------------------------------------------------------------------------------------------

        Question. List the ANDA's that are currently being delayed because
    of an outstanding scientific or regulatory bioequivalence issue, and
    provide the mean time the application has been pending before FDA.
        Answer. FDA is not permitted to specifically discuss pending
    applications. However, the types of drug products that may take longer
    to approve are nonsystemically absorbed drug products that require more
    extensive bioequivalence testing and others that raise especially
    complex scientific issues.
        Question. Since 1990, what has been the mean and median review
    cycle in months for ANDA's and ANDA supplements?
        Answer. I will be happy to provide this information for the record.
        [The information follows:]

                              REVIEW CYCLE TIMES (MONTHS) FOR ANDA'S AND AADA'S \1\ \2\ \3\
    ----------------------------------------------------------------------------------------------------------------
                                                                          Originals           Supplement median \4\
                                                                 --------------------------            \5\
                                Year                                                       -------------------------
                                                                      Mean        Median       Major        Minor
    ----------------------------------------------------------------------------------------------------------------
    OCT 89......................................................          6.7          6.7          6.2  ...........
    NOV 89......................................................          7.5          7.6          6.4  ...........
    DEC 89......................................................          8.6          8.1          6.6  ...........
    JAN 90......................................................          8.9          8.4          6.1  ...........
    FEB 90......................................................          9.2          8.9          7.8  ...........
    MAR 90......................................................          9.0          8.9          8.0  ...........
    APR 90......................................................          9.9          9.4          8.1  ...........
    MAY 90......................................................         10.1          9.9          8.8  ...........
    JUNE 90.....................................................         10.2         11.1          9.3  ...........
    JUL 90......................................................         12.6         11.5         10.4  ...........
    AUG 90......................................................         11.9         12.4         11.1  ...........
    SEP 90......................................................         13.9         13.7         12.4  ...........
    OCT 90......................................................         12.2         11.8         12.8  ...........
    NOV 90......................................................         15.6         13.8         13.3  ...........
    DEC 90......................................................         14.9         14.6         12.3  ...........
    JAN 91......................................................         13.0         12.9         11.4  ...........
    FEB 91......................................................         12.6         13.5         14.4  ...........
    MAR 91......................................................         12.6         13.2         12.1  ...........
    APR 91......................................................         14.6         13.3         12.9  ...........
    MAY 91......................................................         13.9         12.4          9.3  ...........
    JUN 91......................................................         12.7         12.7         12.3  ...........
    JULY 91.....................................................         12.0         12.0         11.1          0.7
    AUG 91......................................................         11.8         10.9         13.0          0.8
    SEP 91......................................................         12.2          9.3         12.2          1.5
    OCT 91......................................................         12.5          9.6         10.7          2.1
    NOV 91......................................................          9.7          7.9         13.1          1.2
    DEC 91......................................................         12.0          9.1         14.7          1.7
    JAN 92......................................................         10.9          8.5         11.1          1.2
    FEB 92......................................................         11.3          9.1          9.9          1.2
    MAR 92......................................................          9.3          7.1         12.3          1.3
    APR 92......................................................          8.7          7.2          9.9          1.3
    MAY 92......................................................          7.8          5.4         11.1          1.8
    JUN 92......................................................          7.8          5.8          6.2          1.5
    JUL 92......................................................          6.6          4.6          6.6          1.1
    AUG 92......................................................          5.8          3.8          5.7          1.4
    SEP 92......................................................          6.8          4.7          5.9          1.5
    OCT 92......................................................          5.2          4.4          5.5          1.3
    NOV 92......................................................          4.3          4.2          5.1          1.5
    DEC 92......................................................          5.1          4.8          5.2          1.4
    JAN 93......................................................          6.1          4.9          4.9          1.6
    FEB 93......................................................          6.0          5.4          5.9          1.2
    MAR 93......................................................          5.0          4.7          4.8          1.5
    APR 93......................................................          5.3          4.9          5.2          1.5
    MAY 93......................................................          4.8          4.7          4.4          1.4
    JUN 93......................................................          4.9          4.9          5.1          1.8
    JULY 93.....................................................          5.3          4.9          4.9          2.0
    AUG 93......................................................          5.5          5.0          4.1          1.2
    SEP 93......................................................          7.3          5.2          4.7          1.4
    OCT 93......................................................          5.2          5.2          4.7          2.0
    NOV 93......................................................          7.1          5.3          4.5          1.6
    DEC 93......................................................          5.5          5.1          4.2          1.4
    JAN 94......................................................          5.6          5.1          4.7          2.0
    FEB 94......................................................          7.0          6.0          6.2          2.5
    MAR 94......................................................          5.2          4.9          5.4          1.4
    APR 94......................................................          5.9          5.6          5.2          1.4
    MAY 94......................................................          4.9          4.8          3.7          0.9
    JUN 94......................................................          6.4          4.9          4.4          1.2
    JULY 94.....................................................          4.5          4.3          4.0          1.1
    AUG 94......................................................          5.3          4.8          4.3          1.8
    SEP 94......................................................          4.5          3.8          3.9          0.9
    OCT 94......................................................          5.2          4.5          4.1          1.5
    NOV 94......................................................          4.9          4.7          3.8          1.8
    DEC 94......................................................          5.6          4.8          4.3          1.2
    JAN 95......................................................          5.4          5.4          4.8          2.0
    FEB 95......................................................          5.1          4.9          4.8          1.2
    MAR 95......................................................          4.9          5.0          4.3          1.1
    APR 95......................................................          5.6          5.0          5.8          1.3
    MAY 95......................................................          5.5          5.4          4.8          1.4
    JUN 95......................................................          5.2          5.1          4.6          1.6
    JULY 95.....................................................          5.6          5.4          4.4          0.9
    AUG 95......................................................          5.1          5.4          4.6          1.8
    SEP 95......................................................          5.6          5.8          4.6          1.2
    OCT 95......................................................          5.9          5.7          5.7          1.6
    NOV 95......................................................          6.5          6.6          5.6          2.2
    DEC 95......................................................          6.4          6.3          4.9          1.0
    JAN 96......................................................          6.5          6.4          5.6          2.0
    FEB 96......................................................          6.6          6.7          6.5          1.6
    MAR 96......................................................          7.0          6.9          5.2          1.2
    APR 96......................................................          6.3          6.4          4.9          1.6
    MAY 96......................................................          6.3          6.1          5.2          1.4
    JUN 96......................................................          5.5          5.1          4.2          1.5
    JULY 96.....................................................          5.8          6.0          5.1          1.6
    AUG 96......................................................          5.1          5.1          4.7          1.5
    SEP 96......................................................          5.1          5.2          4.4          2.3
    OCT 96......................................................          5.4          5.5          5.3          1.2
    NOV 96......................................................          5.7          6.1          5.0          1.6
    DEC 96......................................................          5.7          5.9          4.9          1.6

    JAN 97......................................................          5.9          5.7          5.1          1.8
    FEB 97......................................................          5.6          5.1          4.8          1.2
    ----------------------------------------------------------------------------------------------------------------
    \1\ Amendments for both originals and supplements are counted under the review cycle times.
    \2\ Times correspond to actual applications received. The new ANDA/AADA submission policy that went into effect
      1/1/91 allows certain variations in a drug product to be included in a single application.
    \3\ In September 1991, the OGD started implementation of the Application Integrity Policy by suspending review
      of applications suspected of being tainted by fraud. AIP time has been subtracted from review time above for
      the period after 9/91. However, before the AIP went into effect, the review of many applications suspected of
      containing fraudulent data were suspended. These suspensions were not recorded in the MIS and are not
      reflected in the above chart.
    \4\ Mean supplement review cycle times are not captured by the Office of Generic Drugs.
    \5\ Median supplement review times are broken out by major and minor reviews (starting in July 1992). An
      amendment to a supplement may be classified as minor when an experienced review chemist can reasonably be
      expected to take less than one hour to complete the review. Major amendments are all other reviews of
      amendments to supplements.

        Question. Since 1990, what have been the mean and median review
    times for consults sent from the Office of Generic Drugs (OGD) to the
    New Drug Division?
        Answer. The Office of Generic Drugs--OGD--does not calculate the
    mean and median review times for consults sent to the Office of Review
    Management--ORM. However, it can be safely stated that many consults
    take months to well over a year to be returned to OGD. Upon return of
    the consults, OGD must still review ORM's comments and prepare a
    deficiency letter, if applicable, for the applicant. In the fall of
    1996, OGD hired a medical officer to improve the timeliness of reviews
    of abbreviated new drug applications that include bioequivalence
    studies with clinical endpoints.
        Question. How many ANDA's and ANDA supplements has FDA received
    each year since 1990?
        Answer. I will be happy to provide this information for the record.
        [The information follows:]

    ------------------------------------------------------------------------
                                                                   ANDA
                   Fiscal year                   ANDA/AADA      supplements
                                                 received        received
    ------------------------------------------------------------------------
    1990....................................             352           3,946
    1991....................................             300           2,632
    1992....................................             339           3,117
    1993....................................             308           3,506
    1994....................................             332           2,528
    1995....................................             404           2,694
    1996....................................             378           2,521
    ------------------------------------------------------------------------

        Question. How many ANDA's and ANDA supplements has FDA approved
    each year since 1990?
        Answer. I will be happy to provide this information for the record.
        [The information follows:]

    ------------------------------------------------------------------------
                                                                   ANDA
                   Fiscal year                   ANDA/AADA      supplements
                                                 approved        approved
    ------------------------------------------------------------------------
    1990....................................              73           2,489
    1991....................................         \1\ 141           3,413
    1992....................................             239           3,470
    1993....................................             215           2,635
    1994....................................             255           2,486
    1995....................................             288           2,466
    1996....................................             340           2,730
    ------------------------------------------------------------------------
    \1\ In 1991, there were 141 approvals and 4 tentative approvals. The
      tentative approvals were counted previously and should not have been
      included in the count.

        Question. Since 1990, what have been the annual FTE ceilings at OGD
    and the number of personnel on board? Please break out these figures by
    category, e.g., chemistry reviewers, bioequivalence reviewers, etc.
        Answer. I will be happy to provide this information for the record.
        [The information follows:]

                                                 OFFICE OF GENERIC DRUGS
    ----------------------------------------------------------------------------------------------------------------
                                                Program   Chemistry  Bioequivalence   Labeling                FTE
                   Fiscal year                  FTE \1\   reviewers     reviewers    reviewers   On board   ceiling
    ----------------------------------------------------------------------------------------------------------------
    1990.....................................         41         33            28            7        109        121
    1991.....................................         56         42            28            8        134        132
    1992.....................................         57         53            30           10        150        150
    1993.....................................         62         51            28            8        149        155
    1994.....................................         60         50            26            9        145        155
    1995.....................................         59         50            26            8        143        144
    1996.....................................         35         48            25           10        118    \2\ 125
    ----------------------------------------------------------------------------------------------------------------
    \1\ Program FTE include laboratory and management staff, part-time employees, summer students and non-reviewing
      supervisors and scientists.
    \2\ The reduction in OGD's FTE ceiling from 155 to 125 includes two components. Approximately 16 FTE do not
      represent true reductions in the core review functions of the office, as these positions were transferred to
      the Office of Testing and Research (OTR) and the immediate staff of the Office of Pharmaceutical Science.
      These transfers were part of an overall reorganization of the Center, intended to make the best possible use
      of limited resources. The FTE transferred to OTR are still devoted to product quality research and performing
      the same product quality testing function as when they were part of OGD. The additional cut of 14 FTE that
      existed in the OGD in 1994 represent one of many examples of the agency's efforts to comply with directives to
      reduce the number of federal employees.

        Question. Since 1990, what have been the annual salary outlays for
    program FTE's, primary reviewers, and total program outlays for OGD?
        Answer. I will be happy to provide the average salaries for program
    FTE and primary reviewers for OGD.
        [The information follows:]

                                                 OFFICE OF GENERIC DRUGS
    ----------------------------------------------------------------------------------------------------------------
                                                                                                        Total est.
                                                                                          Primary        costs \1\
                               Fiscal year                              Program FTE      reviewers       (salary/
                                                                                                         outlays)
    ----------------------------------------------------------------------------------------------------------------
    1990............................................................      $2,006,879      $3,286,598      $5,293,477
    1991............................................................       3,394,704       4,595,226       7,989,930
    1992............................................................       3,638,505       5,908,980       9,547,485
    1993............................................................       4,090,543       5,688,643       9,779,186
    1994............................................................       4,151,055       5,867,594      10,018,649
    1995............................................................       4,187,318       5,953,800      10,141,118
    1996............................................................       2,609,843       6,195,479       8,805,322
    ----------------------------------------------------------------------------------------------------------------
    \1\ Based on average salary data.

