[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

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                      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.
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    \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