        Question. FDA has a number of responsibilities that the Food, Drug,
    and Cosmetic Act requires be completed within a specific time frame,
    including the obligation to review ANDA's within 180 days. Other FDA
    duties may be important; however, they are not mandated by a statutory
    schedule.
        Administrative support office activities are less likely to be
    subject to a statutory schedule. There are a number of administrative
    offices at FDA including the Office of the Commissioner, the Office of
    Policy, the Office of External Affairs, and the Office of Management
    and Systems. The fiscal year 1997 Program Level Appropriation for these
    offices was $85.41 million and 954 FTE.
        FDA has estimated that an additional $13 million in annual funding
    above the fiscal year 1997 funding level would enable OGD to approve 90
    percent of ANDA's within 180 days. These funds would permit the
    addition of 92 FTE in OGD and related offices.
        Why couldn't FDA fully fund an effective ANDA review program by
    retaining the present level of funding in OGD and transferring
    approximately 15 percent of the resources from the above listed
    administrative offices, or $13 million, to OGD?
        Answer. The $18 million in user fees requested for generic drugs in
    FDA's fiscal year 1998 budget request is necessary to maintain the
    current resource level in the generic drug program. This $18 million in
    user fees does not reflect an increase in funding in this area, and
    should not be construed to be program enhancement funds. If the user
    fees requested in this and other critical program areas are not
    approved, and the existing base resources are not restored, the cuts
    will be felt across each program area of FDA. At this point in time, I
    cannot say with any degree of certainty where specific cuts would be
    taken, but given the magnitude of the potential reduction, I can safely
    say that review times and backlogs for all FDA-related products would
    increase substantially. FDA's ability to fulfill its mission of
    protecting and promoting the health of the American public would be
    seriously undermined. Decreasing the funding available for
    administrative functions would be expected to reduce the agency's
    operating efficiency, which would adversely affect a variety of
    programs, including ANDA review.
        Question. Describe in detail any additional funds you believe would
    be necessary to review 90 percent of ANDA's in 180 days. Please list
    the additional FTE's that you would add, break out these FTE's by
    category, and list where they would be assigned in the agency.
        Answer. The budget provides a reasonable level of resources for
    FDA. As we continue to make productivity enhancements, we can review a
    greater percentage within 180 days. In an attempt to identify an answer
    to your specific question, in a preliminary survey, FDA estimates that
    approximately $12.8 million and 85 FTE per year could be used to
    further enhance the current drug evaluation activities such as the
    review of original ANDA's/AADA's and chemistry supplements within 180
    days, the reduction of overall approval times through a reduction in
    review cycles.
        This $12.8 million can be further broken down: Initial, one-time
    start-up costs of furniture, computer and other equipment, and
    recruitment would be about $2.1 million, or $530,300 per year spread
    over four years. The annual increase in the operating costs of the
    generic drugs program, including research, operations, and
    infrastructure, would be about $4.1 million. Thus, the total annual
    costs to be covered by generic user fees, including the start-up costs
    for the first four years of $530,300, the annual increase in operating
    costs of $4.1 million, and increased salaries of $8.2 million would be
    approximately $12.8 million.
        The increase of 85 FTE would be distributed as follows: OGD (70),
    other CDER offices (7), and the Agency (8).
        Question. The International Committee on Harmonization (ICH), which
    includes the U.S., European Union countries, and Japan, has been
    meeting to seek agreement on standards for clinical trials and other
    related issues. Please provide the employee title and days on travel
    for FDA employees who have attended ICH conferences since 1990. In
    addition, provide a dollar figure for out-of-pocket expenses and salary
    costs attributable to ICH since 1990.
        Answer. The International Conference on Harmonization of Technical
    Requirements for the Registration of Pharmaceuticals for Human Use,
    ICH, is a unique project that brings together the regulatory
    authorities of the European Union, Japan and the United States and
    experts from the pharmaceutical industry in the three regions to
    discuss scientific and technical aspects of new product registration.
        Since commencing work in 1990, ICH has made recommendations and
    developed guidelines with the purpose of achieving greater
    harmonization in the requirements for registration of new medicines, in
    order to reduce or obviate the need to duplicate the testing carried
    out during the research and development and ensure a more economical
    use of material, animal and human resources. An overall objective is
    the elimination of unnecessary delay in the global development and
    availability of new medicines while maintaining safeguards on quality,
    safety and efficacy, and regulatory obligations to protect public
    health.
        Harmonization under ICH involves the European Union, Japan and the
    United States, with the assistance of observers from WHO, EFTA and
    Canada. The six co-sponsors of ICH are: the European Union, the U.S.
    Food and Drug Administration, the Japanese Ministry of Health and
    Welfare, together with the pharmaceutical industry, represented by the
    European Federation of Pharmaceutical Industries' Associations, the
    Japan Pharmaceutical Manufacturers Association, and the Pharmaceutical
    Research and Manufacturers of America. In addition, the International
    Federation of Pharmaceutical Manufacturers Associations participates as
    an `umbrella' organization for the pharmaceutical industry, and
    provides the ICH Secretariat.
        The Steering Committee appoints joint industry/regulatory Expert
    Working Groups to deliberate on technical aspects of harmonization.
    Topics were originally selected under three main subject areas,
    ``Quality'', ``Safety'', and Efficacy'', but in 1994, the scope was
    extended into multi-disciplinary topics concerned with ``Regulatory
    Communications.'' ICH has developed more than 40 technical guidelines,
    and virtually all of these will be finalized by July 1997. These
    guidelines on technical requirements for drug submissions are intended
    to form the basis for allowing a single application to be submitted in
    each of the three regions. ICH is studying a topic proposed for the
    future intended to harmonize the content and format of drug submissions
    in the three regions. This would allow the goal of a single ``global
    dossier'' or ``common technical document'' to be realized. The work of
    ICH is coordinated and reviewed at large conferences held in two year
    intervals. The first large conference, ICH 1, was held in 1991 in
    Brussels, Belgium. The second conference, ICH 2, was held in 1993 in
    Orlando, Florida, and the third conference, ICH 3, was held in 1995 in
    Yokohama, Japan. The next large conference is scheduled for July 1997
    in Brussels.
        There are many ICH activities which support the development of the
    ICH guidelines, including meetings of the technical expert working
    groups and the ICH Steering Committee. I would be happy to provide a
    list of the attendees and the dates of the ICH conferences, along with
    the data related to the travel and salary and benefits costs directly
    related to these conferences, for the record.
        [The information follows:]
    ICH 1--Brussels, Belgium--November 5--7, 1991
    Travel Costs: $17,340
    Salary and Benefits Costs: $10,883
    FDA Attendee Titles:
        Associate Director for Research and Regulatory Coordination, CBER
        Supervisory Chemist, Division of Neuropharmacological Drug
                Products, CDER
        Assistant Director (Chemistry), Office of Drug Evaluation I, CDER
        Assistant Director, Pharmacology/Toxicology, CBER
        Deputy Director, Medical Affairs, CDER
        Director, Office of Drug Evaluation II, CDER
        Acting Deputy Director, CBER
        Director, Office of Drug Evaluation I, CDER
        Director, Division Of Scientific Investigations, Office of
                Compliance, CDER
        Director, CDER
        Director, Office of International Affairs, Office of the
                Commissioner, FDA
    ICH 2--Orlando, FL--October 27-29, 1993
    Travel Costs: $55,205
    Salary and Benefits Costs: $48,879
    FDA Attendee Titles:
        Director, Office of Drug Evaluation II, CDER
        Supervisory Chemist, Office of Drug Evaluation I, CDER
        Assistant Director, Pharmacology/Toxicity, CBER
        Director, Office of Generic Drugs, CDER
        Acting Deputy Director, Office of Research Resources, CDER
        Supervisory Pharmacologist, Office of Oncology and Pulmonary Drug
                Products, CDER
        Associate Director for Medical and International Affairs, CBER
        Associate Director (Chemistry), Office of Drug Evaluation I, CDER
        Director, Division of Anti-Infective Drug Products, CDER
        Director, CDER
        Associate Director for Research, CBER
        ICH Coordinator, FDA
        Supervisory Pharmacologist, Office of Drug Evaluation I, CDER
        Director, Office of Drug Evaluation I, CDER
        Special Assistant to the Director for International Harmonization,
                CDER
        Associate Director for Chemistry, CDER
        Supervisor, FDA
        Director, Division of New Drug Chemistry I, CDER
        Supervisory Research Biologist, FDA
        Supervisory Consumer Safety Officer, FDA
        Director, Office of International Affairs, FDA
        Deputy Center Director, CBER
        Chemist, CDER
        Supervisory Chemist, FDA
        Administrative Technician, FDA
        Representative, FDA
        Deputy Director, Office of New Drug Chemistry, CDER
        Deputy Associate Commissioner for Health Affairs, FDA
        Chemist, CDER
        Consumer Affairs Specialist, FDA
        Public Affairs Specialist, FDA
        Analyst, Office of Policy, Office of the Commissioner, FDA
        Director, Division Of Scientific Investigations, Office of
                Compliance, CDER
        Medical Officer, FDA
        Deputy Director, Division of Scientific Investigations, CDER
        Associate Commissioner for Health Affairs, FDA
        Director, Division of Biometrics, CDER
        Chemist, FDA
        Staff Specialist, FDA
        Supervisory Chemist, FDA
        Chemist, FDA
        Toxicologist, Division of Toxicology and Environmental Sciences,
                CVM
        Supervisory Medical, FDA
        Senior Regulatory, FDA
        Special Assistant to the Director, Center for Veterinary Medicine
        Chemist, FDA
        Special Assistant to the Director, CDER
        Assistant to the ICH Coordinator
        Consultant, FDA
        Visiting Scientist, FDA
        Supervisory Chemist, FDA
        Director, Office of Therapeutics Research and Review, CDER
    ICH 3--Yokohama, Japan--November 27-December 1, 1995
    Travel Costs: $218,447
    Salary and Benefits Costs: $67,461
    FDA Attendee Titles:
        Associate Director, Science and Medical Affairs, CDER
        Associate Director for Medical and International Affairs, CBER
        ICH Coordinator, FDA
        Director, Division of Biometrics, CDER
        Director, Office of Drug Evaluation I, CDER
        Medical Officer, Division of Scientific Investigations, CDER
        Supervisory Medical Officer, Div. of Metabolism and Endocrine Drug
                Products, CDER
        Program Manager, Standardized Nomenclature Program, Office of
                Management Systems
        Assistant Director for Pharmacology/Toxicity, CBER
        Toxicologist, Division of Toxicology and Environmental Sciences,
                CVM
        Director of Strategic Systems Planning Group, Office of the
                Commissioner
        Medical Officer, Division of Clinical Trial Design and Analysis,
                CBER
        Supervisory Pharmacologist, Div. of Oncology and Pulmonary Drug
                Products, CDER
        Supervisory Chemist, Div. Of Medical and Surgical and Dental Drug
                Products, CDER
        Division of Biostatistics and Epidemiology, CBER
        Director, Division of Antiviral Drug Products, ODE II, CDER
        Deputy Director, Division of Scientific Investigations, CDER
        Deputy Commissioner for External Affairs, FDA
        Special Assistant to the Deputy Director of Pharmaceutical Science,
                CDER
        Supervisory Consumer Safety Officer, FDA
        Director, Center for Biologics Evaluation and Research
        Associate Director for Policy, CDER
        Consumer Safety Officer, FDA
        Director, Division of Clinical Trial Design and Analysis, CBER
        Nurse Clinician, CDER
        Associate Director for Research, CBER
        Review Chemist, Division of Chemistry II, Office of Generic Drugs,
                CDER
        Microbiologist, CBER
        Director, Division of New Drug Chemistry I, CDER
        Supervisory Chemist, FDA
        Associate Director for Pharmacology and Toxicology, CDER
        Supervisory Research Biologist, FDA
        Contractor, FDA
        Director, Division of Reproductive and Urologic Drug Products, CDER
        Expert in Telecommunications and Electronic Data Transmission, OC

        Question. The Transatlantic Business Dialogue (TABD) is a group of
    U.S. companies that advocate a wide variety of positions on
    international trade issues. The generic pharmaceutical industry is not
    represented in the TABD.
        The TABD recommends overturning the Bolar provisions of the 1984
    Drug Price Competition and Patent Term Restoration Act (popularly known
    as the Hatch Waxman Act), which are critical to the availability of
    generic pharmaceutical products in the United States.
        How many FDA dollars and days in travel have been spent by FDA
    employees to attend TABD conferences since 1990?
        Answer. TABD is composed of both U.S. and European industry
    representatives. The issues, agendas, participation, and pronouncements
    of the TABD are all controlled by and represented to be the products of
    the industry participants in the TABD. FDA has had no interaction with
    the Transatlantic Business Dialogue, TABD, regarding their position on
    the Bolar Amendment. FDA representatives have attended TABD meetings to
    explain the Agency's position regarding the U.S.-EU negotiations toward
    Mutual Recognition Agreements in the pharmaceutical and medical device
    sectors.
        In 1995 FDA expended 12 staff days, including the Veterans Day
    weekend, to send three people to Seville, Spain, at a cost of $7,400.
    In 1996, the expenditure was 16 staff days, with one person attending a
    mid-year meeting in Brussels, Belgium, at a cost of $2,100, and three
    people representing FDA at the TABD conference in Chicago, at a cost of
    $1,400. So far in 1997, four staff days and $2,100 have been expended
    for an FDA representative to attend a TABD Biotechnology Working Group
    in Brussels.
                                 eximer lasers
        Question. On October 10, 1996, the FDA announced an amnesty policy
    that allows users of illegal eximer lasers (used in eye surgery), which
    are classified as Class III significant risk devices, to come into
    compliance with FDA regulations governing the use of those medical
    devices. Users or manufacturers of these lasers were given until
    January 15, 1997, to submit an Investigational Device Exemption (IDE)
    application to the FDA, or to submit a certification (for reimported
    lasers) that the laser is identical in all relevant aspects to approved
    lasers. To date, how many IDE applications has the Agency received?
        Answer. The Agency has received 15 IDE applications from owners of
    unapproved excimer lasers for refractive surgery.
        Question. How many IDE applications have been approved?
        Answer. The agency has conditionally approved eight IDE
    applications for refractive surgery. The conditions for approval
    include limiting the number of patients as well as the refractive
    indications. Six of the IDE applications were disapproved and one is
    currently under review.
        Question. What options are available to physicians or manufacturers
    who submit an IDE that is not adequate according to FDA regulations?
        Answer. The physician or manufacturer cannot use their laser until
    they have received approval for their IDE. Submitters of an IDE that is
    disapproved have several options. The applicant can respond to the
    deficiencies cited in the disapproval letter and resubmit their
    application. In the applicant's deficiency letter a contact person is
    named for any questions the applicant may have in responding to the
    deficiencies. The Office of Device Evaluation also has an interactive
    review process in place for IDE submitters and urges frequent
    communication with the regulated industry during the review process in
    order to clarify ambiguities or remedy deficient information prior to
    completing the review.
        In addition, it is our understanding from the industry that an
    applicant can trade-in their unapproved device for a legally marketed
    VISX, Inc. or SUMMIT Technology, Inc. device.
        Question. How many certifications has the Agency received? How many
    of these certifications has the Agency accepted?
        Answer. The Agency has received 13 certifications for reimported
    lasers. Of these, two certifications for reimported lasers manufactured
    by Summit Technology Inc. were accepted as complete. A small number of
    certifications are under consideration.
        Question. For certifications not accepted, what course of action
    must the applicant take?
        Answer. Certifications were deemed to be inadequate if the
    certification did not demonstrate that the laser was an approved laser.
    Thus, the owner of such an unapproved laser may only use the laser if
    the device has in effect an approved IDE or an approved PMA. Applicants
    whose certification was not accepted have the option of submitting IDE
    applications for clinical trials for their devices to obtain clinical
    data on the safety and effectiveness of the devices. In addition, the
    applicant may seek approval of the PMA, if the applicant has all of the
    necessary data and information.
        Question. Has a limit been placed on the number of eyes that can be
    treated under each IDE application?
        Answer. Yes, there is a limit on the number of eyes that can be
    treated under an IDE application. All IDE studies, including any IDE
    studies approved for excimer lasers, have a limited number of subjects
    and sites based on the scientific hypotheses being studied by the
    applicant and on statistical considerations. The typical study design
    for this device has between 300-400 subjects per type of visual
    correction or indication being studied.
        The October 10, 1996, letter announcing the FDA's amnesty and IDE
    policy, indicates that: ``The grace period does not apply to
    individuals who have received Warning Letters or other regulatory
    communications from the FDA or who are importers of lasers currently
    under detention.''
        Question. How many warning letters or other regulatory
    communications were sent to manufacturers or physicians who are using
    unapproved (black box) lasers? How many were sent to importers of
    lasers currently under detention?
        Answer. FDA has issued four Warning Letters, or WL's, and four
    untitled letters, or UTL's, to black box users; and two WL's to
    manufacturers of black box lasers. Additionally, the Agency has issued
    5 WL's as well as 1 UTL to users of gray market lasers.
        Question. It has been over five months since the Agency sent the
    October letter. What action has the Agency taken against those who have
    received Warning Letters or other regulatory communications? What
    action will be taken against these individuals?
        Answer. FDA is conducting numerous investigations in the field
    involving manufacturers and owners of unapproved excimer lasers. The
    Agency anticipates that at least some of these investigations will lead
    to enforcement actions, including seizure, injunction and or civil
    penalty.
        Question. Has anyone been injured with an unapproved, illegal
    laser?
        Answer. The Agency has received allegations of injuries, and is
    currently looking into these allegations.
        Question. How much longer will the Agency allow the users of these
    illegal lasers to remain in non-compliance with FDA regulations?
        Answer. The Agency has been working with the physician community to
    bring these users into compliance. Initially, the physicians did not
    have an understanding of their responsibilities under the device law,
    and we waited to give them time to understand and to avail themselves
    of the IDE or Certification process. Additionally, we were exploring
    and evaluating our legal authority to regulate physicians and sort out
    complex issues such as regulation of custom devices. At this point, the
    Agency believes that unapproved lasers that are not under IDE should be
    subject to regulatory action, and we are vigorously pursuing that end.
        Question. The Food, Drug, and Cosmetic Act places a strict ban
    against advertising or otherwise promoting the off-label use of drugs
    and medical devices. I have been told that numerous physicians around
    the country are actively promoting unapproved laser vision correction
    procedures, that the Agency is aware of these advertising abuses, and
    in fact has in its possession copies of many of these advertisements
    and infomercials. Is this true, and, if so, why has the FDA not taken
    enforcement action against the clear violation of the prohibition on
    advertising or promoting unapproved procedures?
        Answer. FDA has long maintained that off-label use of an approved
    device without advertising is within the realm of the practice of
    medicine and the Agency has not exercised its enforcement discretion in
    this area. However, the Food, Drug, and Cosmetic Act prohibits the
    advertising and promotion of off-label use of devices. FDA is aware
    that some physicians are advertising unapproved refractive procedures
    using excimer lasers. The Agency believes that the overriding concern
    from a public health perspective is the use of an unapproved laser.
    Thus, FDA is vigorously following up on the use of unapproved lasers.
        Question. Does the Agency plan to take action, and if so, when?
        Answer. We are vigorously following up on the use of unapproved
    lasers. When we become aware that they are in fact advertising and
    using an unapproved laser, the overriding issue is the use, not the
    advertisement, of an unapproved laser. FDA intends to take enforcement
    action in this area in the near future.
        Question. What resources has the Agency put in place to assure that
    these physician IDE sites are in compliance with FDA regulations and
    that they receive adequate oversight to protect the public?
        Answer. Staff from FDA's Office of Compliance, Office of Device
    Evaluation, and Office of Regulatory Affairs are working together to
    assure that physician IDE sites are in compliance with FDA regulations
    and that they receive adequate oversight to protect the public. Actions
    that are being taken include inspections of sights to determine
    compliance. Further action will be taken against sights that are found
    to be out of compliance, including withdrawal of IDE's and possible
    seizure of the unapproved devices.
                              radiopharmaceuticals
        Question. Why does the FDA on average take 29.8 months to review a
    radiopharmaceutical NDA submission given their high level of safety as
    measured by the incidence rate for adverse reactions?
        Answer. In the past, we had a backlog of applications for
    radiopharmaceutical drugs. For example, two applications in the fiscal
    year 1994 submission cohort were overdue when acted upon, because we
    were working to reduce an existing backlog including those for
    radiopharmaceuticals. The backlog has now been eliminated and we are
    now reviewing applications according to the PDUFA time frames.
    Regarding the effect of the safety record of radiopharmaceuticals, a
    historically good safety record of a broad class of drugs does not
    eliminate the need to thoroughly review each member of the class and
    ensure it is safe and effective. As our current results demonstrate, we
    are able to provide a thorough and careful review and still meet our
    PDUFA goals.
        Question. Is there a reason why the review times for
    radiopharmaceuticals have not improved under PDUFA, even while FDA has
    shown improvement in the time it takes to review drugs in general?
        Answer. Review times under PDUFA have improved quite dramatically
    for drugs in general and for radiopharmaceutical in particular. Because
    the FDA's focus was to eliminate the pre-PDUFA backlog before
    concentrating on applications filed more recently, the overdue rate for
    that division's 1994 submission cohort under PDUFA was 100 percent. For
    the 1995 submission cohort, the overdue rate for NDA's was zero--a
    substantial improvement which has continued in the 1996 submission
    cohort. The improvement is even more striking when looking at the raw
    numbers underlying the percentages. The 1994 cohort of new product
    applications consisted of two original submissions that were filed,
    each of which was reviewed in more time than allotted by the PDUFA
    goals, and one resubmission that was reviewed on time. The very next
    year, the 1995 cohort of applications filed included three original
    submissions and three resubmissions, all of which were reviewed on time
    or faster than the PDUFA goals. The 1996 cohort of applications that
    were filed is larger still. The reasons for this improvement are
    similar to the reasons for improvement for drugs in general:
    accountability, clear objectives, and concomitantly enhanced resources
    that were devoted to meeting those objectives. There is an additional
    factor contributing to improvement in approval times--the elimination
    of the pre-PDUFA backlog of NDA's. After completing that particular
    body of work, the FDA was able to turn its full attention to PDUFA
    applications and to meeting PDUFA goals, with the gratifying results I
    have just described.
        Question. Is there a reason why the Division of Medical Imaging and
    Radiopharmaceutical Drug Products has one of the highest mean drug
    review times? Is the PDUFA process only working well for certain drugs?
        Answer. Again, the Division of Medical Imaging and
    Radiopharmaceutical Drug Products had a backlog in the past, but this
    is no longer the case and the division is now meeting its PDUFA goals.
                            food additive approvals
        Question. To what extent has FDA looked at feasible plans for
    improving the food additive approval process? Have you looked at a way
    to provide a proprietary benefit in exchange for some type of fee?
        Answer. FDA has instituted, and is continuing to implement, a
    variety of reforms designed to improve and streamline the food and
    color additive approval process. The goal of these initiatives is to
    set in place a strong and credible food and color additive review
    process that results in timely decision-making with predictable
    outcomes.
        FDA has initiated several new approaches to the review of food
    ingredients that allow us to better prioritize our allocation of
    resources. FDA has recently proposed to adopt a streamlined
    notification process for substances whose use is generally recognized
    as safe--GRAS--to replace the current petition process by which FDA has
    affirmed, by rule, that the use of a food ingredient is GRAS.
    Substances whose use is GRAS do not require FDA approval and we expect
    that eliminating the petition and rulemaking on such substances will
    free up critical resources for work on food additive petitions.
    Similarly, FDA has also proposed to exclude certain food and color
    additive petitions from a requirement to include an environmental
    assessment, saving both reviewer and petitioner effort.
        In the area of approval of ``indirect'' additives, such as food
    contact substances, FDA has implemented a Threshold of Regulation
    Policy whereby exemptions from the need to submit a food additive
    petition may be granted for certain low-risk food contact substances.
    More than 40 exemptions have been granted by letter under this policy
    during the last two years for materials that would otherwise have been
    the subject of food additive petitions. A Special Project Team has also
    been established to expedite the review of other low-risk food contact
    materials that are not eligible for the Threshold of Regulation Policy.
    As a result, fewer resources have been expended.
        FDA is undertaking many other management and process initiatives to
    improve our guidance to prospective petitioners, establish and
    articulate performance goals for timeliness of decision-making, ensure
    that our communication to petitioners is timely and unambiguous, and
    strengthen and better articulate filing criteria to increase the
    likelihood that filed petitions will be complete and adequate for
    timely review and regulation.
        Under current statute, regulations permitting the use of new food
    and color additives are generic--that is, any person may manufacture or
    use an approved food or color additive in conformance with the
    conditions of use permitted by the regulation. This construct has been
    cited by industry groups as a disincentive to establishing a fee system
    for the support of approval of food additives. Several possible
    mechanisms to provide a proprietary benefit to petitioners have been
    discussed. For example, the food and color additive approval system
    could be constructed so that only the petitioner would have the right
    to market the additive for a certain period of time. Alternatively, a
    system incorporating ``data exclusivity'' could be established--that
    is, for a period of time, the data a petitioner uses to support a food
    or color additive petition could not be used by another applicant to
    support approval of the same additive. Any system to provide a
    proprietary benefit to petitioners would require amendment of the
    statute.
        Question. Exclusive of indirect additives and Generally Recognized
    As Safe (GRAS) affirmation petitions, how many direct food additive
    petitions were approved last year? How many had been pending more than
    five years, and what was the average time they had been pending?
        Answer. In fiscal year 1996, FDA completed action on a total of 22
    direct food and color additive petitions. Of these, 13 were approvals.
    FDA established or amended regulations for the use of 11 direct food
    additives--substances intentionally added to food--as well as two color
    additives for food use. In the other nine cases, the petitions were
    either withdrawn by the petitioner or were dropped because they were
    inadequate for filing.
        FDA has 13 petitions which have been pending for five or more
    years. I will provide, for the record, a table that displays the
    average pending time for these petitions.
        [The information follows:]

     Approval times: Decision cohort fiscal year 1996--Direct food additive
         petitions and color additive petitions pending 5 or more years

            Action                                                    Months
    Initial receipt of petition to approval (average).................    29
    Initial receipt of petition to approval (median)..................    19
    Range.............................................................  6-99
                            =================================================================
                            ________________________________________________
    Last file \1\ to approval (average)...............................    11
    Last file \1\ to approval (median)................................     9
    Range.............................................................  6-20

    \1\ Last file refers to the date of receipt to a petition, in reject
    status, of information necessary to complete the review.

        Approvals for food additives and color additives are effective when
    an order prescribing the conditions of safe use of a food additive is
    published, or when an order listing a color additive is published with
    a specified effective date. Thus, the intervals presented in the top
    half of the table represent the total time from the date of receipt of
    a fileable petition to the date of publication of a regulation. In many
    cases, during the review of a petition, deficiencies in the data
    supporting the safe use of the additive are identified; in such case,
    the petitioner is notified and given the opportunity to amend the
    petition to provide the necessary information. FDA does not have data
    on how much of the total time from receipt to approval is ``FDA time''
    and how much is ``petitioner time.'' However, we do have information
    pertaining to the interval between the date of ``last filing'' (i.e.,
    the date of receipt, to a petition in ``reject status'' of the
    information necessary to complete review of the petition) and the date
    of publication of a regulation.
        Question. How many direct food additive petitions were submitted
    last year?
        Answer. In fiscal year 1996, FDA received six petitions to
    establish or amend regulations for the use of direct food additives.
        Question. How did you arrive at the figures $12 million for food
    additives approvals, and $19 million for post-market surveillance?
        Answer. FDA's budget must also be looked at in the context of the
    overall plan the President has proposed for a balanced budget by fiscal
    year 2002. New and expanded user fees have been proposed across the
    Federal Government. The President's budget identifies by program area
    and dollar amount where fees could be derived. This provides a more
    substantial basis from which to develop reasonable and achievable user
    fees for fiscal year 1998, with input from both Congress and the
    affected regulated industries. We looked across the board at FDA
    activities to determine which would be most appropriate for user fees.
    Any specifics by activity area to be covered by user fees serves as a
    useful starting point for any upcoming negotiations on the proposed
    user fees among FDA, Congress, and the affected industries.
        Proposals under the Foods program include: premarket approval
    activities for food and color additive petitions submitted pursuant to
    certain sections of the Food, Drug and Cosmetic Act--FD&C Act--of
    $12,543, and partial funding of postmarket regulatory activities of
    $19,024, as covered by section 704 of the FD&C Act. User fees are
    proposed to cover essentially all of the costs of the premarket review
    of petitions.
        In general, postmarketing regulatory activities include not only
    traditional domestic postmarketing activities but also emerging
    strategies. These include partnering with state, local, professional
    and industry groups and individuals, to enhance the quality and safety
    of products. In addition, by increasing information sharing and
    technical assistance so that establishments are operating with strong
    quality assurance systems, the Agency anticipates that less formal
    regulatory intervention may be required. Traditional domestic
    postmarketing activities such as inspections, investigations, sample
    collections and analyses, regulatory analytical methods development,
    field exams, recall effectiveness checks, and injunctions and seizures
    will continue to play a role in postmarketing regulation.
        Postmarketing fees are based on the Agency's Official Establishment
    Inventory, or OEI, and would be used to offset a portion of FDA's
    postmarket activity expenses. For postmarket regulatory activity fees
    we have determined a fee of about $550 per establishment, which would
    be applied to the 35,369 Food and Cosmetics Establishments listed in
    the OEI. Any establishment fees would be collected at the beginning of
    the fiscal year.
        Question. Last year, to address the severe backlog of additives,
    money and personnel were temporarily transferred to the Center for Food
    Safety and Applied Nutrition (CFSAN). What is the status of these
    additional resources? When is this commitment scheduled to end? What
    will this mean for CFSAN when future additional resources are no longer
    available?
        Answer. Review of food additive petitions is a high priority for
    the Agency. FDA is committed to reforms that will permit the Agency to
    achieve its goals of health protection, timeliness, and accountability
    in the long-term.
        In fiscal year 1996, CFSAN temporarily reassigned 23 FTE to
    petition review activities in an effort to reduce the current inventory
    of pending food additive petitions. Final decisions were made on
    approximately 30 more petitions than were received during the year and
    the cohort of 295 petitions reported to Congress in June of 1995 was
    reduced by more than 100 petitions by the end of fiscal year 1996.
    Great progress was made; however, much work still remains. In response,
    CFSAN permanently reassigned eight of those individuals to petition
    review activities and has continued to utilize temporary reassignments
    as a means of providing additional resources to food additive petition
    review activities. The remainder of the original individuals
    temporarily reassigned returned to their permanent job assignments;
    seven of these are committed to work on food additive petitions part-
    time or on special petition-related projects. Temporary reassignments
    of 14 other individuals from other programs in the Center have been
    made in fiscal year 1997. It is expected that such temporary
    reassignments will continue in order to accomplish the goals of
    reducing the inventory of pending petitions and eliminating overdue
    petitions.
        FDA provided funds for two major contracts to assist in petition
    review. One is for the review of toxicology studies contained in
    petitions and the other is to review study packages from indirect
    additive petitions. These contracts extend for three years and are
    intended to reduce the inventory of data awaiting scientific review.
    This will allow FDA scientists to focus on new petitions as they come
    in rather than setting them aside to await completion of work on
    earlier petitions. Contracts were also awarded to document petition
    review resource needs, to assist in developing a higher threshold of
    filing, to advise FDA on alternative safety decision models, and to
    conduct petitioner workshops annually. These contracts will result in a
    more efficient process--one where less time is spent in reviewing and
    correcting inadequate petitions and where new decision strategies will
    be available after a petition is received.
        Funds were also provided to upgrade the information management
    capabilities available to the food additive program. When fully
    implemented, the new resources will aid in the searching, retrieval,
    and review of data in food additive petitions, and will markedly
    enhance document management. The work required to install, test, and
    implement these resources is ongoing and is on schedule. FDA is
    committed to reforms that will permit the Agency to achieve its goals
    of timeliness, accountability and predictability in the review of
    petitions over the long-term.
                                     ______

                     Questions Submitted by Senator Specter
                             methadone regulations
        Question. Methadone has been used for over 30 years as a treatment
    for heroin addiction. Is methadone safe to use?
        Answer. FDA has approved methadone as a narcotic analgesic and for
    the detoxification and maintenance treatment of narcotic dependence.
    Methadone is safe under the conditions set forth in the product
    labeling, and for the treatment of narcotic dependence, in the
    regulations set forth under 21 CFR Sec. 291.505.
        Question. Is methadone effective in treatment of heroin addiction?
        Answer. FDA has determined that methadone is effective for the
    detoxification and maintenance treatment of opioid addiction.
        Question. What is the justification of the FDA for regulating
    methadone differently than all other drugs?
        Answer. As a narcotic intended for the treatment of narcotic
    dependence, methadone falls under the Comprehensive Drug Abuse
    Prevention and Control Act of 1970, CDAPCA, Public Law 91-513, and the
    Narcotic Addict Treatment Act of 1974, NATA, 21 U.S.C. Sec. 823(g).
    These statutes require the Secretary to consult with organizations and
    the Attorney General to determine the appropriate methods for medically
    treating narcotic addiction and to develop standards to determine
    whether practitioners are qualified to provide narcotic treatment. In
    addition, the NATA requires the Secretary to determine that narcotic
    treatment providers will comply with standards that address the medical
    use of narcotic drugs, including standards for providing narcotic drugs
    for unsupervised use by individuals enrolled in a treatment program.
    FDA, in conjunction with the National Institute on Drug Abuse, has
    carried out the Department's responsibilities by enforcing process
    oriented regulations. FDA is proposing to switch to an oversight system
    that relies on accreditation to fulfill the Department's obligations in
    this area.
        Question. What is your view in regard to the conclusions of the
    Institute of Medicine Report from 1995 on the Federal Regulation of
    methadone treatment that concludes ``the risks to the public safety and
    the public health of diverted methadone do not outweigh the benefits of
    making methadone treatment more readily available.''?
        Answer. FDA is aware of the risks to the public health associated
    with the diversion of methadone. The current regulations include
    extensive requirements, limitations, and conditions on providing
    methadone to patients for unsupervised use. What is not obvious,
    however, is the extent to which the risks associated with diversion
    affect the availability of methadone treatment. Indeed, the Institute
    of Medicine, or IOM report noted that there are many factors affecting
    the availability of treatment, including financial factors, community
    resistance to new or expanded programs, and others. In addition, in
    several instances, the report stressed the need for quality treatment,
    noting that no treatment is preferable to poor treatment.
        The IOM report included many recommendations for changes to the
    existing regulations. Included were recommendations directed at the
    relaxation, or elimination, of most of the regulatory requirements
    governing the provision of methadone for unsupervised use. The IOM was
    careful to caution that a contingency should be available in case a
    public health crisis resulted from recommended changes.
        FDA is actively considering the IOM Report recommendations,
    including diversion control recommendations, as it continues to
    evaluate changes to the regulatory oversight system for methadone
    treatment.
                                 drug approvals
        Question. As you know, the President's budget proposal would
    redirect a portion of the prescription drug user fees to general
    revenue. To what extent would this proposal, if enacted, negatively
    impact the ability of the FDA to complete drug approvals on a timely
    basis?
        Answer. We are not aware of any proposal to redirect prescription
    drug user fees to general revenue. Under the current legislation, FDA
    deposits PDUFA collections into an FDA account at the Department of the
    Treasury, and these resources are available to the Agency when
    apportioned by the Office of Management and Budget. We do not
    anticipate any change in this current practice and therefore do not
    foresee any effect on our ability to complete drug approvals on a
    timely basis.
        Question. How is the FDA streamlining the process for obtaining
    emergency Investigational New Drug approvals so terminal patients may
    receive immediate treatment in dire situations?
        Answer. FDA currently has a regulation specifically intended to
    expedite obtaining an investigational drug for emergency use where the
    situation does not allow time for submission of an IND. Generally, the
    process works well. In most cases, FDA's review of a practitioner's
    request for 21 C.F.R. Sec. 312.36 use of an investigational drug in an
    emergency situation and FDA's authorization to the manufacturer to ship
    the drug for that use can be accomplished over the telephone or by FAX
    within a matter of hours. It should be noted that an emergency IND can
    only be granted to a licensed physician and not to an individual
    patient or manufacturer.
        Notwithstanding the success of this program, FDA is looking at ways
    to provide more consistent application of evaluation criteria and
    procedures across reviewing divisions and is considering whether to
    propose regulations to clarify the types of treatment uses that can be
    authorized under emergency IND's and the criteria for their
    authorization. However, there are certain circumstances that can affect
    whether a drug may be made available under an IND for emergency use. If
    a manufacturer of a drug does not want to ship the drug for such use,
    FDA does not have the authority to require such shipment. If supplies
    of the drug are low, such as in the situation where clinical trials are
    being done with a lottery, the sponsor must decide whether making the
    drug available under an emergency IND could jeopardize the conduct of
    the ongoing trial. In all cases, even for emergency IND's, local
    Internal Review Board oversight is required.
                        inspection of imported mushrooms
        Question. I have been informed that the FDA and the State
    Administration of Import and Export Commodity Inspection of China (SAC)
    held a meeting in January of this year regarding the current automatic
    detention order in effect for imports of canned mushrooms from China.
    During that meeting, I understand that FDA discussed sending an
    observation team to China. Has a trip to China been scheduled? Does FDA
    have any plans to lift the automatic detention or change the lot by lot
    release program?
        Answer. A meeting was held on January 14, 1997, between
    representatives of FDA and the State Administration of Import and
    Export Commodity Inspection--SACI--of the Peoples' Republic of China,
    or PRC. FDA's imposition of countrywide detention without physical
    examination of canned mushrooms from PRC, due to the presence of
    Staphylococcal enterotoxin--SET--was one of several items discussed.
    PRC representatives indicated their concern with the FDA program, since
    there had been a very low incidence of SET contamination of Chinese
    mushrooms in the eight-year history of the program. The PRC
    representatives also provided a summary of the improvements made by the
    Chinese mushroom industry since 1989 and their government's oversight
    of production and export.
        FDA representatives informed SACI that the Agency still awaits the
    information from PRC which was requested during a July 1996 meeting in
    order to perform a thorough review of processing, shipment, and Chinese
    government's oversight. FDA indicated that once this information is
    received and reviewed, the Agency will determine whether a technical,
    policy team should be sent to PRC to observe and evaluate the current
    situation. To date, FDA has received some of the requested information,
    which is now under review. FDA has also indicated that it is amenable
    to scheduling a visit to PRC in the fall of 1997 and requested a letter
    of invitation from SACI. However, pending the receipt of the remainder
    of the requested information, results of the information review, and an
    assessment of available agency resources, no FDA trip to PRC has been
    scheduled to date.
        Pending FDA's evaluation of the technical and regulatory
    information provided by PRC, and verification that there has been
    satisfactory resolution of the problems that resulted in the country-
    wide detention without physical examination of canned mushrooms from
    PRC, FDA would consider appropriate modifications to the current lot-
    by-lot release program, and the necessity for country-wide detention
    without physical examination of canned mushrooms from PRC. Currently,
    FDA has no immediate plans to lift or change the lot-by-lot release
    program.
        Question. During 1996, were there any detentions or seizures of
    imported canned mushrooms? If so, please provide the Subcommittee with
    the details of each.
        Answer. In fiscal year 1996 there were no seizures of imported
    canned mushrooms from PRC for violations involving the presence of SET.
    In addition, no shipments of product offered for entry under the lot-
    by-lot program were refused entry.
                                     ______

                    Questions Submitted by Senator McConnell
                     recent court ruling and fda resources
        Question. Last week, a United States District Court Judge ruled
    that FDA lacks the statutory authority to regulate tobacco advertising
    and promotion. The judge also stayed--or put a hold on--all of the
    FDA's rules except for the minimum age rule and the rule requiring
    retailers to card anyone who is younger than 27 years old.
        Dr. Friedman, under the Synar Amendment, every state in the union
    already is taking steps to increase its enforcement of its own minimum
    age laws. Given these factors, does it make sense for FDA to continue
    to expend resources on its tobacco rules, especially when the only
    rules in effect duplicate ongoing state efforts?
        Answer. There is a substantial difference between the provisions of
    the Synar Amendment and the FDA tobacco regulations. The Synar
    Amendment requires that, in order for State Substance Abuse Agencies to
    receive federal block grants, States must enact and enforce legislation
    prohibiting the sale of tobacco products to minors. Although all States
    currently have such laws, their enforcement varies dramatically,
    because block grant dollars cannot be used for such enforcement
    efforts. In contrast, the FDA regulation establishes mandatory
    conditions on the sale and distribution of tobacco products that apply
    to manufacturers, distributors, and retailers of tobacco products.
    FDA's regulation is enforceable through fines and other means for non-
    compliance. The funds FDA has requested are for enforcement activities
    to achieve compliance with the requirements of its regulation. Thus,
    the funds requested by FDA are to be used for a different purpose than
    those for the SAPT Block Grant related to Synar.
        FDA believes that enforcement of its regulations is essential if
    there is to be a reduction in the premature death and disease that
    result from the use of cigarettes and smokeless tobacco. The problems
    associated with nicotine addiction are so substantial, in fact, that it
    will take the concerted efforts of everyone interested in improving and
    protecting the health of children and adolescents to achieve the
    Administration's goal of reducing the number of young people who use
    cigarettes and smokeless tobacco by 50 percent over the next seven
    years.
        Question. For the record, please provide a revised estimate of the
    resources (in dollars and FTE's) the FDA believes would be necessary to
    implement the tobacco rules that have not been stayed by the United
    States District Court.
        Answer. The Administration is still requesting the full $34 million
    for the tobacco initiative. The bulk of the money requested for fiscal
    year 1998 is for state contracts to enforce the February 28 provisions
    upheld by the court. Only a small portion--between $1 to $2 million--of
    the planned outreach activities would have been devoted to the
    advertising provisions overturned by the court. Those dollars will be
    re-allocated to outreach for the access provisions already in effect.
     fda's plan is redundant with state efforts to enforce tobacco minimum
                                    age laws
        Question. Under the Synar Amendment, a state risks losing federal
    funding if it is not adequately enforcing its own tobacco minimum-age
    laws. Please explain how the FDA's rules that took effect on February
    28, 1997 are not duplicative of state minimum age laws already being
    enforced by state officials?
        Answer. The FDA rule complements all ongoing activities at the
    state and local level aimed at reducing young people's use of tobacco.
    Despite that fact that all states have minimum age laws for the sale of
    tobacco, the incidence of young people's use of tobacco is rising
    dramatically. Among 8th graders, the rate has climbed 50 percent in the
    last six years. A coordinated effort between federal, state, and local
    governments is essential to reduce the number of young people that use
    tobacco products.
        Question. Dr. Friedman, in FDA's April 23rd letter to me, FDA
    indicated that the Substance Abuse and Mental Health Services
    Administration has informed the FDA that ``all 50 States currently have
    laws prohibiting tobacco sales to minors and that all States have
    submitted their inspection methodologies and sampling designs'' to HHS.
    Does FDA have any indication that the states are not adequately
    enforcing their minimum age laws under the Synar Amendment?
        Answer. According to SAMSHA, although all states have submitted
    their block grant applications to SAMHSA describing their enforcement
    efforts, not all applications have been reviewed by SAMHSA. Preliminary
    results show that although states have begun enforcing their laws, the
    level of enforcement varies from state to state.
        Question. In the final rule implementing the Synar Amendment, HHS
    indicated that states could use certain federal block grant funds
    toward their retail inspection costs. Why is FDA requesting additional
    expenditures to do a job that the states are already performing with
    the aid of existing federal block grants?
        Answer. There is a substantial difference between the provisions of
    the Synar Amendment and the FDA tobacco regulations. The Synar
    Amendment requires that, in order for State Substance Abuse Agencies to
    receive federal block grants, States must enact and enforce legislation
    prohibiting the sale of tobacco products to minors. Although all States
    currently have such laws, their enforcement varies dramatically,
    because block grant dollars cannot be used for such enforcement
    efforts. In contrast, the FDA regulation establishes mandatory
    conditions on the sale and distribution of tobacco products that apply
    to manufacturers, distributors, and retailers of tobacco products.
    FDA's regulation is enforceable through fines and other means for non-
    compliance. The funds FDA has requested are for enforcement activities
    to achieve compliance with the requirements of its regulation. Thus,
    the funds requested by FDA are to be used for a different purpose than
    those for the SAPT Block Grant related to Synar.
        Question. FDA indicates its plan to ``commission'' state and local
    officials to help enforce its tobacco rules. FDA also indicated in its
    April 23rd letter to me that it does not ``necessarily'' plan to
    commission only those state and local officials already responsible for
    enforcing the state's own minimum age laws. Please explain why it would
    be necessary for FDA to enforce its federal minimum age rules by
    funding state officials other than those state officials currently
    responsible for enforcing the State's own minimum age laws.
        Answer. FDA is relying on the states to identify the appropriate
    state agencies who will be contacted for contracting with the federal
    government. It is possible that a state may identify an agency other
    than the one currently responsible for enforcing the state's own
    minimum age law.
                     fda's tobacco plan duplicates efforts
        Question. FDA indicates that it wants to work with CDC to develop a
    national survey of young people to determine, among other things, the
    prevalence of tobacco usage and illegal purchase rates by minors.
    Aren't such efforts duplicative in that state reports required under
    the Synar Amendment are required to indicate illegal purchase rates?
        Answer. No, these are not duplicative efforts. We are meeting and
    working with both SAMHSA and CDC on this issue. SAMHSA, for purposes of
    administering the Synar rule, is monitoring State inspection activities
    and results. SAMHSA is not monitoring teen tobacco use rates.
        Meanwhile, FDA is working with CDC to refine their existing
    national survey of young people, to determine, among other things, the
    prevalence of tobacco usage and illegal purchase rates by minors.
        Question. FDA says that it wants to work with states to develop
    comprehensive-tobacco-control demonstration projects. Don't the Centers
    for Disease Control and Prevention and the National Cancer Institute
    already provide millions of dollars to the states through the IMPACT
    and ASSIST programs to help states develop comprehensive tobacco
    control programs?
        Answer. Enforcement of the FDA rule at the state and local level is
    intended to complement all ongoing tobacco control activities including
    those efforts underway under the auspices of IMPACT and ASSIST. FDA is
    working and meeting with CDC and NIH to coordinate efforts.
    fda should allocate its available resources to product review functions
        Question. In the last Congress, this Committee repeatedly
    encouraged FDA to reallocate its resources in order to meet its
    statutory deadlines for the review of various product applications. If
    FDA was able to find $34 million in its fiscal year 1998 request for
    its tobacco rules, why hasn't FDA been able to find additional
    resources for product review functions?
        Answer. Improving the safety of the food supply and keeping tobacco
    out of the hands of children are both initiatives of the utmost
    importance and are very high priorities for FDA and this
    Administration. While FDA's traditional activities in promoting and
    protecting the public health through product review functions are of
    vital importance, the Administration's budget for FDA should be viewed
    in total, keeping in mind that it fits in with the President's plan for
    an overall balanced budget by fiscal year 2002.
        Question. From what functions did FDA take the $34 million?
        Answer. The Administration's fiscal year 1998 budget for FDA
    includes adequate funding to maintain our current level of activities
    in our traditional areas of concern, as well as provides additional
    funding for two important and high priority initiatives that correspond
    with FDA's mission of protecting and promoting the public health--
    reducing the incidence of death and illness associated with foodborne
    pathogens through the Food Safety Initiative, and reducing the
    availability and appeal of nicotine-containing tobacco products to
    children.
                     prescription drug user fee act (pdufa)
        Question. Dr. Friedman, during the House Commerce Committee hearing
    you stated that FDA's base budget is not stable and this factor could
    put PDUFA at risk of failure. If I recall correctly, user fees under
    PDUFA can only be collected if appropriations for human drug
    application review reach the level provided in fiscal year 1992 for
    such costs multiplied by an adjustment factor. In your statement before
    Commerce Committee, were you referring to the PDUFA I definition of a
    base budget? If not, please define what a stable base fund for FDA is
    measured by, and what level of funding is required?
        Answer. Yes, Senator you are correct. PDUFA I was intended to
    finance increases in the costs of the process to review new human drug
    applications. Performance goals were established contingent to the
    resources provided by user fees in addition to base appropriations
    calculated by the level of FDA funding in fiscal year 1992 multiplied
    by an adjustment factor.
        Question. Did you make the President aware of the potential
    consequences that an eight percent reduction in FDA budget authority
    could have on the agency in light of the fact that no additional user
    fees are authorized?
        Answer. During the President's Budget development many proposals
    were discussed fully. These fees are a part of a government-wide policy
    to establish user fees. These user fees--tied to performance measures
    in maintaining important government functions--are a key component to
    achieving a balanced budget by the year 2002.
        Question. Do you recommend authorization of the President's
    proposed user fees as part of the PDUFA II reauthorization or in
    separate legislation?
        Answer. PDUFA has been a very successful program, facilitating the
    availability of important new therapies to the public sooner than they
    otherwise would have been available, and without sacrificing the
    assurance of safety and effectiveness of these products. Obviously the
    reauthorization of this program is a priority for the Agency and its
    primary beneficiary, the public. Discussions with industry
    representatives on PDUFA II have been productive in identifying several
    areas where the overall process can be improved, including development
    time. We would recommend reauthorization of this program either as
    separate legislation or as part of the larger bill as proposed by the
    Administration.
        Question. FDA's fiscal year 1998 budget proposal states that the
    agency intended to implement the new user fees, which supplant
    appropriated resources, with performance measures and goals. In
    addition, FDA stated it ``will work with its many constituencies,
    including the regulated industry, to develop appropriate performance
    goals.'' If FDA finds merit in setting performance measures and goals
    for its obligations in food, devices, generics, animal drugs, and over-
    the-counter drugs, why hasn't FDA pursued these to date?
        Answer. FDA has always measured its performance. The fiscal year
    1998 President's budget, with its inclusion of new user fees, provided
    an excellent opportunity to tie our request with performance measures
    and goals, as we prepare for a performance-based budget for fiscal year
    1999, as required by the Government Performance Results Act.
        Question. Why has future progress on these accountability
    initiatives been staked to the implementation of substitution user
    fees?
        Answer. The performance measures described relate to the
    availability of resources at the total levels indicated for each
    program, whether those resources are from a combination of budget
    authority and user fees or all budget authority. However, the proposal
    for new user fees provided FDA with an opportunity to tie our budget
    request to performance measures, as required by the Government
    Performance Results Act, or GPRA. The fiscal year 1999 budget will be
    the first under full coverage of GPRA, and will reflect progress on
    performance goals and measures.
        Question. I have noted with interest the FDA's response to my
    questions from the FDA hearing before the Senate Labor and Human
    Resources states that ``it is appropriate that the regulated industries
    contribute a share of FDA's cost of ensuring the safety and
    effectiveness of their products.'' Second, the FDA's budget states that
    the FDA supports the development of ``appropriate performance goals to
    ensure'' that user fees ``will be used to finance and enhance program
    activities.'' Appropriate is a vague, relative term, Dr. Friedman. Are
    members of this subcommittee to conclude that FDA means that it is
    ``appropriate'' for PDUFA to provide additive funds while any new user
    fees substitute appropriated funds?
        Answer. The President's fiscal year 1998 request includes a variety
    of different user fees as part of FDA's budget, and in the overall
    context of a balanced budget by the year 2002. User fees in need of
    reauthorization--the Prescription Drug User Fee Act and the Mammography
    Quality Standards Act--are additive. To meet the requirements of a
    balanced budget by fiscal year 2002, the President's budget also
    includes proposals for a number of new user fees which are not additive
    to existing resources, but substitute for appropriated funds, as a way
    to reduce the deficit. In either case, FDA remains committed to
    developing performance goals that reflect the level of resources
    anticipated.
        Question. Relative to performance goals, how do ``appropriate''
    performance goals differ from what FDA does now?
        Answer. FDA has been working to develop additional performance
    measures as well as working to fine tune its current performance
    measures that will accurately reflect the important work done by the
    Agency in our core activities of premarket review and postmarket
    assurance. This work has been driven by the statutory requirement for a
    performance-based budget for fiscal year 1999, stipulated by the
    Government Performance Results Act.
        FDA is making progress in defining results-oriented performance
    measures through a vehicle which we are defining as ``process
    improvement'' goals. These are goals that position the Agency to be
    better able to strive toward outcome goals such as reduction in product
    hazards. Process improvement goals can be one of two types, as
    illustrated in connection with our request for additional funding for
    the Food Safety Initiative.
        First are those that reinvent programs to be better able to produce
    outcomes. An example of this type of goal might be to establish a
    collaborative arrangement with states, and the regulated industry, so
    the appropriate persons are working together to produce results that
    these institutions working alone are not able to accomplish. An example
    of this would be the Agency's seafood initiative in which FDA, the
    States, and the regulated industry work together to establish an
    industry managed quality control system which will position the
    industry to produce consistently high quality and safe seafood
    products. The HACCP system--Hazard Analysis Critical Control Points--is
    an illustration of a reinvention performance goal that will make major
    differences in the safety of seafood to the U.S. consumer.
        Second are those that establish a capability to measure and track
    outcomes. Examples of such process improvement goals include the
    establishment of a seafood data base which will collect information on
    product hazard information. Another example would be the Agency's work
    with other Federal regulators to establish a Sentinel System which
    collects microbiological data on foods, and which will enhance the
    government's capability of tracking food safety outcomes that will be
    of interest to Congress and the public.
        The challenges to such endeavors include the expense associated
    with establishing such systems and institutional arrangements, the
    continuing uncertainty that causal links can ever be established
    between Agency efforts and desirable end outcomes, and the usual
    cultural resistance of moving from traditional organizational
    arrangements and measures that require reliance on influence rather
    than control to produce desired effects.
        Question. Dr. Friedman, you've expressed repeated concerns that
    without at least level funding with fiscal year 1997, the FDA will not
    be able to perform its statutory duties to protect the public's health
    and safety. Third party review has generated much attention in recent
    years as a means to reduce the time necessary for evaluating safety and
    efficacy and to reduce resource demands on the FDA. How could third
    party review entities alleviate FDA's budget constraints?
        Answer. FDA is exploring this mechanism, but the concept of third
    party reviews is problematic for several reasons. First, FDA's
    scientific and clinical experts are charged with exercising independent
    and unbiased judgment. They comply with stringent financial disclosure
    and conflict-of-interest requirements designed to protect the decision-
    making process against bias. It is not clear how or whether this
    independence can be maintained with the private sector, particularly
    since the sponsor gets to choose the private party and repeat business
    may depend on the sponsor's satisfaction with the private party's
    decision.
        Second, FDA's reviewers have extensive knowledge about all of the
    similar products that are made by different companies around the
    country. When a reviewer looks at all of the drugs for arthritis and
    other inflammatory diseases, or all of the heart valves, what that
    reviewer learns from each review increases his/her understanding of
    that group of drugs or devices and their effect on the body. As a
    result, FDA reviewers see problems that reviewers with less information
    may not see.
        The third problem with privatization is the lack of continuity.
    Third party reviewers may have little knowledge of the specific
    development process for the product and/or of the development
    agreements made during the process.
        FDA believes that contracting out product review to third parties
    should be done only if there is evidence that it can be done without
    jeopardizing the public health. FDA has been working on a pilot program
    to determine whether third parties can accomplish the goal of getting
    safe and effective products to the American public.
        Question. Dr. Friedman, FDA provided an incomplete answer to my
    question regarding FDA's plan to respond to industry members who
    request proof that a dollar in new user fees pays for a dollar in
    review work within their specified account. FDA's letter notes that
    PDUFA is independently audited and these funds are meticulously
    accounted for. I commend the agency on its careful attention to the
    concerns of drug companies. However, does the FDA believe that PDUFA
    accounting methods should be used for future user fee proposals?
        Answer. FDA believes that funds received for specific activities
    should be used only for those activities. FDA has experience under the
    Prescription Drug User Fee Act, or PDUFA, and the Mammography Quality
    Standards Act, or MQSA, of assuring the use of any fees collected to
    fund specific activities. FDA is committed to continuing this practice.
    Let me assure you that any fees collected under legislative authority
    that requires such fees to be used for specific programs or activities
    will be used for the program areas so designated. Further, as we
    continue discussions with Congress and industry on the proposed user
    fees, we would be amenable to including this particular point as part
    of those discussions.
        Question. Would the FDA object to the consistent use of PDUFA
    accounting methods throughout the agency? If so, what problems does FDA
    foresee in such a system?
        Answer. Providing for appropriate financial management procedures
    and controls for the review process of Human Drug Applications, as
    required by PDUFA, presented a number of challenges to FDA financial
    and program managers. This is primarily because the Act created a
    definition for the process which included a unique subset of activities
    to be included, and specifically excluded other functions of the
    offices involved in the process for which user fees could not be
    allocated. To begin with, FDA first had to examine and amplify the
    definition of what is included in the process and what is excluded from
    it. In doing this, we found that none of FDA's accounting cost centers,
    in their entirety, could be included in this definition. This required
    an extra level of time reporting, in order to meet the unique
    requirements. Pieces of each had to be excluded, because of specific
    exclusions in the new statutory definition, and in the legislative
    history.
        Since these inclusions and exclusions defined a totally new subset
    of FDA activities, it was necessary to develop and implement a
    methodology that would allow the agency retrospectively to capture the
    fiscal year 1992 costs from the ``base year'' for the newly defined
    ``Process for the Review of Human Drug Applications'' and allow that
    same methodology design to be used for future year cost management and
    calculations.
        Costs are accumulated using a variety of methods including time
    reporting, management surveys, and detailed interviews which are
    specifically tailored to meet the requirements of PDUFA. In essence,
    the procedural methods FDA utilizes for PDUFA are an overlay and in
    addition to FDA's core accounting system to meet a unique set of needs.
    While these techniques are very reasonable to apply for PDUFA, they do
    add to our financial management costs and may be unnecessarily
    burdensome to be implemented throughout FDA for existing needs.
    However, if FDA were to implement new user fee programs, such as those
    proposed in the fiscal year 1998 budget, with a defined subset of
    activities, it is likely that many of the same methodologies for the
    allocation and control of costs would be employed by the Agency.
                                    fda--fte
        Question. Dr. Friedman, can you provide information on the number
    of full-time equivalent positions that have been supported exclusively
    by user fees to date and the projected number of FTE's that would be
    funded by user fees under the fiscal year 1998 budget?
        Answer. During fiscal year 1996 the Agency financed 600 FTE with
    collections authorized by PDUFA. The Agency expects to continue at
    least this level of FTE in 1997 and 1998, and possibly more if
    application workload and accompanying fees continue to increase. For
    MQSA, FDA financed 43 FTE's, and estimates 35 for both fiscal years
    1997 and 1998. For the new user fees proposed in the Administration's
    budget, 1,120 FTE's would be financed.
        Question. Dr. Friedman, during the House Agriculture Appropriations
    Subcommittee hearing, you stated that each year FDA experiences a 2.5
    percent reduction in FTE's, and that the FDA is prepared to absorb the
    cost of inflation through efficiencies. Can you describe those
    efficiencies for this subcommittee?
        Answer. Our budget has been roughly flat in recent years. As a
    result, FDA's budget has actually declined in real terms due to
    increased inflationary costs for pay and benefits, and other operating
    expenses. Even with this absorption, FDA is committed to making the
    government work better and continues to be active in response to the
    efforts of the National Performance Review, NPR, and the HHS
    streamlining initiatives, and its own reviews to support its own
    streamlining and reinvention efforts. To meet these inflationary costs,
    we have initiated specific streamlining and reinvention initiatives.
        Building on our central mission to promote and protect the public
    health, we have embarked in the past year on five far-reaching
    reinvention initiatives: reforming drug and medical device regulation;
    overhauling regulation of drugs made from biotechnology; streamlining
    food safety regulations; reinventing animal drugs; and increasing the
    availability of new cancer therapies. When fully implemented it is
    expected that these reinvention initiatives could save industry
    millions of dollars, and help FDA attain its streamlining goals, while
    investing agency resources in its core mission to promote and protect
    the health of the American people.
        The Agency is continuing with the Reinventing Administrative
    Management Program, or RAMP, designed to gain further efficiencies in
    administrative and management systems. Several RAMP initiatives have
    helped by reducing the number of reviews and redundant steps in
    administrative processes and more will follow.
        The Streamlining Administrative Management project encourages
    senior management officials to redelegate administrative authorities to
    as low a level within their organizations as they consider appropriate.
        In other streamlining efforts, FDA analyzed supervisory ratios and
    spans of control agency-wide and initiated programs focusing on
    eliminating redundant and unnecessary steps and on reducing internal
    management controls. One such initiative is that over 100 policies
    addressing principles and procedures to enhance committee integrity and
    accountability were streamlined which eliminated bottlenecks in the
    process and greatly reduced the amount of time and paperwork. We
    reengineered the process for obtaining and reviewing financial
    disclosure forms, thus reducing the time required to complete the forms
    from 3 hours to 15 minutes. We reduced, from three levels to one, the
    number of approvals required to clear conflict of interest waivers for
    government employees serving on advisory committees. We implemented an
    Administrative Quality Assurance Program in compliance with the Federal
    Managers Financial Integrity Act. This program, a combined effort of
    headquarters and field offices, is designed to assess the management
    controls and programmatic requirements within selected administrative
    field components and make improvements. Thus far, the program has
    replaced three existing review programs, improved the follow-up on
    findings, and reduced travel time and checklists.
        GPRA has also played a large role in the reinvention process. FDA
    implemented a broad-based training initiative to enhance manager
    preparation for incorporation of performance measures as an integral
    part of planning and managing their programs. To date, over 400 agency
    managers have received hands-on training in performance measurement
    techniques through the GPRA pilot and training efforts. The combination
    of FDA's reinvention and streamlining initiatives will enable the
    Agency to position itself for the 21st century and manage more
    efficiently while carrying out its mission of protecting the public
    health.
        Question. Do I understand correctly that such efficiencies will
    save 3 percent of the FDA's annual budget?
        Answer. No, but these actions should help us absorb the roughly
    three percent in anticipated inflationary costs for fiscal year 1998
    for which we did not receive additional appropriations.
        Question. Are these accounted for in the fiscal year 1998 budget?
        Answer. Yes. The President's fiscal year 1998 budget request, taken
    in total, would provide FDA the resources necessary to undertake our
    core activities of premarket approval and postmarket assurance as we
    fulfill our mission of promoting and protecting the public health.
        Question. If so, do the savings apply to the total budget, Salaries
    & Expenses, certain activities such as generics review?
        Answer. Our ability to absorb inflation costs through increased
    efficiencies would apply across all FDA programs.
        Question. If not, why are they absent?
        Answer. The President's fiscal year 1998 budget request, would
    provide FDA the resources necessary to undertake our core activities of
    premarket approval and postmarket assurance.
        Question. I note with interest that the FDA budget justification
    lists 329 FTE's as dedicated to Generic Drug Evaluation. Am I wrong in
    my understanding that the Office of Generic Drugs has a 126 FTE
    ceiling?
        Answer. The Office of Generic Drugs has a 125 FTE ceiling.
        Question. Can you explain the 200 FTE discrepancy?
        Answer. The total number of FTE in the Agency allocated to the
    generic drug review process is 329. Of these, 125 represent the ceiling
    for the Office of Generic Drugs, Center for Drug Evaluation and
    Research, or CDER. Their primary mission is to review and evaluate
    Abbreviated New Drug Applications and Abbreviated Antibiotic Drug
    Applications, establish bioequivalence specifications for drug
    products, and develop guidelines for bioequivalence reviews. An
    additional 90 FTE located in other CDER organizations also contribute
    to the generic drug review process. These individuals include
    additional reviewers, regulatory staff, information technology support
    staff and other support staff. The remaining 114 FTE provide
    inspectional support in the Office of Regulatory Affairs.
            shifting of resources to user fees supported activities
        Question. When questioned about deficiencies in performance, the
    FDA points to a lack of adequate resources. Dr. Friedman, it appears to
    me that FDA's management of resources is also a critical component in
    the performance equation.
        I note with interest that the FDA budget justification lists 329
    FTE's as dedicated to Generic Drug Evaluation. Am I wrong in my
    understanding that the Office of Generic Drugs has a 126 FTE ceiling?
    Can you explain the 200 FTE discrepancy?
        Dr. Friedman, several questions recently raised in the media
    focused on FDA's practice of shifting assigned resources to other
    activities. For example, the FDA has consistently told the generic drug
    industry that the reason why generic drug reviews take so long is
    because the agency lacks the resources needed to hire more reviewers.
    Yet press reports indicate that the fundamental reason generic drug
    reviews take so long is because FDA is shifting resources out of the
    Office of Generic Drugs in order to meet the PDUFA goals for new drug
    approvals. In addition, an FDA official testified that the reason food
    additive petition reviews were so long was due in FDA's focus on
    meeting PDUFA goals at a recent hearing before the House Subcommittee
    on Government Reform and Oversight.
        In contrast, I understand House Commerce Oversight and
    Investigations Subcommittee Chairman Joe Barton expressed grave
    concerns regarding the possible use of PDUFA funds for other FDA
    activities.
        Dr. Friedman, I know you share my concern that this subcommittee
    faces difficult decisions regarding funding allocations. Reliable data
    and budgeting are paramount in assuring member confidence that every
    dollar of approved funding goes to the function that this subcommittee
    assigns. Please clarify to this subcommittee FDA's response to these
    reports of resource ``borrowing.'' What resource reporting methods
    would provide this subcommittee with the necessary information to
    evaluate the accuracy and legitimacy of questions regarding resource
    ``borrowing.''
        Answer. The issue involves protection of certain activities from
    reductions to which other activities are subject. Under PDUFA, fees can
    only be collected and made available to cover increases in the costs
    for the process to review human drug applications over and above a base
    level of appropriated resources, as provided in the Federal Food, Drug
    and Cosmetic Act, in section 736 (g)(2)(B). This provision of the PDUFA
    legislation along with the requirement to apply an adjustment factor
    calculation, defined in section 735 (8) of the FD&C Act, to the fiscal
    year 1992 base level of appropriated funding for the process, was
    enacted to ensure that user fees collected under PDUFA are indeed
    additive resources for the review of human drug applications. In the
    straight-lined budget environment to which FDA has been subject for the
    past several years, when a significant portion of base appropriated
    resources must remain stable or increase, other activities must take a
    higher proportion reduction to absorb increased inflation costs.
                                 fda priorities
        Question. FDA's fiscal year 1998 budget request proposes about $244
    million in regulatory fees to be paid by the industries it regulates.
    The request also included $58 million for new agency initiatives.
    Specifically, FDA requests $24 million to implement the President's
    ``Food Safety Initiative'' and $34 million to implement the FDA
    regulation prohibiting advertising of tobacco products to children. FDA
    consistently fails to meet its statutory deadlines for review of food,
    drug, and medical device applications and petitions and claims that the
    agency is unable to meet these deadlines because it lacks the necessary
    resources. Dr. Friedman, on average, your agency fails to meet its
    statutory deadlines to review petitions and applications for foods,
    drugs, and medical devices. You claim that FDA lacks the resources
    necessary to meet these statutory duties. Yet, FDA proposes two new
    spending initiatives totaling $58 million. All of this comes in a year
    when discretionary monies are tighter than ever. Let me ask you about
    the priority setting issue this Committee will probably face. Should
    existing FDA activities be cut to fund new spending initiatives or is
    maintenance of existing agency activities a priority over new spending
    initiatives?
        Answer. The Administration's budget for FDA should be viewed in
    total, keeping in mind that it fits in with the President's overall
    balanced budget plan by fiscal year 2002. I am unable, at this time, to
    prioritize among the new funding included in the budget versus our
    traditional areas of concern. Improving the safety of the food supply
    and keeping tobacco out of the hands of children are both initiatives
    of the utmost importance and are very high priorities for FDA and this
    Administration. However, FDA's traditional activities in promoting and
    protecting the public health through premarket review and postmarket
    assurance are also of vital importance.
        FDA has made strides in improving performance its many programs.
    For human drugs and biologics, we have consistently succeeded in
    meeting and even exceeding all performance measures established in the
    Prescription Drug User Fee Act, or PDUFA.
        But even in areas where we did not receive additional resources, we
    continue to make progress. In medical devices we have improved
    premarket approval reviews, or PMA's, while maintaining review times
    for abbreviated applications--the 510(k)'s. This latter category of
    applications--which accounts for the vast majority of all device
    submissions--covers devices that are substantially equivalent to those
    already on the market. In fiscal year 1996, we approved 43 PMA's, a 6-
    year high, and 24 major new products, an all-time high. Further, eight
    of the 15 PMA's submitted to FDA in the first half of fiscal year 1996
    received a first action within the 180-day deadline--significantly
    better than in either 1994 or 1995.
        Even though we are approving more PMA's for increasingly complex
    devices, and we have improved the time to first action, the PMA
    approval time is coming down only slowly. It takes too long--more than
    two years--to get a device through the process. We continue to focus on
    bringing down PMA review times, just as we have done in the human drug
    area.
        FDA has also successfully managed the review times for 510(k)
    applications. In fiscal year 1996, the median review time for these
    devices that received a finding of substantial equivalence was 85 days.
    The reviews were almost 70 percent longer--144 days--at their peak in
    1993. Even accounting for applications that had to be returned to the
    manufacturer for more information, the average 510(k) review time in
    fiscal year 1996 was 110 days, down from the peak of 184 days in fiscal
    year 1994.
        Even with our best efforts, there is still room for improvement,
    particularly in the area of food additive petitions. In the past, we
    have fallen short on average of meeting statutory deadlines. However,
    in the past few years, we have made a concerted effort to improve in
    this area by speeding up the review process and reducing the inventory
    of pending petitions. Scientists from other program areas were shifted
    to petition review, the existing electronic information processing
    infrastructure was modernized, technical services were contracted out
    to third parties, and we provided guidance to petitioners on how to
    improve the quality of their submissions to the Agency. These efforts
    have paid off. In June 1995, there were 295 petitions in the inventory.
    By the end of fiscal year 1996, we had received an additional 82
    petitions, yet the inventory was 60 below the total in June 1995. We
    approved the highest number of petitions in a decade--54--during
    calendar year 1996. Further, the median time from receipt to approval
    of food and color additive petitions decreased from 37 months in fiscal
    year 1993 to 27 months in fiscal year 1996. While we are still not
    where we want to be, we clearly are continuing to make progress.
        The new user fees proposed in the budget would allow us to continue
    our current level of activity in each of these areas.
                                     ______

                      Questions Submitted by Senator Burns
                                   user fees
        Question. The fiscal year 1998 budget request has a nearly $68
    million decrease for non-user fee budget authority, but a nearly $69
    million increase in total funding. The increase is accounted for by new
    user fees. What is the rationale for the decrease in budget authority,
    and how will the decrease affect the FDA's ability to review new and
    supplemental applications if new user fees are not authorized?
        Answer. The Administration's budget for FDA should be viewed in
    total, keeping in mind that it fits in with the President's plan for an
    overall balanced budget by fiscal year 2002. The President's Budget
    proposes new user fees for many FDA activities in the context of
    constructing a balanced budget by 2002. The Administration believes
    these new user fees are appropriate funding mechanisms in that the
    industries regulated by FDA benefit from increased consumer confidence
    in their products.
        If the proposed user fees are not authorized and the base resources
    replaced by these user fees are not restored, the impact across all FDA
    programs would be tremendously detrimental. The Administration is
    proposing new user fees of $131,643,000, of which $122,436,000 would
    replace existing base appropriation resources, and 1,120 FTE. Without
    new user fees or the restored base resources, the necessary reductions
    would be felt across each program area of FDA.
        Further, the President's budget included new funding for food
    safety and tobacco regulation. At this point in time, I cannot say with
    any degree of certainty where specific cuts would be taken, but given
    the magnitude of the potential reduction, I can safely say that review
    times and backlogs for all FDA-regulated products would increase
    substantially. FDA's ability to fulfill its mission of protecting and
    promoting the health of the American public would be seriously
    undermined.
        Question. Do you believe that new user fees, beyond those
    authorized under the Prescription Drug User Fee Act (PDUFA), are
    justified to offset decreased budget authority, and is this good policy
    in light of the success of PDUFA?
        Answer. We believe that PDUFA, with it's reliance on performance
    measures, goals, and program improvements can be a successful model for
    user fees in other FDA programs to enhance performance and efficiency.
    The industries regulated by FDA derive valuable benefits from some FDA
    activities, including increased customer confidence in their products
    and significant protection from liability. FDA's reputation also
    improves the competitive position of American firms in overseas
    markets. The President's budget proposes that the regulated industries
    contribute a share of FDA's cost of ensuring the safety and
    effectiveness of their products. The following are the types of user
    fees, by program area, being proposed by the Administration. We intend
    to work with Congress, industry and other affected parties to develop
    these or other proposals to achieve informed consideration of proposed
    user fees, and to ensure necessary funding for important FDA public
    health activities in fiscal year 1998. The new user fees proposed in
    the President's Budget and before the Committee are based on the PDUFA
    model but proposed in the context of balancing the budget by 2002.
                                     ______

                     Questions Submitted by Senator Bumpers
                  fiscal year 1998 program levels (user fees)
        Question. The fiscal year 1998 budget shows an increased program
    level, but assumes new user fees. What reception are you getting from
    the authorization committee and the regulated community from the user
    fee proposals?
        Answer. New and expanded user fees were proposed across the Federal
    Government as part of the overall plan the President proposed earlier
    this year for a balanced budget by fiscal year 2002. FDA's authorizing
    committees in the House and Senate have not yet held hearings or
    invited testimony from FDA specifically on the user fee proposals, with
    the exception of a House Commerce Committee hearing on the Prescription
    Drug User Fee Act, or PDUFA. The House and Senate authorizing
    committees have expressed interest in timely reauthorization of PDUFA,
    which also has the highest support from industry. Although no extensive
    discussions have been held on the other user fee proposals, the
    regulated industry has not expressed support of these fees.
                              fda field operations
        Question. Over the course of the past several years, FDA has
    received overall increases in budget authority from this subcommittee.
    In fiscal year 1994, the total made available (including user fees) was
    $869.6 million. For fiscal year 1997, the amount is $995.9 million and
    you propose an increase to $1.064 billion for fiscal year 1998. At the
    same time, I hear of reductions in operational activities at the field
    level. For example, I understand NCTR has lost 20 or more positions
    over the same period due to budget shortfalls. Would you respond to
    this issue.
        Answer. In fiscal year 1994, NCTR utilized 249 budget authority
    FTE. The estimate of budget authority FTE utilization for NCTR in
    fiscal year 1997 and fiscal year 1998 is 223. This is a net loss of 26
    FTE by the NCTR between fiscal year 1994 and fiscal year 1998. The bulk
    of this reduction, 20 FTE, is the NCTR program share of the President's
    initiative to reduce the deficit by streamlining Federal employment.
    The remaining decrease of 6 FTE is the result of the NCTR absorbing a
    share of agency-wide reductions.
        NCTR base resources have been fairly consistent for the past
    several years, both in dollar terms and as a percentage of the Agency's
    total Salaries and Expenses appropriation. Fluctuations are
    attributable to the amount of one-time contract support made available
    to the NCTR. Reductions in funding for the NCTR and other programs have
    resulted from the Agency absorbing contract and salary inflation
    increases and a general decline in available operating costs to all FDA
    programs.
        Question. What amounts of the budget that would have otherwise gone
    to NCTR have been used for other operational activities. What might
    those activities be? Which of these activities might be referred to as
    ``initiatives''?
        Answer. The adjustment of $5.7 million in the amount planned for
    NCTR in fiscal year 1997 is not really a reallocation to other
    programs, but an adjustment to reflect the true continuing costs of
    FDA's major programs. The estimate for NCTR furnished to the Committee
    in mid-1996 was too high because it was based on an unusually high
    level of funding for NCTR in fiscal year 1995.
        The reason that the obligations for NCTR were unusually high in
    fiscal year 1995 relates to the nature of NCTR's operating budget,
    which includes a number of support service contracts. NCTR relies on a
    high level of contract support for managing its facilities, maintaining
    its animal colonies, and for many other research support services. In
    past years, FDA has redirected funds toward the end of the year from
    other programs to NCTR for its contract support. NCTR's operating
    budget is then reduced by the same amount at the beginning of the next
    year so that the overall level of funding remains relatively constant.
    The Agency is not able to provide these additional funds to the NCTR at
    a consistent level every year, but endeavors to keep NCTR funding at a
    ``base'' level necessary to maintain its current level of operations.
    The Agency's current estimate for NCTR for fiscal year 1997 of $31.3
    million is very similar to NCTR's actual expenditures for fiscal year
    1996 of just under $31 million. The current fiscal year 1997 estimate
    reflects the current planned level of funding for NCTR and for all
    other programs.
        The reallocations from the NCTR to the other program areas are not
    truly program increases or decreases, but adjustments to more
    accurately reflect the continuing cost in fiscal year 1997 of the level
    of program activities conducted in fiscal year 1996. However, since the
    fiscal year 1997 appropriation did not include inflationary allowances,
    all programs have had to absorb a reduction in their operating funds,
    and NCTR has had to absorb its proportionate share of this reduction.
    In partial compensation for this, the Agency did allocate an increase
    of $533,000 to NCTR early in fiscal year 1997 to absorb some of the
    inflation in NCTR's contract costs.
                             nctr lab construction
        Question. I understand construction of the Arkansas Regional Lab
    (NCTR) is underway. Will the amount requested for fiscal year 1998
    complete construction of Phase II at NCTR?
        Answer. The fiscal year 1997 appropriation of $13,000,000 for Phase
    I of the Arkansas Regional Laboratory, ARL, will support construction
    of the building, foundation, substructure, superstructure, exterior
    enclosure and roofing as well as major building systems such as fire
    protection, HVAC, electrical and some site work. The fiscal year 1998
    request for $14,550,000 will complete Phase II, the laboratory portion
    of the project, of the construction of the ARL, by completing building
    systems and providing laboratory fit-out. This amount is based on the
    Architecture and Engineering estimate. The construction bid process for
    Phase I is underway and will determine the exact amount needed to
    complete the ARL. Some portion of the ARL fit-out planned in Phase II
    is likely to be deferred to Phase III.
        Question. What will be the total remaining cost to complete Phase
    III?
        Answer. Phase III is estimated to be $9,800,000 and provides the
    renovation of the existing NCTR Building 50 in its entirety to
    accommodate the common ORA/NCTR administrative and support area. This
    projection is based on the Architect/Engineer estimate. The
    construction bid process for Phase I is underway and will determine the
    exact amount to complete Phase III. Construction and construction
    management costs are estimated at $37,400,000.
        Question. Does FDA intend to seek a full request for Phase III in
    the fiscal year 1999 budget?
        Answer. FDA and the ORA Laboratory Consolidation Plan require the
    completion of all Phases for the ARL project to be successful in
    providing the state-of-the-art facility and quality of work life
    environments which ORA and NCTR staff need. Hence, FDA will address the
    ARL project and Phase III in subsequent years.
                               lab consolidation
        Question. Your plan for lab consolidation includes the Arkansas
    Regional Lab as a facility which will host operations current conducted
    at several other facilities. What is the status of FDA field lab
    consolidation?
        Answer. In 1994, ORA received approval from the Secretary of Health
    and Human Services to proceed with streamlining laboratory operations.
    The plan calls for the creation of 5 large multipurpose laboratories in
    Seattle, Washington; Los Angeles, California; Jefferson, Arkansas; New
    York, New York; and Atlanta, Georgia; and 4 specialty laboratories in
    San Juan, Puerto Rico; Winchester, Massachusetts; Philadelphia,
    Pennsylvania; and Cincinnati, Ohio; for a total of nine field labs,
    replacing the current network of eighteen laboratories, over a 20-year
    period, from 1994 to 2014. FDA projects costs savings of $112.7
    million, based on the fiscal year 1997 annual review and updated cost
    estimates, namely rents and budget outlays toward lab consolidation.
    FDA will maintain inspection, public affairs and enforcement operations
    at the current District offices and resident posts. In fiscal year
    1995, 1996 and 1997 appropriations, FDA received appropriations for the
    design and land acquisition for the Los Angeles and Arkansas new
    facilities; the construction of ARL Phase I core and shell.
        Currently FDA has formulated Building and Facility plans including
    new construction, expansion, restructuring, and decommissioning, as
    well as personnel transfer plans which carry out the ORA 21 Laboratory
    Consolidation goals and coincide with current facility lease expiration
    dates.
        In fiscal year 1997, three FDA laboratories, Buffalo, Chicago and
    Cincinnati are scheduled to be closed and two laboratories,
    Philadelphia and Winchester, MA, restructured. The fiscal year 1997
    work plan comprehensively transferred the corresponding analytical
    programs and resources to the respective multipurpose or specialty
    laboratories. I would be happy to provide for the record a list of
    dates for either closing or restructuring for each of these labs as
    well as provide more detail on our planned laboratory consolidation.
        [The information follows:]
        Lab closure dates: Buffalo, October 1, 1996; Chicago, July 1, 1997;
    and Cincinnati, June 30, 1997.
        Lab restructure dates: Philadelphia, October 1, 1996; Winchester
    Engineering and Analytical Center, July 1, 1997.
    ORA 21 Multipurpose labs
        1. New York-Northeast Regional Laboratory, Northeast Regional
    Office and New York District Office-Jamaica, Queens.--An authorization
    for prospectus was approved in 1994 with delineated area in the Borough
    of Queens. An Architect and Engineering or A&E Program of Requirements
    was prepared for 75,000 net sq. ft. laboratory and 100,000 net sq. ft.
    regional and district office facility. In fiscal year 1996, GSA/FDA
    finalized negotiations for the 4.5 acre site at York College, Jamaica
    Queens. GSA had intended to award the lease by April 1997. We have now
    been advised by GSA that the lead offeror has rescinded his proposal.
    GSA will now go to other offerors to continue the project. FDA
    occupancy has been scheduled for March-May 1999.
        2. Arkansas Regional Laboratory.--In fiscal year 1995, Congress
    authorized $2,500,000 for A&E design for the ARL. The ARL A&E design
    was completed in March 1996. In fiscal year 1996, $3,800,000 was
    appropriated for the joint ARL/NCTR facility. fiscal year 1996 funds
    were used for A&E design items including construction of an animal
    quarantine facility and preparation of space for an ORA Dioxin lab
    facility. ARL facility construction is estimated at $37,400,000. Phase
    I construction funds were approved in fiscal year 1997. In fiscal year
    1998, $14,550,000 is requested to complete Phase II, the fit out of
    Arkansas Regional laboratory. Construction bid process is underway and
    award is anticipated summer of 1997. Phase III, the NCTR building 50
    renovation and the new common ORA/NCTR administrative and support area
    was initially estimated at $9,800,000.
        3. Los Angeles-University of California at Irvine.--In fiscal year
    1995, $9,800,000 was appropriated for A&E design and land acquisition.
    FDA, through the Corps of Engineers, has awarded an A&E design contract
    to Zimmer, Gunsul, Frasca/HDR, and acquired 10 acres of land, at
    University of California at Irvine. FDA and the A&E firm have developed
    a design concept for the replacement laboratory, which is planned to
    house 75 laboratory staff and support personnel, estimated at
    $26,500,000. No construction funds have been approved.
        4. Southeast Regional Laboratory.--In fiscal year 1996, GSA issued
    a sole source Solicitation for Offer to construct 42,000 net square
    feet of lab and lab support space adjoining the current FDA complex at
    8th and Peachtree Streets. The ground breaking ceremony occurred in
    January 1997. Construction completion and FDA occupancy is expected by
    December 1997.
        5. Seattle Laboratory.--In fiscal year 1996, a 5,000 square feet
    expansion project of the lab was completed.
    ORA 21 Specialty Labs
        6. Cincinnati.--National Forensics Chemistry Center and Cincinnati
    District Office--The decommissioning of the current facility began in
    1996. A prospectus was approved for 31,170 net square feet laboratory
    space and 13,930 net square feet office space. Ground breaking occurred
    in October 1996. Construction completion and FDA occupancy is scheduled
    for late 1997 or early 1998.
        7. Philadelphia.--GSA is proceeding to expand the U.S. Customhouse
    facility in Philadelphia by 8,378 square feet and accommodate 16-20
    additional laboratory staff. FDA occupancy of new space on floors 10
    and 12 is expected by summer 1997.
        8. San Juan.--FDA will renovate and expand the facility to house
    20-25 total laboratory employees by the year 2000.
        9. Winchester.--FDA building and facility funds were used to
    establish an American Association for Accreditation of Laboratory
    Animal Care, or AAALAC, facility. Design of additional AAALAC
    facilities is under development and awaiting cost estimates.
    Other Facility Activities
        Decommissioning: Decommissioning schedules have been established
    for each closing laboratory upon lease expiration. In fiscal year 1996,
    FDA B&F funds totaling $2,600,000 were ear-marked for facilities
    decommissioning activities at Buffalo, Cincinnati, Chicago, and New
    Orleans. In fiscal year 1997, decommissioning activities are scheduled
    for Baltimore, the Brooklyn complex in New York, and the Pico Blvd.
    facility in Los Angeles. In fiscal year 1998, decommissioning
    activities will commence for Dallas, Minneapolis and Detroit.
        Personnel Activities: Voluntary transfers to other ORA labs:
        In fiscal year 1995, 19 transfers at a cost of $910,000.
        In fiscal year 1996, 9 transfers at a cost of $284,900.
        In fiscal year 1997, the lateral transfer period has been extended
    throughout the fiscal year; to date 16 have been approved at an
    estimated cost of $525,000.
        Total cost to date is $1,719,900.
        Total transfers to date is 44.
        Question. When will other field labs begin transferring operations
    to the Arkansas Regional Lab?
        Answer. Once the Chicago laboratory closes on July 1, 1997,
    Chicago's dioxin program, 5 FTE, the high resolution mass spectrometer,
    valued at $450,000, and, associated glassware and supplies will be
    moved into an interim laboratory facility. The interim laboratory
    facility is renovated space located in NCTR's Building 14. ORA plans to
    start operations at the dioxin laboratory by late summer 1997. ARL is
    anticipated to have 10-12 staff in Jefferson, Arkansas during 1997-
    1999.
        Other ORA personnel, programs and equipment are scheduled for
    transfer upon their lease expiration dates. Laboratories in Detroit,
    Minneapolis and Dallas will be transferred to ARL during 1999 and 2000,
    and Denver and Kansas City during 2010-2014.
        Question. When will transfer of all operations to the Arkansas
    Regional Lab be complete?
        Answer. The ORA Lab Consolidation Plan has scheduled full occupancy
    and completion of all transfers to ARL by 2014.
        The ARL facility has a capacity of approximately 140 operational
    and support staff. Upon laboratory closures scheduled to take place by
    2000, at Minneapolis, Detroit, Chicago and Dallas, approximately 55
    operational FTE will be transferred to ARL. Additionally in between
    2010 and 2014, upon lab closures in Denver and Kansas City,
    approximately 85 additional operational FTE will be transferred to ARL.
        Question. What are the projected savings of this consolidation
    effort and what efficiencies will result?
        Answer. FDA projects a costs savings of $112.7 million, through
    2014, based on the fiscal year 1997 annual review and updated cost
    estimates, namely rents and budget outlays toward laboratory
    consolidation. FDA will maintain inspection, public affairs and
    enforcement operations at the current District offices and resident
    posts.
        ARL is an integral part of the Laboratory Consolidation plan not
    only from a programmatic efficiency standpoint but also because the
    completion of ARL and closure of the six existing labs contributes
    approximately 50 percent of the Lab Plan cost savings.
        Let me provide for the record a statement made by the GAO about FDA
    lab consolidation efforts to date:
        [The information follows:]
        ``ORA has used the Southeast Regional Lab, SRL, located in Atlanta,
    Georgia as the model of the future for the multipurpose/mega labs. SRL
    services the southeastern United States from Louisiana to North
    Carolina. This laboratory consistently meets time frames and has an
    excellent rapport with its customers. More importantly, SRL has a large
    enough cadre of scientists to conduct uninterrupted operations on a
    day-to-day basis and meet emergency and other non-routine requests that
    arise. It's this critical mass of experienced, equipped scientific
    staff, housed in a state-of-the-art lab, which provides the wherewithal
    to meet efficiency and effectiveness goals. Hence, the Lab
    Consolidation Plan incorporates these essential elements to efficiency
    at each of its planned mega-lab facilities.''
        Similar efficiencies are expected from consolidation at ARL.
                          fiscal year 1998 initiatives
        Question. The fiscal year 1998 budget contains a number of new
    initiatives. One concerns tobacco. Another related to food safety. What
    amount of the tobacco ``initiative'' will be used for normal
    enforcement activities and please explain the items within this request
    that are actually new activities for the agency.
        Answer. The tobacco initiative is a new agency effort.
    Implementation of the first provisions of the rule that went into
    effect in February 1997 has been underway for some time. It is normal
    for the Agency to train, commission, and contract with state and local
    officials for the enforcement of FDA regulations. That is how the
    tobacco rule will be enforced and, in that sense, the Agency considers
    these to be ``normal enforcement activities.''
        Question. What effect will the recent court decision regarding FDA
    regulation of tobacco have on this initiative or similar activities at
    FDA?
        Answer. The February 28 access provisions have gone into effect and
    the Agency will continue to implement and enforce those provisions. The
    access and labeling provisions scheduled to go into effect this August
    were upheld but stayed by the district court. The advertising and
    promotion provisions scheduled to go into effect in August were
    overturned by the district court. The parties have appealed.
        Question. If full funding is not included for your Food Safety
    initiative, will you be able to work with USDA, EPA, and CDC in a way
    to blend all resources, government-wide, into this effort or do you
    feel that FDA will not be a player to the extent of the other agencies?
        Answer. FDA's fiscal year 1998 request provides adequate resources
    to maintain our current level of activities that were funded in fiscal
    year 1997. However, to go a step beyond our ``every day efforts'' to
    reduce the risk to health that foodborne microorganisms pose to
    consumers, we have requested additional funding for the Food Safety
    Initiative, or FSI, which is an important extension of all ongoing food
    safety efforts. Without this additional funding, we will not be able to
    work toward the goal of reducing the incidence of foodborne illnesses.
    Further, Seafood HACCP will be implemented at a much slower pace.
        The federal food safety agencies will continue to respond to
    problems once they are identified, until the goals of the Food Safety
    Initiative are realized. The Food Safety Initiative will enable the
    Agencies to develop systems with strategies and mechanisms to
    anticipate and prevent most of the significant food safety problems. It
    is clear that outbreaks such as hepatitis in frozen strawberries, E.
    Coli in unpasteurized apple juice, and Cyclospora in raspberries, will
    only increase in terms of frequency. The ability of the Federal
    government, and in particular FDA's ability to prevent and respond to
    these situations, will be greatly enhanced by this new funding. The
    goal of the initiative is to reduce the incidence of deaths and
    illnesses associated with foodborne pathogens.
                                     ______

                     Questions Submitted by Senator Harkin
                           safety of the blood supply
        Question. I'm informed that prior to 1990 when blood was first
    screened for Hepatitis C, an estimated 300,000 people annually were
    infected with Hepatitis C from blood and blood products. While this has
    now been reduced to about 180,000 a year, the continued prevalence and
    increasing death rate from this disease merits attention. How has the
    FDA followed up on the recommendation last year by the House Committee
    on Government Reform and Oversight that the estimated 300,000 living
    recipients of blood and blood products who were infected with Hepatitis
    C prior to 1990 be notified of their potential infection so that they
    might seek diagnosis and treatment?
        Answer. An estimated 3.9 million Americans are infected with
    Hepatitis C virus, or HCV. Seven percent, or about 300,000 people,
    acquired their infection from blood transfusions received prior to
    1990. The number of transfusion-associated Hepatitis C cases each year
    has declined dramatically since the introduction of screening tests,
    and CDC currently estimates the risk from blood to be between 0.01
    percent and 0.001 percent, per unit transfused, or no more than 1,000
    HCV infections from blood transfusions each year.
        Transfusion-associated risk is only a small proportion of the
    overall HCV infection burden in the United States. Most HCV infections
    in the United States are acquired from other sources and 8,000 to
    10,000 people die each year from HCV-associated chronic liver disease.
        The issue of notification of recipients of blood products from
    donors subsequently found to be infected with HCV, or look back
    notification, has been publicly discussed at the Blood Products
    Advisory Committee on several occasions.
        In April 1997, the Department of Health and Human Services brought
    this problem to the attention of the first meeting of the PHS Advisory
    Committee on Blood Safety and Availability. This Committee includes
    representatives of industry, consumers, scientific experts and
    ethicists. Its purpose is to provide a forum to examine the broad
    public health and societal implications of blood safety issues. The PHS
    Advisory Committee provides advice to the Secretary of HHS. This issue
    also has been considered by HHS's Blood Safety Committee which includes
    the DHHS Blood Safety Director, the Director of NIH, the Director of
    CDC, the Administrator of HCFA, and the Commissioner of Food and Drugs.
    The Blood Safety Committee is involved in identifying issues for
    discussion by the PHS Advisory Committee.
        At its April 1997 meeting, the PHS Advisory Committee considered
    the issue of HCV look back notification of recipients but did not issue
    recommendations. Among the issues discussed at the Advisory Committee
    meeting were the overall problem of HCV in our country; the patient's
    right to know about possible infection; the difficulty of tracing blood
    recipients; the utility of a targeted look back to certain populations
    such as the hemophilia community; and other issues. The PHS Advisory
    Committee indicated it would attempt to provide DHHS with
    recommendations in a timely fashion. The FDA is awaiting the
    recommendations from the PHS Advisory Committee on Blood Safety and
    Availability.
        Question. Has FDA developed guidelines or standards that blood
    banks should use in notifying individuals of their exposure to
    Hepatitis C through contaminated blood or blood products?
        Answer. Most plasma derivatives undergo manufacturing or viral
    inactivation procedures that will eliminate any HCV which may have come
    from donors whose positive status was not detected by the current
    screening tests. However, in some immune globulin products without
    viral inactivation, there have been transmissions of Hepatitis C virus
    in recent years. The FDA has acted in close concert with the CDC to
    identify such events and manufacturers have initiated notifications to
    alert individuals who received these blood products of their possible
    exposure. These products are now either virally inactivated or else
    tested for HCV by gene amplification and released for commercial
    distribution only if found to be negative for HCV.
        Transmission of HCV by blood component transfusion is more
    complicated. At this time, the FDA has not developed guidelines or
    standards to be used in notifying individuals of their exposure to
    Hepatitis C through contaminated blood components. Although effective
    donor screening has substantially reduced this risk since 1990, the
    best approach to identifying persons who become infected by transfusion
    both prior to and since 1990 remains undefined. This question has been
    brought before the PHS Advisory Committee on Blood Safety and
    Availability.
        Options under consideration for recommendation by the Committee
    include recipient tracing based on knowledge of a positive donor,
    public health service announcements focusing on prior receipt of
    transfusion, and physician education regarding disease prevention,
    management and therapy. It is likely that some combination of these
    approaches will be recommended.
        The CDC already has begun implementing a broad nationwide
    prevention and control plan for Hepatitis C. This program is aimed at
    early identification of persons with chronic HCV infection, including
    transfusion recipients, and reducing transmission in groups at high
    risk of infection. Three approaches are being used to identify and
    educate persons at risk of HCV infection: verbal, written, and visual
    material directed to the public; educational efforts directed to health
    care and public health professionals; and, development of community-
    based prevention programs.

                             Conclusion of Hearings

        Senator Cochran. Today's hearing concludes our review of
    the budget request for the President's fiscal year 1998 budget.
        The subcommittee will recess and reconvene at the call of
    the Chair.
        [Whereupon, at 11:50 a.m., Thursday, May 1, the hearings
    were concluded and the subcommittee was recessed, to reconvene
    subject to the call of the Chair.]

    AGRICULTURE, RURAL DEVELOPMENT, AND RELATED AGENCIES APPROPRIATIONS FOR
                                FISCAL YEAR 1998

                                  ----------

                                           U.S. Senate,
               Subcommittee of the Committee on Appropriations,
                                                        Washington, DC.

        MATERIAL SUBMITTED BY AGENCIES NOT APPEARING FOR FORMAL HEARINGS

        [Clerk's note.--The following agencies of the Department of
    Agriculture and one related agency did not appear before the
    subcommittee this year. Chairman Cochran requested these
    agencies to submit testimony in support of their fiscal year
    1998 budget request. Those statements follow:]
                           DEPARTMENT OF AGRICULTURE
                           National Appeals Division
                Prepared Statement of Norman G. Cooper, Director
        Mr. Chairman and members of the Subcommittee, I am pleased to
    appear before you to discuss the fiscal year 1998 budget request for
    the National Appeals Division--NAD.
                                    mission
        NAD was established by the Department of Agriculture Reorganization
    Act of 1994, Public Law No. 103-354. The mission of NAD is to carry out
    the provisions of that law in establishing an independent
    administrative appeals process. NAD conducts evidentiary hearings and
    reviews respecting adverse program decisions made by agencies of Rural
    Development, the Natural Resources Conservation Service, the Risk
    Management Agency, and the Farm Service Agency.
        Program participants--appellants--have the right to appeal adverse
    decisions and to have a hearing before an NAD hearing officer in their
    State of residence. Once a hearing officer makes a determination, the
    appellant or the affected agency head may request a review of the
    hearing officer's determination by the NAD Director. NAD's final
    determinations are reviewable by United States District Courts.
        NAD is headquartered in Alexandria, Virginia, with a small review
    and support staff, with three regional offices responsible for the
    activities of more than 70 hearing officers in three geographic areas:
    Eastern--Indianapolis, Indiana; Southern--Memphis, Tennessee; and
    Western--Lakewood, Colorado.
                               current activities
        Recent accomplishments include:
      --NAD conducted a national training conference in fiscal year 1996,
            and in fiscal year 1997 is conducting training conferences at
            three regional sites and at headquarters. These conferences
            provide development opportunities to ensure that NAD personnel
            are kept current of Administrative proceedings, current laws
            and regulations in the program areas that are subject to NAD
            jurisdiction. In addition, training is provided in standards of
            review, evidentiary considerations and judicial issues, ethics,
            and EEO.
      --In accordance with the Government Performance and Results Act, NAD
            has drafted its 5-year Strategic Plan and 1997 Annual
            Performance Plan.
      --NAD interim final rules imposed a reconsideration requirement for
            Director Review Determinations, and NAD has developed a
            procedure for such reconsideration. Reconsideration of a
            determination of the Director may be requested by the appellant
            or the Agency within 10 days of receipt of the determination.
            The Director has 5 days to issue a decision on the request for
            reconsideration.
      --An NAD directives system and a Hearing Officer Manual have been
            developed to provide a systematic method of communicating
            information and policy to the headquarters and field office
            personnel.
      --A Civil Rights and Equal Employment Opportunity Advisory Committee
            consisting of representative employees from headquarters and
            the field offices was established to advise and help the
            Director.
      --NAD has initiated a quality assurance program designed to enhance
            quality of decisions, advance the rights of program
            participants, and promote the lawful operation of agency
            programs.
      --During fiscal year 1996, there were 6,137 appeals requested and
            1,263 Director Reviews. Of the 1,263 Director Reviews, 1,006
            were requested by appellants and 257 were requested by heads of
            agencies. Additionally, 54 requests for reconsideration were
            received.
                        fiscal year 1998 budget request
        For fiscal year 1998, NAD is requesting $13,359,000 in direct
    appropriations. This request represents an increase of $1,641,000 over
    the fiscal year 1997 appropriation. The increase consists of $143,000
    for pay costs, and the remaining $1,498,000 will fund four initiatives.
        The first initiative will enable NAD to replace the tracking system
    that now track appeals only for former Farmers Home Administration's
    cases. The current system cannot accommodate cases from other agencies
    that are now appealed to NAD. For example, if information on an appeal
    pertaining to a disaster program is requested, it must be obtained by a
    manual search, which is costly and time consuming. This limits our
    ability to provide Congress, USDA, and other interested parties,
    accurate and timely information regarding appeals handled by NAD, as
    well as to make informed management decisions. NAD needs to develop and
    procure a new tracking system to meet these requirements.
        The second initiative provides necessary training to NAD hearing
    officers and review staff, as well as other employees. They must keep
    abreast of current laws and regulations, administrative procedures, and
    automation. To ensure fair and impartial determinations based upon
    correct application of laws and regulations, and guarantee the rights
    of program participants and the efficient operation of agency programs,
    hearing officers, in particular, must be trained in the proper methods
    of fact finding, hearing procedures, and application and analysis of
    regulatory authority. The NAD staff is dispersed across the country,
    and the development of a standard curriculum to include a minimum
    number of quasi-judicial courses to be completed within specific time
    frames would ensure a standard level of competency is reached and
    maintained.
        With proper training, hearing and review officers will be able to
    render competent determinations based upon a required level of
    knowledge. In addition, they will be supported in rendering timely,
    complete, and correct determinations with assistance from NAD personnel
    with extensive knowledge of computer systems that support the hearing
    and review officers in affecting NAD's goal of timely, complete, and
    correct determinations.
        The third initiative will fund the development of an automated
    system to provide hearing officers and the review staff electronic
    access to previous NAD decisions. This system will establish a
    mechanism that will be used by all NAD hearing and review officers to
    ensure consistency in NAD determinations, and it will supplement an NAD
    directive system that provides guidance on policy and law.
        The fourth initiative provides for the enhancement of new computer
    equipment to ensure NAD employees are able to provide quality internal
    and external customer service in an efficient manner. Because of the
    geographically dispersed nature of NAD operations and its customer
    base, efficient and reliable data communications capabilities are
    critical to achieve quality, timeliness, and completeness goals.
        We urge the Committee to approve these initiatives in the interest
    of improving the services that we provide to our stakeholders. NAD's
    primary stakeholders include: four statutorily-defined client
    agencies--Farm Service Agency, Rural Development, Natural Resources
    Conservation Service, Risk Management Agency; potential appellants--
    including all participants in programs administered by NAD's four
    client agencies and applicants for such programs, and advocacy groups
    that represent appellants.
        NAD has streamlined its organizational structure effectively and
    efficiently to carry out its statutory mandate. To sustain its mission
    in delivery of high quality adjudication administrative appeals and
    reviews, NAD requires the appropriation requested.
        This concludes my statement Mr. Chairman. I will be happy to answer
    any questions that the Subcommittee might have.
                                     ______

                         Office of the Chief Economist
              Prepared Statement of Keith Collins, Chief Economist
        This statement discusses the functions and fiscal year 1998 budget
    request of the Office of the Chief Economist.
        OCE is a small staff of economists, scientists, meteorologists and
    support personnel all located in Washington, D.C. The Office reports
    directly to the Secretary of Agriculture. OCE has three primary
    missions: 1) provide economic analysis to executive branch and
    Congressional policy officials on alternative policies, programs and
    regulations; 2) serve as a focal point for the collection and reporting
    of economic and weather data, forecasts and projections related to
    agricultural commodities and the performance of the agricultural
    economy; and 3) conduct statutory review and oversight responsibilities
    related to risk assessment and cost-benefit analysis of major USDA
    regulations. OCE consists of three functional units: the Immediate
    Office, the World Agricultural Outlook Board--WAOB, and the Office of
    Risk Assessment and Cost-Benefit Analysis--ORACBA. Recent activities
    and accomplishments in each of these three areas are briefly discussed.
                    immediate office of the chief economist
        The immediate office, with a staff of nine, directs a wide range of
    analysis related to policy, program and legislative proposals, and
    regulations. The focus is on only the most substantial, complex and
    controversial issues, usually at the request of the Secretary, other
    Administration officials, or members of Congress. The most important
    products are briefings, and briefing and analysis papers prepared on
    tight deadlines. These analyses generally focus on short-to medium-term
    effects, involve staff from other agencies, and apply the results of
    existing, basic economic research to specific policy issues. The
    immediate office staff is also responsible for regulatory review. A key
    role of the staff is to coordinate analyses among USDA agencies. OCE
    staff include the directors responsible for coordinating agricultural
    labor issues and sustainable development issues within USDA. Examples
    of key activities are:
        Farm Bill Implementation.--Since passage of the 1996 Farm Bill, the
    staff of the Immediate Office has had a series of key implementation
    responsibilities. OCE coordinated analysis of, and the decision process
    for, the Secretary's decision to implement the Northeast Interstate
    Dairy Compact. OCE briefed the President's Chief of Staff twice on this
    issue and several members of Congress as well. OCE coordinated, with
    the Assistant Secretary for Marketing and Regulation, a review of the
    performance of the National Cheese Exchange--NCE--and analysis of
    options to replace the use of the NCE price in Federal Milk Marketing
    Orders. OCE also chaired USDA's Interagency Dairy Analysis Team which
    served as the reviewer for the concept proposals prepared by the
    Agricultural Marketing Service for Federal Milk Marketing Order
    consolidation and reform. OCE reviews resulted in material changes to
    the options released to the public for comment. OCE is also
    participating in the preparation of the economic analysis for the
    planned proposed rule on order consolidation and reform. OCE also
    served on numerous decision teams for the Secretary to resolve issues
    related to farm and conservation program implementation.
        Commodity Market Analyses.--During the 1996/97 crop years, prices
    of wheat, corn and milk reached record highs. In the spring of 1996,
    cattle prices reached a 10-year low. OCE provided the Secretary regular
    briefings on the developments in commodity markets during this period.
    OCE coordinated development of the President's initiative to support
    beef prices, announced in April 1996, and participated in the briefing
    of the President. OCE coordinated the Secretary's initiative to
    stabilize milk prices, announced in December 1996, after the
    unprecedented decline in the Basic Formula Price.
        Concentration.--OCE played a major role in the Department's efforts
    to understand and address issues of concentration in agriculture. OCE
    provided staff support to the Secretary's Advisory Committee on
    Concentration in Agriculture and co-chaired the Department's Response
    Team which reviewed the report and developed responses to its
    recommendations. The Team's efforts resulted in a number of
    programmatic changes in the collection and dissemination of market
    information.
        Karnal Bunt Compensation.--OCE assisted Animal and Plant Health
    Inspection Service--APHIS--in establishing a compensation scheme for
    producers, handlers and others adversely affected by the Federal
    quarantine established for the eradication of Karnal Bunt. Activities
    included directing analyses of the effects of the quarantine on the
    wheat industry and developing compensation plans for producers,
    handlers, and flour millers.
        Crop and Revenue Insurance Evaluation.--OCE assisted the Risk
    Management Agency--RMA--in evaluating the rating structure and
    reinsurance implications of revenue insurance. In cooperation with
    researchers at The Ohio State University and the Economic Research
    Service, a model was developed to evaluate the performance of the 1996
    reinsurance agreement and to assist RMA in negotiating the 1998
    Standard Reinsurance Agreement with crop insurance companies.
        Testimony and Congressional Analyses.--During the past year, the
    staff responded to many Congressional requests for information or
    analysis. During fiscal year 1996 and early fiscal year 1997, OCE
    testified before Congress as the principal USDA hearing witness five
    times. Testimony was provided on the following issues: the effects of
    immigration reform on farm employers; risk assessment at USDA;
    allegations of price manipulation on the National Cheese; renewable
    fuels and energy security; estate and capital gains taxes. In addition,
    the Chief Economist frequently appeared before Congress with the
    Secretary, Deputy Secretary or others on issues ranging from the USDA
    budget, the Conservation Reserve Program--CRP, concentration,
    international trade to dairy policy.
        Special Studies.--OCE has coordinated a number of special studies
    bringing together analysts from various USDA agencies to ensure the
    best expertise addresses the issue. For example, OCE coordinated the
    Department's response to the Environmental Protection Agency's--EPA's--
    proposed rule on particulate matter and ozone, and OCE has participated
    in executive branch analysis of the effects of global climate change.
    OCE chairs the Capper-Volstead Committee which responded to requests
    related to permissible activities of cooperatives. OCE responded to
    many requests for rapid analysis of issues such as the effects of the
    Florida freeze; the relationship between price volatility and commodity
    stocks policy; using cost of production to establish the Basic Formula
    Price for milk; economic effects of U.S. grain imports from Canada;
    effects of proposed changes in the Commodity Exchange Act; implications
    of foot and mouth disease in Taiwan for U.S. pork exports to Japan and
    for U.S. producers; U.S.-EU grain and oilseed Uruguay Round concerns;
    North American Free Trade Agreement; and regionalization of plant and
    animal health regulations. OCE participates in the USDA working group
    on the 1999 World Trade Organization agricultural negotiations
    including preparation of analysis of U.S. objectives and approaches.
    OCE also provides staff support to the Secretary's Special Assistant
    for Trade.
        Regulatory Review and Clearance.--A major responsibility of the
    immediate office staff is to review and clear regulatory impact
    analyses of USDA regulations. During fiscal year 1996, OCE reviewed and
    cleared approximately 70 significant or economically significant
    regulations. This process often involves assisting the regulating
    agency with identification of feasible alternatives and planning the
    economic analysis. Examples of special rulemaking efforts this past
    year included the Conservation Reserve Program, the Environmental
    Quality Incentives Program, the Wildlife Habitat Incentives Program,
    avocado imports, and organic certification.
        Agricultural Labor.--OCE fulfills the statutory mandate to consult
    with the Department of Labor--DOL--on regulations related to the H-2A
    Temporary Agricultural Worker Program. A major effort this past year
    involved working with DOL on a final rule issued in 1997 establishing
    the conditions under which a farm employer would be jointly responsible
    for actions of a farm labor contractor. Other key activities included
    rulemaking support to EPA through analysis of pesticide protections for
    farm workers, such as warning sign posting, decontamination sites, and
    analysis of immigration reform on USDA programs and on farm employment.
        Sustainable Development.--OCE advises the State Department, Foreign
    Agricultural Service--FAS, and others of sustainable development issues
    for negotiations, treaty formulation and implementation, and trade
    discussions. For exam